Bret & Donna weekly Commentary.

...
Interesting what makes the headlines. Seems journalists generally take the information then work out what could make the biggest negative impact. So it is with the July REINZ statistics. The headlines were a flat or falling market (down 2%). The headline should have been Best July in 3 Years! As nationwide the number of sales showed an increase. It’s no wonder confidence is down. Our advice – stop reading the news and get on with your life. Let’s accentuate the positive and eliminate the negative. The current market is active and changing for the better.

How low can it go?

How low can it go? The OCR is falling like a rock – will that translate into being the fire-starter for the property market? Time will tell.
The bigger question is if it’s a soft/falling market – doesn’t that make it a great time to buy? The bottom line is it’s all about confidence – a sentiment that seems is in short supply according to the Business Confidence Survey https://tradingeconomics.com/new-zealand/business-confidence
This is no doubt the reason why the upper end of the market is a bit sticky. However there’s no doubt with interest rates as they are it is a great time to buy. Those who are prepared to buck the current sentiment will no doubt be rewarded in time. The phrase ‘should have bought back then’ comes to mind. Of interest, we note competition for property returning with several multiple offer situations in play.

August Update.

2019-08-01 10_58_38-(1) Bret & Donna - UP Real Estate - Home.png

AUGUST BLOG: Call us optimistic, but we sense the tide may be turning in the residential property market. We are currently experiencing an increasing number of people who have decided to enter the market as purchasers. This is translating into solid activity. The foreign buyer ban has cooled the market, particularly in the $2m plus price bracket; we note for the first time more overseas owners selling than buying. However with the shortest day behind us our industry is experiencing the traditional midwinter shortage of new listings. For a variety of reasons, including how the garden looks, fewer vendors tend to list their properties in the winter months. The result is a realigning of the supply and demand equation which is generally frustrating for buyers and very good for vendors. Our company auction clearance rate is in the 80 plus percent range for the 2019 year to date. Food for thought.
It’s going to be interesting to see how the current rental market, particularly at the lower end, plays out. The change in the way investors can off-set losses, the Bright-Line Test, the Healthy Homes legislation and a shift in the LVR are all undoubtedly affecting the appetite for investment. At the same time, as mentioned previously, renters are taking advantage of this moment in this market to become homeowners, in many cases buying those homes that were rented. So the question is – who is going to supply the rental housing in the future? I’m not sure disincentivising mum and dad investors and others is a smart thing, if the tax payer ultimately is left as the supplier of rental housing.
#bretanddonna
#thedynamicduo
#uprealestate
#auckland

Disincentivising Mum and Dad investors?

Was the netball win compensation for the cricket loss? Not really, but congratulations to the Silver Ferns – wonderful!

It’s going to be interesting to see how this rental market particularly at the lower end plays out. The change in the way investors can off-set losses, the Bright-Line Test and healthy homes legislation and a shift in the LVR are all undoubtedly affecting the appetite for investment. At the same time, as mentioned previously, renters are taking advantage of this moment in this market to become homeowners, in many cases buying those homes that were rented. So the question is – who is going to supply the rental housing in the future? I’m not sure disincentivising mum and dad investors and others is a smart thing, if the tax payer ultimately has to become the supplier of rental housing.

 

Here's to a Great June !

It’s mid-winter, the tides going out in business confidence, add news of a water shortage after one of the driest January to June periods on record and you have a recipe for a flight to Fiji!

With school holidays starting this week, it may be the perfect solution for Aucklanders down on serotonin and Joie de vivre!

Not us! We’re here making the most of low interest rates and keen first home buyers. More than that, we are being pleasantly surprised at the consistency of our sales volumes. Largely thanks to our 80% plus auction clearance rate, our June 2019 was up 20% on June 2018 in unit sales and 32% in the dollar value of sales made. In short, we are taking a glass half full approach.

64809872_2894663047272090_628262971335770112_o.jpg

Market Update

In a market where buyers can be tentative, the ability to get them to engage is a key issue. While the numbers attending open homes are on average down, buyers are attending our online open homes in droves. This is translating into a higher percentage of qualified buyers at our UP open homes – not so many tyre kickers. Our virtual walk-through tours allow buyers to walk through a home at the click of a mouse, at their own speed, stop and look around and revisit at will. They also have a ‘dolls house’ and floorplan view at their fingertips. Our statistics have shown these virtual tours to be 7-10 times more engaging than an ‘agent fronted’ video. Most searches today are conducted via a mobile phone, virtual tour technology has the ability to engage across ages, demographics and all price ranges, the consequence is that our buyer reach is increased exponentially. As other agencies are reporting lower sales numbers in this market, we are actually up. There is a range of reasons for this – without a doubt this outstanding technology is giving our homeowners/vendors a distinct advantage. The great news for our clients is that we are currently supplying this outstanding medium as part of our incredible ‘no-cost’ added value media package.

Click here and take a tour https://my.matterport.com/show/?m=9fyP6Y9rd1j

Market Update.

MARKET UPDATE: If buyers or sellers were waiting for the budget before making the decision to proceed, the wait was not worth waiting for! The budget was noticeable in its absence of anything around tax, property or how we might stimulate the economy. In short, there’s no reason to not get on with your life. Particularly if you’re a first home buyer or investor – now’s your time. https://www.interest.co.nz/…/lower-interest-rates-flat-hous…
Is it a good time to sell? If the web traffic around our listings is anything to go by, yes there is huge buyer interest in the wings. Will you get a good price? Depending on what your property is, where it’s located and how it’s presented, yes. Things around the residential market in the area’s we serve are not nearly as bad as the media headlines portray. If you’re thinking of making a move, give us a call we'd be happy to fill you in.

61745906_2364730940245749_1996245239483858944_o.jpg

Market Update

INDUSTRY UPDATE: Are we really just sheep? It never ceases to amaze me that sales volumes rise as prices rise - go figure. It would seem people would prefer to pay more when everyone else is. However statistics tell us that currently prices have softened somewhat and at the same time interest rates have continued to fall to historically low levels – the perfect scenario for buyers. Yet industry wide sales numbers are down. Savvy buyers should be onto this and make the most of this moment in time. It’s a great time to buy – it would seem the ingredient that is lacking is the confidence to leave the herd

Market Update

INDUSTRY UPDATE: News of the week – it’s Archie… Who would have thought. 
Less surprising was a drop in the OCR (Official Cash Rate). How this will flow onto mortgage rates time will tell. It would be safe to say however rates won’t be rising any time soon. Regardless it will give further confidence to house buyers who are already enjoying mortgages in the 4% range for 3 years. It would seem buyers are getting a whiff of this. In answer to what’s the market doing? It’s actually quite balanced, price aside there is buyer interest in pretty much everything we have listed – prices are not rising and buyers are particularly cautious in their approach. It would be fair to say the selling process is taking a little longer. But actually it’s all good.

Market Update

Market Update

They say nothing stays the same for very long. Well we can report that is very much the case for the Auckland real estate market we serve. April has ended on a very high note with record sales numbers on our board. In short, there is a new breeze blowing – confidence is returning as witnessed by many ‘multi-offer’ situations occurring alongside competitive auction bidding. Those homes that had remained unsold are steadily being picked off by buyers making the most of low interest rates. In summary, we are now working hard to find more houses to meet renewed buyer demand.

Need to sell?

Give the 'The Dynamic Duo' Bret & Donna a Call!

Market Update.

With the Capital Gains Tax monkey now off the back of the property market it feels very much like a new breeze is blowing. Certainly for us April has been an outstanding month with great sales being made across the price ranges. So much so we are now in a situation where we are looking hard for more options to satisfy the increasing list of cash buyers looking to purchase. In short, our prediction is that these next months will be a good time for vendors looking to sell, if that’s you, I’d love to hear from you. I have a no cost marketing package that is proving particularly effective.

Autumn update

With the end of daylight savings and as we approach Easter and the school holidays we note the traditional shrinkage in homes being listed for sale. Alongside this we also note an increase in the number of sales as buyers and sellers find a meeting of the minds albeit after a protracted period. These factors together may work in favour of those listing in this early Autumn period. With that in mind, here’s brief article that is worthy of considering if you are looking to sell.   

https://www.oneroof.co.nz/news/ashley-church-how-to-sell-your-home-in-a-flat-market-36174

Six Factors - Tony Alexander

I thought this piece by Tony Alexander featured on OneRoof was a great overview of the market - well worth reading.

https://www.oneroof.co.nz/news/tony-alexander-the-six-factors-that-will-determine-another-house-price-boom-in-nz-36112

In short, the dynamics of the market place have changed, and are changing. Those vendors that can see that will meet the current market, which may be the reality for some time.

#CGT Capital Gains Tax.

The talk of a Capital Gains Tax now appears to be being kicked down the road and potentially watered down. This politically sensitive potential change to the Tax System will no doubt be modified in line with poll reactions. Either way for those buying and selling the family home it will have no impact. You can’t help but wonder if the unintended consequence of a CGT is that more money is invested in the family home rather than a rental investment. The double whammy being house prices increase and rents escalate?

 

Good News - 38% Increase in Sales!


Good News - 38% Increase in Sales!


We are thrilled to report a 38% increase in our sales numbers in the current financial year, plus a record December. Put those facts alongside the recent headlines and it begs the question – how can that be? In short, UP Real Estate started this business 25 years ago with the specific intention of providing a bespoke focused approach to every listing – we call it ‘Real Estate by Design’. It’s different, incredibly effective and brings with it significant benefits to each of our clients – the facts speak for themselves. In short, if you’re thinking of selling or know someone that is, you should find out how we can help. I’d love to demonstrate the difference.

‘Clean sweep’ for regional house price rises

December saw the national median increase by 1.5% from $551,750 in December 2017 to $560,000 in December 2018. Prices for New Zealand excluding Auckland increased by 6.4% to $480,000 up from $451,000 in December 2017. In Auckland, prices rose by 0.2% to $862,000 up from $860,000 in December 2017. Only one region experienced a record median price – the Bay of Plenty with a 2.0% increase taking the median to $610,000 up from $598,000 in December 2017. “Whilst the Bay of Plenty was the only region with a record median price achieved in December, in actual fact it was a strong month from a price perspective as every region in New Zealand saw an annual increase in the median price.

The last time all regions saw annual price increases was back in June 2017,” says Norwell. “Additionally, Auckland finished the year in a strong position with the highest price for the region in 9 months at $862,000.

Breaking the region down, Auckland City saw an annual increase of 7.8% resulting in the highest median price for the City in six months at $986,000 and Waitakere City had a 6.2% increase to record median price of $828,000. However, on the flip side, North Shore City median prices fell -11.6% to $980,000 and Franklin District saw a fall of -4.2% to $680,000.

Source - Press release REINZ 18/1/19

Auckland Following Australia ?

Auckland Council's chief economist David Norman argues Auckland's housing shortage will prevent Sydney and Melbourne style price falls.

The downturn in the Australian housing market is being closely followed on this side of the Tasman, with many people believing Auckland's housing market will follow the Australian market and head into a slump next year.

However Auckland Council's chief economist David Norman doesn't think so.

In a LinkedIn post, Norman said Auckland's housing market was unlikely to follow trends in Sydney and Melbourne.

"Suggestions that the Auckland housing market will follow those of the Australian eastern seaboard seem baseless," he said.

"Sydney and Melbourne are in a very different position, having not systematically under-built the way Auckland did, and thus having no significant shortfall.

Related Topics

PropertyAuckland CouncilAustraliaHousingApartmentshousing constructionDavid Norman

"Auckland's shortfall is around 46,000 dwellings.

"Our trans-Tasman cousins' two largest cities have an oversupply of apartments, largely the result of building for the foreign investor market that is not as buoyant any more (the way Auckland overbuilt for overseas students in the early 2000s).

"This has concerned some of the banks in Australia for years and explains some of their nervousness about lending for apartment projects in NZ.

"Hopefully this chart [See below] will dispel some of their fears!"

"We need to keep building for a very long time at current rates and faster to eliminate our shortfall," Norman said.

2019-01-14 12_39_32-Auckland Council's chief economist David Norman argues Auckland's housing shorta.png

Ring Fencing - A Solution?

The Inland Revenue Department (IRD) admits it can’t be certain how removing a tax break enjoyed by residential property investors will affect the rental market, as well as the property market more generally.

It can however say with a high degree of certainty that once fully implemented, the proposed law change will cost investors $190 million a year.  

Currently residential property investors can use losses on their rental properties to offset the tax they need to pay on their other sources of income - wages, salaries, business income, etc.

However the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Bill, introduced to Parliament on December 5, seeks to change this.

If passed, a residential property investor will only be able to offset deductions against income from their property portfolio.

The aim of the proposed law change is to level the playing field between property speculators/investors and owner-occupiers.

By stopping subsidising investors’ mortgage servicing costs, the Government hopes their abilities to outbid owners-occupiers for properties will be reduced.

The IRD, in its regulatory impact statement, says this could “improve first home buyers’ ability to compete with investors, improving housing affordability for home buyers, and increasing the share of New Zealanders who own their own homes”.

However it has a “low” degree of confidence in this outcome eventuating.

It notes: “There is significant uncertainty about the net impact of the policy on the housing market, especially on the rental market.

“Overseas experience underlines the uncertainty in the direction and magnitude of housing market impacts. For example, negative gearing was banned in Australia between 1985 and 1987, and while rents spiked in Sydney during this period, they were flat or falling across much of the rest of the country.

“The exact relationship between the tax changes and observed changes in rent is unclear.”

Related Topics

PropertyIRDProperty investmentproperty speculationring-fencing rental lossescapital gainsrental incomelandlordsRentsHousing AffordabilityStuart Nash

The IRD also notes that "given the number of other policy and regulatory changes to the housing market, it may not be possible to isolate the impact of this proposal on the housing market".

However when it comes to the impact on investors, the IRD is fairly confident in its estimates.

It says 40% of taxpayers with rental properties record losses at any one time. And on average they enjoy a tax benefit of $2000 a year.

The IRD points out: “The magnitude of losses being claimed is likely to be dependent on changes in the housing market (for example, increases in rents will tend to reduce rental losses, all other things being equal), and interest rates.”

While this $2000 figure might sound relatively low, the IRD says reduced returns for some landlords could encourage the transfer of housing stock from investment housing to owner-occupier housing.

Given owner-occupied houses tend to have few people per house, this could put pressure on the rental market, unless there’s an adequate flow of new housing into the rental market.

“This may lead to increased rents. Landlords may also pass on their rental losses to tenants in the form of increased rents,” the IRD says.

Nonetheless, the IRD acknowledges the context in which the law change is being proposed:

“Speculative capital gain is a likely driver for investor activity in the residential housing market,” it says.

“The average return on rental property excluding capital gains is low – the average gross rental yield on a three-bedroom Auckland property is 3% per annum. This suggests investors are buying property in anticipation of capital gain.”

Revenue Minister Stuart Nash says: “In conjunction with the extension to the bright-line test [from two to five years], ring-fencing losses from rental properties would make property speculation less attractive and level the playing field between property investors and home buyers.

“The new rules will not apply to a person’s main home or a property that is rented out and used privately such as a bach.”

INDUSTRY UPDATE

INDUSTRY UPDATE: With an OCR on hold and a current interbank mortgage war that is resulting in record low rates, it’s no wonder October numbers just released have resulted in an increase in the number of sales. Alongside this, the Reserve Bank have flagged their intention to review the current Loan to Value Ratios. Currently, banks can only lend 15% to new customers with less than a 20% deposit and 5% of banking to those with less than 35%. 
Our observation is that in real terms there is no shortage of homes available, rather sales volumes have been and still are limited by bank funding criteria. Consequently, these two factors together should have a positive impact on market sentiment and ultimately activity.

pig.png