Tony Alexander: Six reasons why house prices are rising

Welcome to 2021 and my first weekly column for OneRoof. Each week I’ll look at different aspects of developments and trends in housing markets around New Zealand, with a special emphasis on the market accounting for about two-thirds of the value of real estate turnover in New Zealand.

But first, a trigger warning. Having undertaken housing analysis through the four housing cycle peaks since deregulation - 1987, 1996, 2004, and 2015 - there are some key things I’ve learnt about housing. The most important is that getting emotional about house price changes can be a mistake.

Distress about the high mortgages first home buyers have had to take on these past two decades to secure a property has led many analysts to forecast substantial price declines and advise people not to buy. They have had their analysis distorted by focusing on what they believe “should” happen rather than what “is” happening and what most probably “will” happen.

Getting emotional about government policy changes favouring tenants and selling one’s investment property in disgust last year or earlier has probably also not worked too well for such investors. House prices have soared these past seven months and one reason may be those earlier sellers scrambling to get back in.

The analysis and commentary I present here will be solely based on what I see happening and why, and where I feel things most probably will go using experience in the housing sector since the 1970s, and the numerous factors in play.

So, let’s start with a high-level overview of why house prices have risen so much since we came out of the nationwide lockdown in May. These aren’t all the factors, but they are the main ones.

• Interest rates were cut to record lows in 2019, producing accelerating price rises around the country immediately ahead of Covid-19, and acting as the trigger for Auckland to end its three-year period of lying “fallow” which started in 2016.

• Interest rates got cut again in March 2020 and the Reserve Bank since then has emphasised its determination to keep rates low for many years, even hinting at a negative official cash rate this year - which almost certainly will not happen.

• Banks have cut term deposit rates far more than mortgage rates and this has produced a structural shift by some investors away from low-risk low-return assets to higher risk housing. To illustrate, since January 2019 the average two-year fixed mortgage rate has fallen 1.8 percent to 2.49 percent, while the average two-year bank term deposit rate has fallen 2.6 percent to 0.85 percent.

• Almost every Kiwi believes that once the borders open, we will be flooded with returning expats and desperate foreigners. This anticipated flow of people (which probably won’t occur to the expected degree) is driving behaviour now, encouraging people to buy before the new arrivals do. Reinforcing this behaviour, many people are swapping anecdotes, true or not, of Kiwis buying properties sight unseen while still stuck offshore.

• Diversion of $10 billion we Kiwis were going to spend on offshore travel into home renovations, gardening, spas, motorcycles, boats, and house purchases. But more than that, some people have time-shifted their five-year plans away from travel, travel, binge, travel and then buy a home, to buy a home first, then one day travel and binge.

• FOMO – fear of missing out – has soared, driven not just by evidence of prices soaring, but the lowest property listings on record. I can measure this explicitly each month in a survey run with the Real Estate Institute of New Zealand. Amongst many other questions, I ask real estate agents throughout the country whether they see buyers displaying FOMO. Back in May, a net 2 percent of agents said they were not seeing FOMO. Come June that was a net 31 percent seeing it, August 57 percent, and December 88 percent.

Will prices keep rising strongly? I’ll start looking at that issue from next week.

- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz

Solo 7 Day - 200kms Tramp raising $$ for the SPCA

I am going to do a 200km tramping trip starting 4th January 2021 - 11th January and I would like your support as I am wanting to raise money for the SPCA over what is their hardest time of year. I'm not wanting to take you away from other charities you may support; however for those of us that are animal lovers you might find a way to part with a little cash......or a lot, you decide! It would certainly help me forget about the looming blisters ;-)

The trip will be starting in Turangi then towards and over the Mount Tongariro Alpine Crossing through to National park village and then onwards along the Retaruke river and Blue Duck Station, from there south to the Whanganui river. All up 200kms (or thereabouts).

I plan on doing this over 7 days, weather and volcanoes willing it will be a great trip for me and a great opportunity to raise some money for a great cause.

If you are interested here is the link to the give a little page (money goes direct to them)

https://givealittle.co.nz/fundraiser/solo-7-day-200kms-tramp

Thanks heaps and feel free to share this email and the "give a little page" link !!

Thanks Kindly 

Ray White Now - December 2020

The Ray White group released their November sales figures which were the best on record, and these were reflected through the Real Estate Institute of New Zealand data which shows the highest number of property sold in the New Zealand residential sector since March 2007. Overall, the number of residential properties sold in November 2020 across New Zealand increased by 29.6 per cent from the same time last year. 9,885 properties were sold which is the highest recorded sales for the past 13 years. The regional areas outside of Auckland showed that the number of sales increased by 18.3 per cent for the month. While the Auckland area showed a much stronger increase of 53.9 per cent year-on-year to be the highest number of sales since records have begun being taken by the Real Estate Institute. House prices, of course, have been in the news of late in regard to the annual increases and these continued during November across New Zealand. The strongest markets showed the Tasman region has increased by 28 per cent followed closely by the Manawatu/Whanganui region with a 25.8 per cent increase with property having an average median price of $500,000 in this area. Southland increased by 23.6 per cent, while the region of Taranaki showed an increase of 21.7 per cent. In total 11 regions saw a record median price achieved during November with New Zealand’s average median price moving to $749,000. A report released this week by Housing Stats New Zealand shows several interesting changes in demographic and geographic ownership of property. While there are a number of highlighted comments through this report, it does show the depth of housing throughout New Zealand and the strength of the general outlook that New Zealanders have on the purchasing and renting of property. Our Ray White numbers continue to increase with listings coming onto the market in good supply. As we move closer to the Christmas and New Year period, we continue to encourage sellers to list their property positively in regard to marketing as we believe that being able to digitise properties in the marketing area over the Christmas and New Year period will bring positive results for those who are considering selling. The buyer market continues with good strength and depth. Interest rates continue to remain low and this is providing a good level of affordability for those who are considering purchasing. Ray White Now is produced in conjunction with real-time data from our 182 offices across New Zealand. Ray White, on a monthly basis, completes over $1.866 billion worth of property transactions and currently manages a portfolio of 19,228 properties through our property management division. We welcome your enquiry to assist with your real estate needs across New Zealand.

Read the full magazine digitally here

REINZ Report October Stats

12 November 2020

For immediate release

Auckland median house price hits $1m mark in October; 9 other regions & 28 Districts hit record

median prices

Median house prices across New Zealand increased by 19.8% from $605,000 in October 2019 to a

new record median high of $725,000 in October 2020; and up from $689,000 in September this year

(a 5.2% lift) according to the latest data from the Real Estate Institute of New Zealand (REINZ),

source of the most complete and accurate real estate data in New Zealand.

Median house prices for New Zealand excluding Auckland increased by 15.4% from $520,000 in

October last year to a new record median price of $600,000, and up from $585,000 in September

this year (a 2.6% increase).

Additionally, Auckland’s median house price increased by 16.3% from $860,000 at the same time last

year to $1,000,000 a new record high, and up from $955,000 in September this year (a 4.7%

increase).

WHY ARE WE SEEING STRONG SALES RESULTS NOW?

Ray White NOW Oct 2020

Real estate markets are driven by a number of factors however the two basic fundamentals of supply (the number of total properties for sale) and demand (the number of buyers active in the marketplace) play a significant role in establishing market conditions that favour sellers or buyers. In general terms, when supply is low and demand is high these conditions are favourable for our sellers. Conversely, when supply is high and demand is low these conditions are favourable for buyers.

So what are we seeing now? Supply We are well into spring and it’s the time of year when we start to see an increase in the number of new listings coming to the market. If you look at the numbers that are occurring each week, while the supply-side still remains strong in comparison to this time last year being up 13.59 per cent, this is not enough to service the demand level that is evident on a continued basis with the sales volume lifting by 49.46 per cent on the same time last year.

Demand Demand continues to outweigh supply. When looking at the number of potential buyers in the market there are several considerations that we take into account. The number of buyers looking online for property, the number of buyers who enquire on properties for sale, the bidding activity we see each week across our auctions and also the number of people actively gaining pre-approval for finance to purchase a property. Summary When looking at the reasons as to why we are seeing such strong results in our current marketplace, we need to look at what those key contributing factors are and what part they play when it comes to transacting real estate. Firstly, it’s important to understand the effect stock levels have on the market.

With stock levels still being a topic of conversation and the recent increase in new listings coming to the market, we are still not seeing enough stock coming to the market to meet consumer demand as we continue to outsell our inventory. The second factor is the depth of the buyer pool. This plays a significant part in building competition across properties along with giving buyers the confidence to purchase, as does the sale method. 11,700 Kiwi expats returned to New Zealand as of July 2020.

Vendors who have chosen to come to the market in recent weeks have been able to capitalise on the reported results due to two fundamental factors; being stock levels and the depth of the buyer pool. As mentioned, we have seen an increase in new listings coming to the market in the last week however the depth of buyers in the market continues to put pressure on house prices and affordability. In the last 7 days across New Zealand, Ray White had 191 properties scheduled to go to auction, leading to an auction day clearance rate of 78.7 per cent. There are several considerations we observe when looking at the number of buyers active in the market.

Buyers behaviour remains constant with their journey starting out by looking at property online. Evidence shows through our Ray White website that buyer online enquiries have surged on this time last year. To expand on this, industry real estate portals such as oneroof.co.nz, realestate.co.nz and trademe.co.nz/property are also reporting compelling evidence related to online enquiries. The next organic move in a buyer’s journey is to view the property, proceeding to offer or bidding at auction. We can evidently report on this through our transparent auction data. When we take a look at our auctions held over the past week, we attracted on average 3.9 registered buyers across auction properties. When we observe different aspects of the market, one point that remains positive is our active days on market. This is the average number of days a property takes to sell in current market conditions. We have seen a decrease of 5 days across the country from 39 to 34 compared to last year. This is evidenced by the strength of the market with favourable lending rates coupled with supply and demand placing downward pressure on the average days it takes to sell a property.

Buyers having the maximum financial capacity to purchase a property is one of the key leading indicators when it comes to buyer confidence. Loan Market, our loan brokerage partner, has reported over $1.2 billion in pre-approved loans across New Zealand. These are buyers that are ready to proceed with offers where no finance clause is required. So what factors are contributing to buyer confidence? Interest rates continue to underpin purchasers buying power and today interest rates are at record low levels, advertised from 1.99 per cent fixed for one year with the OCR remaining at 0.25 per cent since 16 March, 2020.

• Importantly, the general consensus among economists is that they will remain at these low levels for the foreseeable future.

• Interest rates are a driver of home affordability and in many areas, while prices have risen in the last 12 months, corresponding interest rates have reduced.

• Banks and lenders remain very supportive of lending for residential property. The chart on page 13 shows the monthly home loan pre-approvals recorded by the Loan Market Group, which is our loan brokerage partner and New Zealand’s largest independent broker that settles over NZ$650 million in loans per month. Pre-approvals are indicative loan approvals obtained by buyers before they buy a property to enable them to bid confidently.

• Record levels of government stimulus are part of the supporting reason behind a high proportion of buyer sentiment.

Property market runs hot: prices reach an all-time high

New Zealand’s national average asking price reached a record high of $717,600 in September, a 10 per cent increase when compared with the same month last year according to the latest Trade Me Property Price Index.

Trade Me Property spokesperson Logan Mudge said out of New Zealand’s 15 regions, seven reached record property prices in September. “The average asking price in Wellington, Auckland, Taranaki, Marlborough, Manawatu/Whanganui, Northland and the Bay of Plenty all hit record highs in September as a flurry of buyers hit the market.”

Read More here….

https://www.trademe.co.nz/c/property/news/property-market-runs-hot-prices-reach-an-all-time-high?utm_source=tm-mk-property620&utm_medium=email&utm_campaign=newsletter&utm_content=article1&mkt_tok=eyJpIjoiTW1FMU1EZ3lNalpsTlRNeCIsInQiOiJOZUpIZUs1WERpZ3dKbURtTzBhbElEbVk5N3NpdUFCUjRtVnpUb2NYaFJldjdJaEZtR3ExWXd2TjhpcTQ0dFRHc1wvRGsxNmpcL2t0bFNDVGRJeW84VCs0YVBtbkVwYU5WNXp2cTh5SjhtR0VNQnMwdlhwakV5emJ0Y1J5aFwvN094ciJ9

Rather than cashing up, landlords are buying more properties after changes to the Residential Tenancies Act

https://www.interest.co.nz/property/107409/rather-cashing-landlords-are-buying-more-properties-after-changes-residential#comment-1253568

Tony Alexander.

Fears that recent changes to the Residential Tenancies Act would cause investors to exit the market appear to have been baseless, according to the latest survey of real estate agents by the Real Estate Institute of New Zealand and economist Tony Alexander.

The October survey showed a strong majority of agents reported more investors were looking to buy residential properties than were looking to sell, and the numbers looking to sell had increased every month since May, with investor interest more than twice as strong in October as it was in May.

"That ...should finally put to rest the argument that the government's imposition of new rules raising landlord costs and shifting tenancy power to renters, will generate an exit of investors from the sector and produce a sharp reduction in rental accommodation availability," the report said.

"If some investors are selling, many more are buying."

The survey's results suggest the claims, by landlord groups prior to the passing of legislation, of a mass exodus of landlords from the market was probably little more than scaremongering motivated by self interest.

The survey also found that a slim majority of agents reported seeing less interest in local properties from overseas buyers, which made it unlikely that there would be a rush of returning New Zealanders to prop up demand.

"This validates the fact that currently the gross inflow of Kiwis to our shores is very low and suggests that when international travel becomes available quarantine-free, we will not see the rush of one million Kiwis back to our shores as some might be thinking," the report said.

"However, it should be noted that ahead of lockdown the net flow of Kiwis back home hit a record of +20,000 after averaging an annual loss of that amount in the previous two decades," it said.

The survey also found that obtaining finance was still a concern for many, even with the removal of loan-to-value ratio restrictions on new mortgage lending, with 46% of agents reporting this as a concern.

However concerns about rising unemployment and loss of income are fading, with just 27% of agents reporting those as concerns compared to 48% in May.

Market Update with Bret Glazer & Donna Churton

Today the government announced the new alert levels for Auckland with a decrease to level 2 at 11:59pm on Wednesday, 23 September and the balance of the country now at alert level 1. Cabinet will meet again to review the alert level settings on 5 October.

As we enter the final full week of September our results reflect the continued momentum of the real estate market. In looking at our live listings, these are currently 26.04 per cent up on the total number of properties listed in the last 28 days, which is 2,028. While the continued number of listings is helping buyers with choice, the depth of purchasers in the market adds to the momentum of the sales numbers, which are currently 41.79 per cent ahead of the same time last year. In real terms this means that we are overselling our current listing bank, and this is adding to the pressure on prices and the availability of stock as a total inventory. Although this number is 27.01 per cent ahead of the same time last year, it continues to have variances week-by-week and this is in favour of the sellers.

There has been a lot of data released this month on the momentum of the real estate market. On top of this, there have been several new forecasts made by economists around their potential predictions of price rises or otherwise for real estate over the next quarter and 12-month period. While these predictions vary, they are now all in the positive from a 3.5 per cent lift to an 8 per cent lift in prices in 2021.

The economists are citing price increases for 2021 based on three main factors; firstly, the low cost of money borrowing at historic low interest rates which is aiding affordability. Secondly, the increased migration numbers of people resettling back to New Zealand and the growing confidence that New Zealand has curbed the recent pandemic crisis. Are these factors correct? Should there be other factors that are just as important? Only time will tell. If you are considering selling, then clearly there is significant momentum in the market that is in favour of sellers.

Well marketed properties that have transparency around pricing for buyers give a higher response rate and with the current pre-approval levels there is a deep buyer pool. We produce Ray White Now based on accurate analysis of our data for our clients to make decisions based on what is happening now. Supply and demand, pre-approved buyers and auction results are just part of the information we can provide during these changing times. Ray White has 182 offices across New Zealand, and we welcome your enquiry to assist with your property transaction.

Bret Glazer

(Ray White NOW)

The Market Did Not Slow

The new Covid outbreak did not slow the housing market, with new OneRoof-Valocity house price figures showing positive growth in all but two regions since the start of the pandemic.

The OneRoof-Valocity Covid Index found that property values nationwide were up 1.9% in the five months to the end of August.

Greater Auckland was up 1.8% on the index, despite a return to lockdown, but the best-performing regions were Hawke's Bay and Canterbury - both up 3.7% - followed by Manawatū-Whanganui (+2.5%) and Wellington (+2.2%).

Check out the full details here

We are “Spreading our Wings”

We are “spreading our wings” If you’ve not caught up with the news, we’ve had a colour change. After having many successful years in real estate, it is time for us to spread our wings, we would like to announce that we have made the move to Ray White Damerell Group. With a significant shift in the way people receive information, it is important that we explore all avenues when given the responsibility of marketing your home. It is also important that during the peaceful enjoyment of your current home we can effectively provide you information around the value of your home, or current market trends. After comparing all major players in the real estate market, we found Ray White Damerell Group to be a clear leader in the industry, having invested several million dollars in the last five years in intuitive communication systems and technology, that maximises results for you our clients when aligned with social media and internet campaigns. We are excited, and we know you will be too. Firstly, a big thank you for the overwhelming support we have received from friends, family and clients, the response has been humbling to say the least. Why the Move, And Why Now? While you still get us ‘Bret & Donna - The Dynamic Duo’ and our strengths in face to face engagement, marketing, negotiating, and selling, you now have an even more powerful team behind you. The Ray White Damerell group owns offices in Ponsonby, Grey Lynn, and Mt Albert, with over 40 experienced salespeople. Our presence in the city fringe works to your advantage along with our strong connections with the other 61 Ray White Auckland offices. A dedicated marketing team, in house legal counsel and expert administration also assist us in providing a “best in class” service. Not Too Big to Care While our family just got bigger, it does not mean we have changed. In fact, it has been about creating more time to care about what is important to you. We are excited to bring to you even more marketing capabilities to the sale of your property – you deserve the BEST PRICE! Please feel free to drop us a line, email bret.glazer@raywhite.com or phone 021509882 & Donna at donna.churton@ raywhite.com or phone 0275455353, we’d love to catch up for a coffee (or a beer or wine) any time.

A Significant Shift in the Market

The latest survey report from Tony Alexander confirms what we have observed and reported via our newsletters and blogs. In short, there has been a significant shift in the dynamic in the residential market over the last two months in particular. Buyer demand is ramping, available homes for sale are falling and prices are firm. Here’s the in-depth report: https://static1.squarespace.com/static/5ce1fd700bf20400017d3a30/t/5f56de6b35cfcb0f5c23dc93/1599528579683/Tony+Alexander_Report_September_2020_FINAL.pdf

The market really does have a spring in its step and with it the traditional listing season in the run up to Christmas. The slight obstacle in this path is the October 17 election and school holidays. Given the current momentum our bet is that neither will dampen current buyer demand.

A Property Grab is Underway!

Despite the return to level 3, August proved to be a huge month for us here at UP and the residential market in general. Using our virtual tour and virtual auction technology we managed to build on the momentum created before the lockdown. It was interesting to see how seamlessly buyers and sellers slotted into virtual mode, this resulted in some outstanding auction results and a 91% clearance rate.

For us serving central Auckland there appears to be a ‘property grab’ underway. No mystery really when you consider the long term historically low interest rate environment is only likely to get lower. This leaves the value of money in the bank at close to zero, hence the refocus on property. Add the likelihood of ex-pat Kiwi’s returning in droves as the borders reopen and you have a recipe for property demand that is likely to be maintained.

The Flight to Property is Both Increasing and Understandable

If nothing else the Covid-19 lockdowns seem to have had many consider the direction of their lives. As a consequence it seems real estate has come front of mind for many. Given the likelihood of a negative OCR or even lower interest rates, the flight to property is both increasing and understandable. For first home buyers and renters it is a moment in time not seen before and for those looking to buy up its never been more affordable. Yes you need to be employed to be able to take advantage of the situation, given that, the age old concept that ‘cash is king’ is seriously under threat. Here at UP most homes in and around $1 million sell within days and we have interest in pretty much everything. In spite of this level 3 lockdown we have had another very strong month.

Things Are Looking UP!!

Things are looking UP! Alongside our ‘by design’ approach we have developed a digital package for homeowners – we call it ‘Digital by Design’. The results are impressive and are resulting in increased exposure for our vendor clients. Otherwise known as the ‘UP Digital by Design advantage’, on social media our brand has reached approximately 61% of Auckland City’s population.

Last month our Matterport digital walk through tours generated over 72,000 impressions, with over 11,000 people taking the virtual tours of the homes we have online. Since August 2019, traffic to the UP website has more than doubled, going from averaging 2,000 per day to now 4,130 daily.

As a litmus test of the strength of our marketing, over the last 30 days UP listings on Trademe Property have attracted 47% more views than the average. In short, the number of eyeballs on the homes we are marketing is increasing exponentially. All this adds up to added value for those using the UP ‘by design’ model.

How the market is responding post Covid-19

With winter and the school holidays upon us, central Auckland traditionally heads to warmer climates offshore. However this year with border controls in place it feels like we are in stay home and get on with it mode. No wonder, given many had a 6-7 week break during level 4. Regardless of the reason, business is brisk, our June results were very encouraging. Because of the factors just explained, if you’re thinking of selling, now really is a very good time. Speaking of which, we are having great success with our new Digital by Design packages. These are incredibly cost effective and a great way to market your home using today’s technologies. I’d love to explain. If you’re looking for an overview of how the market is responding post Covid-19, this latest report from REINZ is particularly interesting. https://bit.ly/2YMO5eF

Now maybe your moment

With the shortest day behind us all of a sudden the runway towards summer has opened up - always a great feeling! With demand for homes strong and supply limited, we are hopeful the spring listing season will emerge early to satisfy the growing number of buyers standing in the market. Big hit numbers on the web are translating to large numbers viewing our open homes, which in some cases is resulting in brought forward auctions. No real surprise when you look at the cost to rent a property alongside the cost of ownership. At the entry level end of the market, the prospect of ownership for many first home buyers is particularly appealing. Whether or not this activity is a moment in time or the new normal – time will tell. In the meantime if you’re considering selling now maybe your moment.

Free at last!! Or are we?

INDUSTRY UPDATE: Free at last!! Or are we? Level one has ushered in our ability to function on a ‘business as usual’ basis, the only issue is that during the lockdown period it seems some homeowners became convinced by various media that it was not a good time to sell. This has resulted in a general shortage of available homes for sale. This fact is confirmed with Trademe listings in Auckland down 23% year on year. Conversely however, buyers are out in force, buoyed by low interest rates they are very much on the hunt, in many cases needing to compete hard for their next home. The upshot is that due to supply and demand, in the areas we serve, prices are firm. In many cases auctions are being brought forward, open home numbers are strong and some homes have been snapped up in days. In fact it is actually a great time for homeowners to be on the market. We just need them to come out of lockdown!

Market Update 5th June 2020

Business is brisk. It is surprising the amount of activity there is in play right across the price spectrum. Doubtless we will be in level one within days, however it feels like the housing market has taken a pre-emptive position. Several of our homes experienced 50-80+ buyers viewing at their open homes last weekend, this on the back of record numbers viewing online, some homes received over 4000 hits in a 24 hour period. If you’re thinking of making a move now is a good time.

Market Update, 28th May 2020

With LVRs (Loan to Value Ratios) now gone and interest rates continuing to trickle down it really is a wonderful time for buyers to become homeowners. The market is returning to normal activity post Covid-19 restrictions, as peoples circumstances evolve. Our expectation is that market values will be robust on the back of low interest rates, fuelling both the purchasers ability to buy and the sellers capacity to hold. Despite level 2 we continue to field solid enquiry and buyer interest. Inspections, offers and sales are all on the increase as we move into the new normal. There is no reason to be fearful about going to the market. What we read and hear about the market place, redundancies and business closures is not stopping people getting on with their lives. As to market values in the areas we service, this very much depends on the type of property you are selling i.e. the demand for it, based on its amenity value and condition. In short, to apply an arbitrary comment is not appropriate, as every property/situation is different. What we can say is that from the start of lockdown until now, there is little evidence of any significant drop in values.

Activity is on the INCREASE!

We have attached some interesting insights just received from Trademe. As you can see activity is on the increase, enquiries are developing, which are evolving into offers. They say it takes 30 days to create a habit, a lot of us have just spent 42 days in lockdown. Needless to say it will take time for the real estate market to truly emerge from hibernation. It would be fair to say though, that there is life after lockdown, we are currently pleasantly surprised at just how much.