Property Report: Industry experts have their say

NZ Herald

6 Sep, 2015 04:00 PM8 mins to read

Industry experts give their take on the property market. Photo / Richard Robinson

Mike Bayley, managing director, Bayleys Corporation

The drivers of Auckland's residential property market have sustained sales volumes and sales values over winter — and there are no real indications that they will be abating in the near future.

Net migration numbers remain at record-breaking peaks, supply of new housing stock is thin and unable to meet demand, mortgage interest rates are at their lowest levels in a generation, and there is a benign inflationary environment (with the exception of the Auckland housing market).

Usually, the market expects trading in the residential property sector to slow over winter. However, our figures from June to August this year have shown the strongest seasonal performance in the company's history. And business in the pipeline looks equally compelling.

Is the "bull run" we have seen in Auckland over the past two years sustainable into 2016? We believe so. Auckland has made much of its marketing push to become a "world class city" on a global stage alongside the likes of London, Vancouver and Sydney.

However, this admirable ambition brings with it certain ramifications. For the residential property market, this is higher house prices, as Auckland property values are now assessed on an international rather than domestic stage.

Until one of the market drivers softens or deteriorates, we are unlikely to see any noticeable adjustment to buying patterns, and I doubt whether the Government's pending new tax and banking restrictions will have much effect on dampening market demand as we know it.

Carey Smith, NZ chief executive, Ray White Real Estate

Sales numbers for the year to date remain slightly up on those from the previous year.

Most regional areas outside of the major cities are beginning to show an uplift in sales numbers and prices. This is largely because of sellers divesting from the Auckland and Canterbury markets and purchasing in regional locations.

The lowering of interest rates is a key driver of housing affordability. Increased net immigration, combined with the number of listings available, means prices are maintained or increasing in many areas, including regional areas.

The LVR announcements by the Reserve Bank come into force in Auckland on October 1. The investment sector will require a deposit of 30 per cent as a loan-to-value ratio, and this will provide for more stability in the investment sector.

The consequence of the tighter policy in Auckland has meant regional areas have had their LVR relaxed to 10 per cent and this will invite potential investors to look into other markets.

The Reserve Bank still considers the real estate market to be volatile and the continuing announcements, aligned with restrictions and lowering interest rates, will ensure buyers and sellers become more knowledgeable in their purchasing decisions.

Lower interest rates, particularly in Auckland and Canterbury, will continue making real estate attractive for homeowners. There should be no slow down with prices, however sales numbers will remain consistent.

Keith Niederer, general manager, LJ Hooker and Harveys Group

Low interest rates and immigration are set to encourage and continue Auckland's busy property market. Many Aucklanders will continue to shift and purchase properties in the provinces from the sale of their Auckland homes.

First-home buyers will need to look further afield and may have to travel a fair distance to work. There are no longer any bargains.

The cost of building a home will continue to go up; for homeowners wanting to improve their existing home with alterations or additions they may find it hard to get a builder as the builders focus on the bigger jobs, which are plentiful.

Sales volumes nationally will continue to be around the 7,000-a-month mark as many people capitalise on a very good market.

In the New Year, the Auckland apartment market will be in unprecedented demand as many foreign students enrol for their education. Apartment sales in the city will continue with a strong demand as executives tired of the daily commute seek to live closer to work, while possibly keeping a beach house retreat. We may see more baches and beach properties come on the market and, with the volatility of dairy payouts, many dairy farmers who own baches may realise they are better to concentrate on the farm.

Investors will be affected by legislation changes, and some may look to cash up now while good prices are attainable.

The best value real estate in Auckland is lifestyle blocks.

Hayden Duncan, CEO, Harcourts

The key feature of the residential property market is still strong demand, fuelled by low interest rates and a shortage of supply.

Though much of the focus has been on Auckland, demand is healthy around the country, with Harcourts' written sales in all regions over the past three months well up on the same period last year. Harcourts recorded 7,425 written residential sales from May to July, up 27.5 per cent on the same period last year.

Aucklanders are increasingly buying property in the regions. Central region, which includes Waikato and Bay of Plenty, recorded a 76.3 per cent increase in sales this July compared to July 2014.

With reducing stock levels and increased buyer interest, auction figures for central region are also up 98.3 per cent on last year. By comparison, other regions such as Wellington, Christchurch and the rest of the South Island are experiencing a more traditional winter market, with fewer new listings.

In the northern region, the crucial issue remains a lack of stock. High demand continues to push up prices in the region.

Though Auckland listings were up slightly in July, we still have people reluctant to sell because they're worried about not being able to buy elsewhere in the region, or they're holding on to one property and buying another to make the most of healthy rental returns.

Peter Thompson, managing director, Barfoot & Thompson

What has flown under the radar is that, since May, Auckland house prices have been stable.

When compared on a year-on-year basis there is an apparent increase, but in reality the real price surge was in the early part of the year, and the average price being paid today is only 0.6 per cent higher than the average price paid in May.

The median house price over the same May to July period rose only 0.9 per cent.

The key reason behind this is that buyers, owner-occupiers and investors, have concluded that the market is fully priced. What can't be foreseen is what will occur as the spring selling season arrives. Traditionally, prices increase, and the potential exists for prices to rise again.

Offsetting this is the Government's and Reserve Bank's determination to suppress Auckland price increases, and in November sterner investment rules will apply. The Reserve Bank says the number of new homes built has not dented the shortage of supply, that net migration is at record levels and that mortgage rates are unlikely to increase for a while. Indicators such as these usually put pressure on prices.

Time will tell whether the new regulations will be strong enough to counter these factors. Anecdotal data exists that investors are turning their attention to lower-priced Northland property.

What can be expected is the number of homes sold will remain high.

Barry Thom and Grant Lynch, owners, Unlimited Potential Real Estate

Recent days have demonstrated the volatility of world share markets and there's much talk about the impact of China's economy on ours — alongside news that commodity prices have been falling, with particular impact on our dairy farmers.

Offsetting that, interest rates continue to fall, immigration continues at record numbers and the housing shortage will take years to resolve.

Buyers continue to show enthusiasm, with records continuing to be broken, particularly in Auckland central, albeit on a selective basis.

October 1 denotes the start of new rules for investors; it will be interesting to see the impact this has, given 40 per cent of current buyers are in this classification.

The spring listing season is upon us and already we note an increase in vendors going to the market.

Time will tell if the supply/demand ratio has any impact on levelling prices.

Although the exponential gains of recent times may not be sustainable, Auckland continues to climb the ladder of the world's most liveable city rankings and it's hard to see a significant downside, short of Government intervention.

It may well be that the economic news and share market performance continues on its rocky road.

This being the case, history records that when other forms of investment become unstable, there is generally a flight to bricks and mortar.