The property market is about to boom! I will tell you why…
The property market is about to boom! I will tell you why…
I am continually getting asked the same question right now. “Tell me, what is the property market going to do?” As an owner of New Zealand’s only online real estate agency, I feel I am in a unique position to answer this question. Why? Because since 2015 we have been building one of the biggest comprehensive databases in New Zealand of national buyers. We are currently asking them what is happening and speak to our vendors regularly. Therefore, after hearing their opinions, I am of the opinion that at Proppy.co.nz we are very bullish on the New Zealand residential property market.
Proppy.co.nz has got an active, large national database. It’s not biased to any one region - it is now unpacking a very interesting picture. Let me tell you what it is telling us…. it is pointing only one way – the property market its set to boom again;
are low, very low! Some banks now are advertising rates as low as 2.79% for fixed rates. Even at the long end of the curve i.e. the 5 year fixed end you see rates sitting below 4%. If anything else, low interest rates will bring buyers back, and it also brings families wanting to upgrade into the property market. We are seeing this already.
. Let’s face it, residential property yield hasn’t been high recently but it’s certainly much better than having money sitting in the bank, and certainly much better than some other risky options available. We are hearing “property is still king!, “That’s where I will park my money in the near future”. I think you will have a lot of people scratching their heads in a low interest rate environment and property will again be enticing for them.
- they are not going to be quite as bad as people think. Sure, unemployment will be high and higher than what kiwis lately have come accustomed to… but I think unemployment won’t be particularly focussed into the mainstream middle class, and the wealthy brackets will still recycle properties as they would normally would. Buying and selling is not off their agenda for the moment. The passion kiwis have for property is still very much alive.
First home buyers
- they are starting to call us. We are getting a large volume of viewings in this end of the property spectrum. We have gone through recent periods where the government have ramped up deposit-to-loan ratios essentially stifling the first home end of the market. With these regulatory rules largely being removed the whole market goes full steam ahead. Let’s not forget you need all parts of a property market to function. What this essentially means is the middle of the market will work too (families upgrading) and that in turn means the high end properties / larger family homes will have ready and willing buyers. All very encouraging.
- I have spoken about them in my last blog but they are definitely coming out in high numbers. They want to help their families out in these unusual times if they can. You will see them active in all parts of the market.
- I think you will see some pivoting of commercial real estate owners moving back towards buying residential property where the market seems a little easier into the uncertain future. This government cannot let people live rough on the streets (that’s what they were voted in on) so beneficiaries will be winners in the upcoming election. Music to residential property investors’ ears, as they will be still able to pay the rent and not easily default.
– I think people are scared of it. 50+ billion dollars in this latest budget will haunt a few people. Regardless of what you hear in the mainstream media I actually think the majority of New Zealanders are slightly better financially literate than what people think… people are worried about the inflation coming and people will take up these low rates while they are on offer. It is already creating competition. Proppy.co.nz is already seeing a spike in enquiries. You will see busier open homes and this occurred in the weekend just been.
– Let’s not forget that. Those 6-7 weeks that we all stayed under one roof. You will see all sorts of selling behaviours. Divorces, kids squabbling in homes too small for them all, people living in apartments realising they aren’t all that big now, downsizing - mum and dad locked in a 5 bedroom family home, even just having time and the ability to consider and ponder their next move, all of this will and already has come to fruition. You will see vendors listing and re-buying, buying in the same market to find the home that works for them. Again, really great for a property market scenario.
New building and consents.
Last week Fletchers announced they would lay off some 1000 staff of their workforce. So, the residential new builds may start stalling. Let’s think about the government talking up getting ‘shovel ready’. I just don’t see it happening fast enough. The migration has the hand break on too. If kiwibuild is anything to go by, homes won’t be built quick enough. New build subdivisions about to come on tap possibly will be mothballed either by companies like Fletchers and the banks. So, I don’t see new suburbs popping up quickly any time soon. But what I do think we will see, is people who may have fancied a new shiny home will enter back into the more established housing market. Again, it will increase demand for everyday housing - only a good thing if you are selling into this future market.
The lure away from NZ
- there will be no OE’s and moving to a new country in quite some time, I would suggest. I look back on my OE very fondly as some of the best days of my life! But what I did do was I worked for sometime in NZ, saved a little nest egg to go on my right of passage overseas. I could have put a deposit towards a house but I chose not to and spent it in London. I saved over there instead, and bought my first home on my return. This type of behaviour in the short to medium term has been flipped on its head I would suggest. Kiwis will just stay put, but I think the smart ones will enter the first home category now and buy before heading offshore. Similarly, the kiwis returning from overseas are largely now back if they were indeed worried about COVID. They are and will now be looking around doing research. If they can find employment, they will buy. Some will buy now rather than staying another 5 years and buying their dream family home they will be somewhat forced to enter the market.
These are just some reasons and there are plenty more that we are hearing and talking about with our followers at Proppy.co.nz.
Sure, it’s a rocky path ahead, but for now we are seeing New Zealanders wanting to buy, and smart sellers taking advantage of it. It’s a great time to upgrade your home in this market! Yes, there will be isolated pockets in NZ where essentially no tourism has affected the marketplace and potential prices. However I was very encouraged to see Air BnB’s latest website statistics saying kiwis are investigating Airbnb type holidays in the usual hot spots like Bay of Islands, Rotorua, Queenstown, Wellington, etc. So, all is not lost there.
My final point which I feel strongly about is I think the property market was not broken before COVID-19 and it isn’t really now. The Auckland market was starting to really get heated again before the pandemic, and the regions were really humming along. The government stimulus during the crisis all helped. The upcoming spend after this election cycle will be a huge help as this coupled with record low interest rates & low LVR’s that have come out the end of COVID will only capture the kiwi property fascination again. We are hearing this first hand and people’s desire to want to be involved again with property.
I don’t know what you think but I think the V shaped recovery is not far away.
Am interested in your thoughts?