Predicting the unpredictable
The market is back in full swing and now is the time we all better start looking forward to our Easter break! We had a great holiday spending time with family but we’re excited to be back for another year in the property market. As we attempt to try and predict the unpredictable, here is how we think the year might shape up.
Auckland finished 2019 strong with good prices and clearance rates on the up. The regions continued to bathe in the afterglow of strong growth, although the most recent data has indicated a slowdown. A look across the ditch will see strong indications of a bounce back in both the Sydney and Melbourne markets. This, in turn, should fuel continued interest in major cities around New Zealand. The regions will take a pause after some significant growth.
With every new year comes new goals and property investing is sitting high on the 2020 list. Although it’s a bit early to call we have already seen a pick-up in investor activity at open homes. Changes to the tenancy rules (it feels like there’s a new one every week!) that come into effect this year coupled with the requirement to meet the Healthy Home Standards by 2021 will likely bring forward the exit plan for some investors. This, in turn, makes more room for first home buyers. There could be great buying in this space with low interest rates making property an attractive investment.
The consensus from those who pretend to know is that interest rates will likely remain low. That’s great if you’re borrowing although not so good if you are looking for a return on cash deposits. At the time of writing this barometer, strong data out from quarter four of 2019 has seen ANZ indicate that they are unlikely to cut rates any time soon. Personally, I struggle to see why we don’t have inflationary pressures with high fuel, increased wages and food costs. Could the inflation monster be ready to pop its head up? On the flip side, an upside of low interest rates is that nearly every investment property is cash flow positive.
Back in the early 2000’s I was paying $40 dollars a week for rent, $60 for food and $50 for fun. Admittedly this was good old Palmy North but these days students are looking at a minimum rent of around $150 for a bedroom in an average flat (and more like $250 for a good one). New Zealand is expected to reach a population of 5 million by the end of the year which is decades ahead of previous forecasts. With this we can only expect increase demand placed on housing. And with the seat of government, two universities and an international movie studio all based in Wellington, this fair city continues to be in hot demand.
Insurance continues to throw up a few issues especially in ‘high risk’ areas (the risk being decided by the insurance companies). If the Wellington region experiences another sizable quake, we are likely to see some real pressure in this sector. There would be the potential that some properties are deemed uninsurable. This, in turn, will void any potential bank funding and have a significant impact on the market value. Fingers crossed for business as usual – the bigger the gap between events, the more the memory fades.
The Wellington Market
The lines at open homes during the first few weeks resembled a queue at Disneyland with numbers jumping up to 50 plus for first home properties. Even apartments were getting double digit turnouts! Those numbers were quite easily broken down into first home buyers with a 2020 resolution of home ownership and parents looking to secure accommodation for their children attending tertiary education providers. The next few months will be interesting to watch as we plummet towards a September election.
WELLINGTON MARKET QUICK FACTS
Average sale price by Ward:
What’s on this February in Wellington:
Wellington Lantern Festival 2020, Wellington Waterfront
The Wellington Lantern Festival is back for its 5th year and bigger, brighter and better than ever before!
14 – 15 February 2020 will see Wellington’s waterfront lit up by spectacular handcrafted lanterns – from Odlins Plaza to Waitangi Park. This event is free to the public and not-for-profit.
Wellington Holi Colour Fest 2020, Frank Kitts Park, Jervois Quay, Wellington
Holi : The Festival of Colour and Celebration is now happening at the Coolest Capital of World. This is one festival, where people of all ages and cultures can get together, celebrate diversity and look forward to the future. Bring your family, friends to the iconic Upper Frank Kitts Park, throw colour on each other, enjoy delicious food and dance to tunes of renowned Djs.
Island Bay Festival Day in the Bay 2020, Shorland Park, Reef St, Island Bay, Wellington
This cool free, action packed event attracts a huge crowd from all over Wellington – people who come to enjoy the hospitality of our South Coast. Performance artists provide entertainment as you stroll through the park and surrounding area. It’s a family fun day out – so bring friends, whanau, a hat and plenty of sunscreen.
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.