It’s been a hot topic for as long as I have been in the industry but I still think the public at large can be forgiven for feeling somewhat blindsided by the announcements of last month. A Government that was voted in on a minor increase to the top tax rate and a promise of ‘that’s it’ for this term, but that wasn’t it. The five-year extension to the bright line test and removal of the interest deductibility seemed to come out of the blue. And the speed at which it was implemented reeked of corporate efficiency. So, what does this mean for the property market?
The future is so bright
The bright line test was first introduced by a National government in an attempt to remove house flippers and slow market growth. Since then we have had the foreign buyer ban of 2018, an extension of the bright line from two to five years and the removal of ‘ring fencing’. The impact? Prices are through the metaphoric roof! So, will a further extension of the bright line have the desired effect on prices and do “first home buyers” really stand a chance?
I blame the banks
Getting finance to buy a home used to be hard. When I was growing up in the 1980’s, I had a friend whose dad was the manager of the local BNZ branch. Back in those days that meant he was pretty much God. Anyone wanting a loan would don their best suit, prepare a solid case and hope that the manager had got out of the right side of the bed. Fast forward to 2021, you send off a quick email to a mortgage broker, signature adopted on DocuSign and hey presto: hundreds of thousands of dollars of debt lodged against your name. The ease and willingness of banks to offer debt with a willingness to sign your life away to that same debt is just a way of life.
Who really drove up prices post Covid?
We all know Covid has changed the playing field but why has this black swan event put such incredible pressure on our housing stock? Of course, there is the obvious one, low interest rates. But one of the major drivers, in our opinion, is the sheer numbers of people moving from higher valued markets out to the regions in search of that all-important lifestyle change. With the rise and rise of zoom and virtual offices, people are no longer tied to large cities. So, they are cashing up and moving to coastal and rural towns for a taste of the good life. But if everyone is moving, what is driving price rises in the cities? Well for those of us still keen to stick out city life, there are plenty of people looking for somewhere more enticing than a 1% term deposit to put their money. And, as it turns out, property is an appealing option. With low housing stock, and plenty of buyers, it’s a simple case of supply and demand. But is the housing stock really that low? Or is it that we actually have a shortage of affordable housing in desirable areas?
The system is just too slow
Last month we had an old railway cottage on the market in Ngaio. These now popular homes were originally constructed in the 1920’s using a kit-set design. The timber was milled up north, numbered and then railed down to Wellington. On arrival it took the railway corporation one week to construct the home, yes that is right one week. Today it takes anywhere from five months to a couple of years to build a house. Our under supply will never change when it takes thirty times longer to build a house than in the 1920’s. Just think how fast they could have whacked one of those beauties up if they had had power tools. The costs of time and costs associated with construction are just far too much, which in turn puts pressure on existing housing stock.
Pulling the leavers hard in any direction means you run the risk of jerking the market back hard in the other direction. And given that New Zealanders have trillions tied up in property, that would be just as damaging as rapid rises, if not worse. What markets don’t like is uncertainty and interfering in a natural market can create this danger. So, what’s the solution? Stop talking about it, the less oxygen you give it the faster it burns out.
The Wellington Market
The Wellington market continues to chug along but with slightly less steam and a touch more predictability than the start of the year. It’s a game of two halves at the moment with beautifully presented and maintained homes still capable of achieving eye watering premiums and the others selling well-ish for now. What the changes will bring are yet to be determined, but we will be sure to let you know as soon as they are!
Wellington Market Quick Stats:
What’s on this April in Wellington?
Newtown Festival, 11 April, Newtown
Bringing the colourful and funky atmosphere of Newtown to the streets, the festival incorporates more than 150 acts and 400 stalls, as well as a number of free activities including a balance bike course, skating and a ferris wheel.
On the stages throughout the festival are dancers, buskers, circus performers and musicians, spanning many different genres and styles. Alongside the entertainment you’ll find outdoor cafes, craft beer precincts, arts and crafts stalls, and food galore – with many international flavours in the mix. Local venues Bebemos, Monterey/Newtown Social Club, Black Coffee, Baobab and Moon, are set to continue the party into the evening.
Peachy Keen, 3 April, Basin Reserve, Mount Cook
Wellington’s newest music festival Peachy Keen is a celebration of women in music that you don’t want to miss out on.
Peachy Keen is Wellington’s first female-led and focused festival that was created to celebrate women in music. From the founder and event organiser, Amber Mossman, through to the performing artists, crew and security staff, Peachy Keen is all about wahine.
“Shake, Rattle ‘n Roll” Parkinson’s Comedy Night, 13 Apr, 7:00 – 10:00 pm, Ivy Bar & Cabaret 63 Cuba St, Te Aro
Headlined by acclaimed stand-up artists, Michele A’Court and Neil Thornton, and hosted by prominent MC Jerome Chandrahasen, you can look forward to an unforgettable night at Ivy Bar on Wellington’s Cuba Street.
Two people with Parkinson’s, Kitty Fitton and James Nicolle, will also take the stage, to put a comedic twist on living with the life-long condition. You will not want to miss their hilarious takes!
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.