The big change this year has been the number of parents looking to buy property for their children. There are two motives driving this change: providing accommodation in a tight rental market and securing a foothold in the investment market. The difficulty for any buyer at the moment is stock levels with only 552 properties available for sale at the time of writing.
This month we ask why is it that so few properties are coming to the market.
It has never been easier to own a rental property. Upwards pressure on rents coupled with the lowest interest rates we have ever seen has meant it is now possible to buy a cash flow positive property. The last few years have seen fantastic returns and an increase in paper wealth for property investors. Even the introduction of new rental rules hasn’t dampened the morale of landlords who have (in many cases) just passed increased costs onto tenants. Policy change can often insight market change and while the logical prediction may have been a mass exodus of investors, we have only seen numbers on the rise.
For anyone with baby boomers as parents, you are likely to have been regaled with stories of 20% interest rates to counter the stories of hardship as first home buyers attempt to get into today’s market. Securing finance in those days was the tricky part. Immaculately dressed you would go cap in hand to the bank manager to beg for funding which was more often than not denied. Fast forward forty years and banks will bid for your business and depending on their current position they may offer a cash incentive as well. This cheap money has allowed more people to purchase real estate. Many own more than one property which contributes to the reduction of supply.
The land of Milk & Honey
Prior to the 2008 election the then leader of the opposition filmed an ad in the Westpac Stadium claiming that 34,000 New Zealanders left for greener pastures in the preceding year. Fast forward a decade and New Zealand’s population has exploded with mass migration and little thought given to how we should effectively manage such an influx. Increased population with no forward planning has seen pressure placed on an already tight housing market.
Lost generation of construction
Very few people have interest in properties that were constructed between the early 1990’s and the 2000’s. This is mostly due to tricky designs and cheap materials causing what is now commonly referred to as ‘leaky home syndrome’. Buyer aversion to this period of construction has seen a large proportion of properties constructed in this era removed from buyer consideration. Couple this with an increasing reluctance by banks to lend and the available pool of viable property for sale is significantly decreased. More recently we are seeing a similar issue occurring with homes clad in asbestos containing materials, which has in turn become an issue for lending and insurance. When buyers can’t obtain finance, it makes property very hard to sell which again contributes to the stock shortages we are experiencing.
We are currently working closely with over twenty local families looking to secure their forever family home. Funnily enough, my family and I also sit firmly within this camp. In a normal market, buyers would have multiple properties to consider at any given time, at which point they would secure their dream home and sell their current one. But families hate insecurity and are unwilling to move without knowing they can be successful in their next purchase. This Mexican standoff is causing a lot of frustration and a major issue in the Wellington property market.
The Wellington Market
I’m unsure if anyone can really make sense of the market at the moment! January was full speed ahead, with a drop off the pace in early Feb only to finish strong. Some properties are getting astronomical attention while others just aren’t. My tip to buyers is to worry less about purchasing their dream home and just focus on getting a foot in the door. Like the great Tom Panos would say, it’s not your wife, if you don’t like it, sell it!
WELLINGTON MARKET QUICK FACTS
Average sale price by Ward:
What’s on this March in Wellington:
CubaDupa 2020 Cuba Dupa, 107 Cuba Street, Saturday 28 March and Sunday 29 March
The last weekend of summer will see CubaDupa return to the streets of Wellington on the 28th and 29th of March 2020 for the most vibrant and creative event on the calendar.
This free, family friendly event, boats over 19 hours of curated entertainment spanning the genres and creative mediums, and has become synonymous with colour, character, costume and a weekend at which Wellingtonians feel free to bring out their wild side.
Newtown Festival 2020, Riddiford Street, Riddiford Street, Newtown, Sunday 8 March 9:30am – 9:00pm
Come to Aotearoa’s biggest free music festival and street fair, in the heart of Newtown. On Sunday 8 March 2020, the beloved Newtown Festival invites a 80,000 strong crowd to the streets of Newtown to enjoy over 150 acts and 450 stalls in celebration set in one of Wellington’s most exciting and colourful communities.
Wellington Pride Parade, Courtenay Place, Tennyson Street, Saturday 7 March 6:00pm – 10:00pm
The world’s coolest little capital will once again come alive with a huge celebration of Pride, Love, Inclusion and Diversity.
There will be Dykes on Bikes. There will be drag performers. There will be floats from community groups, charities, our forces and corporates – all coming together to show off the glitz, glamour and glory of our community. There’ll also be 1000s of spectators lining the streets to witness this dazzling annual display of diversity.
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always happy to help.