After a long period of ‘normality’, community transmission is back and we find ourselves in a Level 4 lockdown. A place, quite arrogantly, I don’t think any of us thought we would ever be again.
Unlike last year, there doesn’t appear to be the same level of fear. We have been here before. We understand the virus better. We have a vaccine. And working from home is a firmly established business practice. So, what next for real estate?
The RBNZ was due to review the OCR (official cash rate) the day we went into lockdown so this decision has been delayed. Adrian Orr did however continue on the media circuit, discussing his thoughts and the bank’s monetary statement which has since been published. What the Governor made clear was that he believed the housing market was over heated. But with a near oversupply of housing stock in the construction pipeline, and net migration potentially dipping into the negatives, he does expect house price falls in the region of 5%. Making percentage predictions is a dangerous game, something he might have forgotten from last year where wild predictions of 30% drops were made!
Townhouse developments are popping up like mushrooms in a cold Dunedin flat, with multiple developers chasing the same types of properties. The heat in this particular sector has placed enormous pressure on labour and materials on what is already an incredibly tight supply chain. The old rule of thumb for development was a profit and risk of around 25 to 30%. A standard margin these days is down in the low teens which can put developers at risk should costs escalate as prices stagnate.
Millionaires on the minimum wage
In a previous life I was a valuer for a Lower Hutt based company. At the beginning of the last decade the average house price in Stokes Valley, famous only for its Guy Ngan sculpture, was around the $250K mark. Fast forward one short decade and you have properties selling over a million dollars! The average income for the suburb however has only moved slightly placing the debt-to-income ratios at dangerously high levels. This makes such locations vulnerable to movements in borrowing costs.
The Wellington market
The market continues to tick along although it feels like some of the higher priced properties are hanging around a little longer. When dealing with buyers on our own properties they have been less inclined to factor in future price growth when considering the expense associated with deferred maintenance.
During this lockdown, as with the last, the team have spent many an hour on the phone checking in with our buyers. Turns out not a lot has changed, and people are looking forward to the day they can get back on the open home circuit. Very happily, the move into Level 3 today means we can show houses, albeit with some restrictions, again. If you have any questions about viewing property or selling at Level 3, please do not hesitate to call.
Wellington market quick stats
Alert Level 3 Private Viewing Guidelines:
- There are only two private viewings permitted at any property daily so please ensure you call ahead to guarantee your spot
- Please arrive on time, text the agent and wait in the car until the agent indicates it is safe to enter
- Only two people per bubble are permitted to attend the viewing
- All attendees must scan in, sanitise and wear a mask
- Ensure physical distancing is always maintained
- Please advise the agent if you would like to open cupboards or doors and they will do that for you
- All visitor contact details will be held and shared for the purposes of a contact tracing if required
- Anyone who has been unwell or self-isolating is not permitted to view any property