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QV's house price index Oct. 2023
17 November, 2023
Market News

NZ residential rental market news, November 17

Sam Nicholls
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Don't bet against a rapid rise, Hastings is winning the emergency housing battle, and a 3D printed house?

This week's TLDRs...

Real Estate Institute’s House Price Index overview  
    The Real Estate Institute notes slow but steady improvement in the housing market in October. 
    Despite a 2.5% decrease in sales from September, there was an 8% increase compared to October 2022, and the national days to sell dropped by seven. 
    Nationally, prices are still 14.6% lower than their peak, with Wellington down 22.6% and Auckland down 19%. 
    Prices are up 5.8% over five years. 
    Increased activity is reported among buyer groups, with more investors and FHBs, and vendors showing a willingness to be realistic with pricing. 
    New listings increased by 2.6% YOY and 21.9% compared to September across all regions. 
    The market shows signs of improvement, supported by increased engagement and certainty from buyers in major centres post-election and with warmer weather. 
    Real Estate Institute CEO Jen Baird emphasises the impact of high-interest rates, the cost of living, and post-election market dynamics on the next three months of data. 
    Read the article

QV: Property values are slowly rising in most regions
    The average value of NZ homes rose by $18,388 (+2.1%) over the three months ending in October, reaching $907,387. 
    Most regions experienced an increase in average values, with the highest gains seen in Auckland (2.7%) and Wellington Region (2.5%). 
    Hastings and Invercargill also had quarterly gains of 2.4%, while only three regions saw declines: New Plymouth (-2.8%), Whangarei (-0.4%), and Hamilton (-0.2%). 
    Expect the market to remain "flat to gently rising" in the foreseeable future due to interest rates and credit constraints. 
    Read the article

Market recovery looks stunted
    Residential sales declined by 2.5% in October, with 5,619 recorded sales, down from 5,762 in September. 
    The dip in sales is concerning for those anticipating a market recovery. 
    October sales were up 8.0% from the previous year but remained down 24.9% and 38.8% compared to October 2021 and October 2020, respectively. 
    The national median sales price in October was $795,000, unchanged from September and down 2.8% from October last year. 
    The REINZ House Price Index rose 1.1% in October compared to September but remained 2.5% lower than October last year. 
    The signs indicate an improving market, with vendors and buyers expressing confidence in the current selling and buying conditions. 
    Read the article

Tony Alexander: Don't bet against a rapid rise in house prices
    First-time buyers constituted 27% of all house purchases in the September quarter, above the long-term average of 21%. 
    Recent surveys indicated a significant rise in first-home buyers since February, reaching a peak of 66% seeing increased young buyers in August. 
    Young buyers accelerated purchases due to a nearly 18% fall in prices, strong listings, reduced investor presence, and increased deposits. 
    Investors are showing increased interest, with a net 26% of agents reporting more investor activity, the strongest reading since March 2021. 
    Investors anticipate rising prices, driven by accelerating population growth and falling construction of new dwellings. 
    Expectations of the return of interest expense deductibility contribute to investor demand, as they anticipate others entering the market. 
    FHBs, motivated by securing a home, may intensify their search due to reports of increasing investor activity, anticipating higher demand and prices. 
    FOMO among buyers is currently at an average level, but positive news on inflation and monetary policy could trigger increased urgency. 
    Good news on inflation, easing monetary policy expectations, and economic indicators may heighten FOMO and accelerate buyer activity. 
    Read the article

Record number of homes completed in Aux
    In September, Auckland Council issued a record 1927 Code Compliance Certificates for new dwellings, the highest monthly figure since data collection began in 2010. 
    This monthly record contributed to a new annual high of 16,769 dwellings completed in Auckland in the 12 months leading up to September, surpassing 16,000 for the first time. 
    The surge in completed dwellings contrasts with a 22% decline in residential building consents for the region in the 12 months to September compared to the previous year. 
    The record completion rate is attributed to the backlog of residential building work in the construction pipeline, with a typical two-year timeframe from building consent issuance to project completion. 
    Read the article

The latest in rent increase numbers
    Auckland tenants are paying $65 more per week on rent compared to a year ago, with the median asking rent reaching $675. 
    Manawatū/Whanganui set a new high, with the median weekly rent at $550, $20 more than the previous month, and Palmerston North reaching a record $580. 
    Otago marked a third consecutive month of setting a new high, with the median weekly rent reaching $590 in October. 
    Trade Me anticipates a busy summer in the rental market, driven by students securing places for 2024 and potential policy changes with the new government. 
    In September, rents for new properties were up 7.2% compared to the previous year, and rents for all properties increased by 4.2%. 
    Trade Me reported a 6% year-on-year increase in demand for rental properties in October, coupled with a 10% decrease in supply. 
    Read the article

A look across the ditch
    In Australia, the Reserve Bank raised the cash rate to 4.35%, the thirteenth increase in eighteen months, contributing to concerns about affordability for potential home buyers. 
    The RBA's rate hikes are expected to affect borrowing capacity, with RateCitys analysis showing a substantial reduction in the amount families can borrow. 
    Rising house prices across Australia, as reported by CoreLogic, create a dilemma for FHBs as borrowing capacity decreases while prices increase. 
    Renting has become more expensive, adding to the challenges faced by younger Australians, especially as real incomes are falling for some. 
    Immigration plays a significant role in the housing predicament, driving demand for accommodation, and while building more homes is a solution, it comes with challenges for the construction industry. 
    The recent RBA rate hike is expected to impact the housing market, possibly tempering the rebound. 
    Read the article

New 3D printed home is first in southern hemisphere
    An Auckland family is the first in the Southern Hemisphere to live in a fully 3D-printed house, constructed in sections from durable, locally sourced concrete material, with the printing process being more emissions-friendly and efficient than traditional methods; the company behind it, QOROX, has also collaborated with councils for other projects like traffic islands and a skate park. The homeowner sees 3D printing as an environmentally friendly option that addresses waste in the construction industry. 
    Read the article

Tenant flees country after rent arrears and a fire
    A tenant on a fixed-term visa fled the country after owing the landlord $16,222 in rent arrears and $550 insurance excess for fire damage caused by cultivating cannabis. The landlord discovered the damage when he found the rental property unlocked and extensively damaged after Pham had left. The landlord, who had already obtained an earlier tribunal order for $8,062.85 in rent arrears, is now owed a total of $14,073, and the tribunal granted immediate termination of the tenancy.
    Read the article

Another house housing migrants in crammed conditions
    An RNZ investigation reveals another case of overcrowded living conditions for migrants in West Auckland. 
    The three-bedroom home in Massey had 17 bunkbeds, with workers living in makeshift space under the house. 
    A worker, having had only a month of work since arriving in August, is expected to pay $150 per week for accommodation. 
    This follows a case three months ago involving over 140 Indian and Bangladeshi workers living in crowded and unsanitary conditions across six Auckland homes. 
    Read the article

Subdivision rules could be changed to help Cyclone Gabrielle homeowners
    Hastings District Council is exploring options to assist people in Hawke's Bay whose properties are deemed unsafe after Cyclone Gabrielle. 
    A proposed rule could allow nearby landowners outside Category 3 to subdivide and sell a section to a Category 3 landowner, facilitating their relocation within the community. 
    The proposal, endorsed by the Māori standing committee, aims to address uncertainties for those considering buyouts and expedite the recovery process. 
    The Severe Weather Emergency Recovery Order in Council would be utilised to streamline the process and prevent appeals. 
    The rule is expected to be in place by mid-2024, providing affected landowners with replacement residential land options in close proximity. 
    The details, including applicable zones (likely rural and rural lifestyle) and the maximum size of replacement land, are still being finalised. 
    Read the article

Significant decrease in emergency housing seen in Hastings
    In Hastings in March 2022, 285 people in 117 households were in emergency accommodation, which decreased to 66 people in 39 households by September 2023, marking a 77 percent drop. 
    The success is attributed to Hastings' place-based housing strategy, initiated as a pilot in 2019, involving collaboration among the council, government, community organizations, and iwi. 
    Challenges included housing 6000 seasonal workers for seven months annually, affecting the rental market and converting houses to Airbnb. 
    Solutions included seasonal worker accommodation on horticulture land, affordable rentals on council land, new subdivisions, public housing by Kāinga Ora, and community housing like papakāinga on Māori land. 
    Five motels were repurposed, and ongoing efforts aim to eliminate families living in motels. 
    Ngāti Kahungunu's involvement is crucial, with Māori representing 70 percent of those in emergency accommodation, and ancestral land used for papakāinga. 
    The Ministry of Housing and Urban Development plans to replicate this success in nine other communities nationwide. 
    Read the article

Banks slow lending to lower DTI rates
    In September, 31.1% of $5.2 billion in new mortgage lending had a DTI of 5, the lowest share since 2017, declining since early 2021. 
    For FHBs, 29.7% of new mortgages had a DTI of 5 in September, down from 41.5% in September 2022. 
    Shares of new mortgages with a DTI of 5 for investors and other owner occupiers were at their lowest since data collection began. 
    At the higher DTI of 7, the monthly share of new mortgages dropped to 5.2% in September, the lowest since data collection began. 
    First home buyers' average gross income was $152,700 in September, up 4.7% annually, while other owner occupiers without investment property collateral saw a 9.9% increase to $202,500. 
    The quarterly share of lending to first home buyers with a DTI of 5 and an 80% LVR dropped to 8.4% in Q3, down from 12.6% in Q3 2022. 
    The share of lending to other owner occupiers without investment property collateral with a DTI of 5 and an 80% LVR declined annually to 1.7%. 
    The Reserve Bank is developing a framework for potential DTI restrictions, and public consultation is expected in early 2024, with restrictions possibly taking effect by mid-2024.  
    Read the article

Mortgage advisors dominate ANZ’s new lending
    Mortgage advisers originated 60% of ANZ's new lending in the year ending Sept 30. 
    Half of ANZ's total mortgage book on Sept 30 was originated by brokers, reaching 30.4% of New Zealand home loans. 
    Home loans constituted 80.2% of ANZ's total lending on Sept 30, up from 78.3% a year earlier. 
    About 34% of ANZ's home loan customers still pay less than 5%, but one-third of them are expected to roll onto higher rates over the next six months. 
    Despite higher rates, a third of home loan customers are ahead on payments by six months or more.
    Read the article

Kiwis dealing well with financial stress, but for how long? 
    Kiwibank economists state that households currently show few signs of financial stress amid higher interest rates, but the labor market's condition is crucial. 
    They forecast unemployment to peak at 5.5% next year, which they consider a "soft landing," but highlight risks if unemployment exceeds 7%, leading to a more significant rise in mortgage defaults. 
    Around 10% of the mortgage book is on floating rates, and the Reserve Bank expects the effective mortgage rate to rise to 6.4% by mid-2024. 
    The economists anticipate the average share of disposable income going to interest payments to double from its 9% low in 2021 to around 18% by mid-2024. 
    Higher interest rates are impacting household budgets, with indebted households paying a larger proportion of disposable incomes on interest. 
    The aggressive hiking cycle by the RBNZ aimed at fighting inflation is noted as the most aggressive in RBNZ history. 
    While inflation remains high above the 2% target midpoint, the economists believe that the RBNZ's inflation-fighting credentials may be upheld with current interest rates. 
    They anticipate a normalising of monetary policy in Phase II, possibly commencing a rate-cutting cycle next year. 
    Read the article

Just over 90% of properties are selling for a profit, down from 99%
    In Q3 2023, the proportion of profitable property resales in NZ stabilised at 92.6%, after a decline of almost seven percentage points in less than two years. 
    This is significantly below the peak of 99.3% in Q4 2021. 
    The median profit for Q3 2023 was $285,000, down from $440,000 in Q4 2021. 
    Loss-making resales in Q3 2023 were often due to short holding periods, with more than half held for less than two years. 
    Properties resold for a profit in Q3 2023 had a median hold period of 8.1 years, while loss-making resales had a median hold period of 2.0 years. 
    The median loss hold period has been below two years since late 2021. 
    Christchurch and Hamilton experienced a reduction in loss-making sales, while Tauranga, Wellington, and Dunedin saw an increase. 
    The slow rise in wider property values over the next six to 12 months is expected to improve resale performance. 
    Resale gains for owner-occupiers may not be cash windfalls, as the equity is typically recycled into the next purchase unless downsizing or moving to a cheaper location.
    Read the article

50 FHBs’ deposits wiped in Q3 sales
    In Q3 2022, 7.4% of New Zealand properties were sold at a loss. 
    Around 50 first-home buyers, mainly in Auckland or Wellington, may have wiped out their deposits. 
    Buyers who purchased in late 2020 to H2 2021 faced challenges recouping the same price. 
    Resellers making a loss may have initially intended to hold for longer but experienced changes in circumstances. 
    Financial stress might be a factor, although mortgagee sales and non-performing loans at banks are not widely observed. 
    In places like Wellington, a 20% decrease in property prices could result in the loss of equity for those who put in a 20% deposit. 
    Most first-home buyers intend to hold for the long term, potentially being unaffected even if their equity drops on paper. 
    Nationally, the median resale gain for investors was $285,000, slightly above the owner-occupier figure of $280,000. For losses, the median for investors was around $48,000, a little above the owner-occupier result of $45,000. 
    Read the article

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