NZ residential rental market news, November 24

Interest deductibility restoration to be expedited, record rent rises, and reduced home loan rates.

This week's TLDRs...

Interest deductibility restoration to be expedited

National’s tax cuts will continue, but funding will no longer come from a tax on foreign buyers; instead, money will be sourced through reprioritisation and other revenue methods. 
No ongoing commitment to income tax changes, including threshold adjustments, beyond 2024, with the Fiscal Plan subject to amendment based on new information or events. 
ACT’s policy to expedite the restoration of interest deductibility and introduce tenancy law proposals, such as a “pet bond,” has been adopted. 
The flexibility of Medium Density Residential Standards will be coupled with ACT’s plan to share a portion of GST from new builds with councils. 
National’s fiscal plan, tax plan, 100-day plan, and 100-point economic plan will proceed with exceptions outlined in the agreements. 
Assessment and response to the impact of energy prices on inflation, as well as the impact of inflation on average tax rates, will be conducted by 2026. 
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Underwhelming search activity on Realestate co nz through October  

Average search activity on Realestate increased by only 1.9% in October compared to the previous year. 
This modest increase is surprising given that October of the previous year had the lowest residential sales recorded since 2011. 
Sales in October this year increased by 7.8% compared to a year ago. 
Contrary to expectations for a spring increase, the national average search per listing declined in both September and October. 
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Ominous signs for the housing market

The housing market's summer start is slow, with a growing gap between newly listed properties and those selling. 
In June, Realestate co nz had 6218 new listings, almost closing the gap as REINZ recorded 5629 sales. 
By October, new listings surged to 9529 (up 53% from June), while sales remained flat at 5619, creating a gap of 3910, a concerning trend. 
Despite hopes for a market recovery, sales numbers and pricing trends have not shown the expected uplift. 
Realestate co nz's average asking price rose from $841,688 in June to $920,678 in October, while REINZ's median selling price increased marginally from $780,000 to $795,000. 
The gap between asking and selling prices more than doubled from $61,688 in June to $125,678 in October. 
With only three weeks until the Christmas break, a quick turnaround is needed for any signs of recovery. 
If current trends persist, there could be a rise in total stock levels, longer property listings, a return to a buyer's market, and downward pressure on prices. 
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500 loss-making sales

The seller of a Hataitai property in Wellington incurred a loss of over $400,000. 
CoreLogic reported that loss-making property transactions increased to 7.4% of sales in the September quarter, up from less than 1% at the end of 2021. 
Among 500 loss-making sales, 50 sellers were first-home buyers who had purchased within the last couple of years. 
The Hataitai property was purchased for $1.73 million in June 2021 and sold for $1.325 million in August, resulting in a significant loss. 
Other notable losses included a Nelson property sold for $1.425 million in September, bought for $1.81 million two years earlier, and an Auckland property sold for $875,000 in July, purchased for $1.208 million in 2021. 
The properties facing the worst losses were owned for just over two years or less, and the reasons for the losses varied. 
Economic factors, market timing, and individual circumstances contributed to the losses. 
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Landlord ordered to pay for jumper that was thrown away

A landlord was ordered by the Tenancy Tribunal to pay $150 to a tenant who claimed the landlord disposed of a sentimental jumper. The tenant asserted the jumper had emotional value, given by a deceased ex-partner, and was left to dry on trellis fencing near his car. The landlord denied discarding the jumper, blaming the property manager, and cited flat rules about leaving personal items in communal spaces. However, the landlord failed to provide evidence of warning the tenant to remove the jumper from communal space. 
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REINZ’s House Price Index

The Real Estate Institute’s house price index rose by 1.1% month-on-month but was down 2.5% compared to the previous year. 
There were 2.5% fewer sales than in September but 8% more than in October 2022. 
The national median house prices are still 14.6% lower than their peak. 
House prices rose by 40% during the pandemic before the downturn, leaving recent buyers at risk of losing their deposits if they sell. 
Prices are up 5.8% over the last five years. 
The Real Estate Institute anticipates watching the next three months for the impact of new government policies, high migration flows, the cost of living, and global factors on the market. 
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Auckland is the #3 most expensive city in the world

Auckland ranks as the third most expensive city globally for rents, behind Sydney and Tokyo, according to a report by Knight Frank. 
Auckland's rents increased by 13.1% over the 12 months to September, with a 5.9% rise from the second to third quarter which might apply to newly signed rental agreements rather than existing rentals. 
The Prime Global Rental Index indicates that rents globally are rising at a rate three and-a-half times their long-term pre-pandemic trend. 
Auckland's rent increases are attributed to record numbers of new migrants entering the country and a shortage of rental housing. 
In the year to September, a record net gain of 119,200 people settled in New Zealand, creating housing demand.
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Gisborne to require 5,000+ new homes, with concerns over affordability

Gisborne District Council plans to densify the city as part of the Future Development Strategy over the next three decades in anticipation of a population increase of 8700 people. 
The plan aims to create capacity for 5650 new houses in Gisborne City and an additional 2235 outside the city on existing zoned land.
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Developer to sell 1,200-home subdivision

The developer of a Mangawhai subdivision with 1200 houses is selling the lot, despite partial sales in stage one. 
Work slowed significantly at the end of the previous year, leaving the greenfield site without houses five years after plans were unveiled. 
Golden Homes, selling house and land packages, sought clarification from the developer amid industry rumours. 
Mangawhai has high property values, with a median house price matching Auckland, and is seen by some as the next Omaha. 
Mangawhai Central's director, Brian Hong Biao Chen, indicated a planned investor exit as the reason for the sale. 
An incoming developer is expected to honour existing pre-sold packages as per the overall sales agreement. 
Court requirements for 50,000 litres of potable water per household impacted the scale of Mangawhai Central. 
The developer proposed ambitious plans for freshwater needs, including a pipeline from Whangarei District supply. 
Investigations into water projects have been shelved until the resolution of the three waters amalgamation.
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The first bank rate cut

Westpac has reduced its two and three-year home loan rates by 10 basis points and its four-year rate by six points. 
The bank now offers the lowest advertised special home loan rates among the five major banks for terms ranging from two to five years. 
Short-term fixed rates have been increased by Westpac in response to varying funding costs. 
Westpac's adjustments aim to address changing funding costs and maintain competitiveness in the market. 
The bank emphasises its commitment to supporting borrowers and savers, offering good value on various home loan terms.
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OCR cut predictions

There might be no advance warning from the RBNZ if the OCR starts falling, as the central bank tends to talk rates up until the moment it starts to drop them. 
Most economists expect rates to start falling at the end of next year or early 2025, with ANZ abandoning its prediction of another OCR rise early next year. 
However, an OCR cut could happen as early as the middle of next year due to the economy's weakness. 
Kiwibank predicts the OCR to remain unchanged in the RBNZ's final monetary policy decision for this year, citing falling inflation beyond forecasts and a quicker-than-expected loosening of the labor market. 
BNZ's Stephen Toplis notes a startling change in the labor market, with businesses transitioning from a shortage of staff to having choices in hiring, potentially leading to a peak in wage inflation. 
High interest rates have contributed to a 3.7% decline in consumer spending over the past three quarters. 
The ongoing net inflow of migrants defies expectations and is putting upward pressure on demand, potentially affecting the RBNZ's stance on rates. 
ANZ suggests the RBNZ could keep the OCR peak unchanged, stress there is a long way to go, and emphasise that the next move could be in either direction, depending on data outcomes. 
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Keyhook makes international waves

International proptech site Proptechbuzz.com highlighted Keyhook as the #1 international proptech product last week after Keyhook's launch on the platform.
Proptech is the development and use of technology to improve the processes of the real estate and property industries. It has seen significant growth as an industry over the past 5-10 years.
Sites like Proptechbuzz aim to highlight international industry leaders and emerging players on a global stage.
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