Tag Archives: REINZ

How the general election impacts the property market

Election Property Market

The hoardings are up (with a few to still to be updated), the door knockers are out in force, and our newsfeeds are flooded with stories detailing the latest resignations and policy announcements – election season is well and truly underway.

Policies and personalities aside, we’re often asked by clients how an upcoming election is likely to affect the property market, particularly sellers who ask whether it’s better to hold off until it’s over or simply to push on through with getting their property on to the market. The conventional wisdom is that markets do not respond well to uncertainty, and given recent developments, the election’s outcome is anything but certain. On the other hand, I’m yet to meet a buyer who has said that they’re going to forego a purchasing opportunity simply because they do not know the makeup of the next government.

While it’s easy for us to rely on anecdotal evidence and the vibe of the market, thankfully we have access to a considerable body of data from REINZ dating back to 1992. Back in 2014, real estate commentator Alistair Helm at Properazzi came up with a seasonable comparison. It uses the three preceding months leading up to each general election date and calculates the representation those months were of the total sales for that year. He then compares that % representation as a single figure against the normal for the same 3 months of the year based on a larger set of preceding data going back to 1992, as follows:

Election Year Sales Graph

Helm comments:

You could say that on average general elections depress property sales as 5 of the 8 elections caused property sales to decline as compared to normal. However there is no real consistency. The completely and significant opposing variance in the results for 1993 and 1996 are too significant to ignore.

Our friends at Bayleys have also analysed the data dating back to 2000:

Our analysis indicates that the majority of those choosing the ‘wait and see’ approach around election dates are property investors, as it is this section which is more likely to be impacted by changes in government policy.

The decision by owner occupiers looking to enter the market or move home tends to be driven by changes in personal circumstances, such as marriage, divorce, having a family, changing jobs, retiring etc. Once these circumstances are in play, the decision to purchase a new home is unlikely to be delayed solely because they coincide with the date of an election.

While there are signs that the Christchurch property market is cooling, this cannot be solely attributed to the election. The post-quake residential construction boom has boosted supply, while LVR restrictions are dampening demand, resulting in fairly modest price growth. The great thing is that a steady market empowers buyers and sellers to make informed decisions with confidence.

Signs that LVRs may be having an impact

April 2014

The Wall Street Journal reports:

New Zealand house prices fell in April while the number of residential properties sold dropped sharply on the year, adding weight to comments by the central bank’s deputy governor last week that new regulations on bank lending are starting to have an impact.

Data from the Real Estate Institute of New Zealand Monday showed the national median home price fell to 432,250 New Zealand dollars (US$371,735) in April from NZ$440,000 in March. On the year, however, the figure was up from NZ$390,500 in April 2013.

REINZ Chief Executive Helen O’Sullivan said the sharp fall in sales volumes impacted all regions, as well as Auckland and Christchurch–the scene of much of the recent price pressure.

“The number of sales in the sub-$400,000 category continue to fall faster than the market overall, suggesting that the LVR (loan to value) restrictions are continuing to have an impact on buyer intentions at the lower price points. The lift in the Official Cash Rate by 0.5% over the past two months is likely to have also had an effect,” Ms. O’Sullivan said.

I have noted before that it seems the Canterbury market is currently “catching its breath”. In Christchurch, despite a drop in sales volumes (487 in April cf. 608 in March), the city-wide median of $412,500 is only 1.3% on a month ago – and up an impressive 10% on last year. For sellers – the market is still in your favour, and with interest rates set to only increase this year, it may be better to act sooner rather than later!

Christchurch house prices hit record high

September 2013 Stats

Liz McDonald at The Press reports:

Christchurch’s median house price has reached $400,000 for the first time after jumping more than 14 per cent in a year.

Sales figures from the Real Estate Institute show homes sold quickly in September as buyers rushed to beat new restrictions on low-deposit lending.

Canterbury buyers secured homes in a median (mid-point) of 26 days during September, the fastest in the country. The region’s median price was $375,000, which was 13.6 per cent higher than the previous September. The number of sales was up by a fifth on a year ago.

From the coalface, I can certainly say that the market is humming along. It’ll definitely be interesting to see what impact (if any) the Reserve Bank’s LVR restrictions will have on the Canterbury residential market. If there’s any advice to give, it’ll be to buy now – ’cause I really don’t think property is going to get any cheaper in the medium term!

August stats show steady growth

August 2013 StatsThe stats from REINZ present a picture of an active market here in Christchurch. The median price of $374,000 is up a modest 2.6% on this time last year, although the institute’s house price index (which adjusts for different types of homes selling) found city prices rose 6.1% in a year. Canterbury homes are also among the fastest selling with an average list-to-sell period of 28 days, with the national average at 34.

It’s apparent that this strengthening market is being primarily driven by investors and first-home buyers competing for similar types of properties. Investors appear to be keen to capitalise on the frenzy in the rental market, whilst first-home buyers are keen to secure a property quickly before the Reserve Bank’s LVR restrictions come into force.

It has been my own experience that these relatively modest properties which appeal to both groups are being snapped up very quickly. One of my recent listings at 202 Beach Road, your classic three-bedroom, one bathroom, Summerhill stone home sold above asking price after only four days on the market – and it was TC3.

Liz McDonald (The Press): ‘Scramble even for ‘very untidy’ homes
REINZ: Sales and prices rising in August real estate market
NZ Herald: Sales growth slows, property prices up $5,000
David Hargreaves (Interest.co.nz): House market ‘will cool off’, say Westpac economists
BNZ-REINZ Residential Market Survey: No good news for buyers

Canterbury homes selling fast

Liz McDonald at The Press reports:

Homes in Canterbury and Westland are still the fastest-selling in the country, as buyers compete for properties.

April figures from the Real Estate Institute show homes sold in 27 days on average.

The median price was $353,000, up 10 per cent since April last year, but down from $359,000 in March. In Christchurch, the median price was $375,000, up 8.7 per cent in a year but 2 per cent down from $384,000 in March.

Institute director Tony McPherson said the strong demand from first-home buyers and investors at the lower end of the market continued.

The shortage of houses was leading to some investors buying damaged properties – those that were safe to occupy but uneconomic to repair – as rentals, he said.

This has definitely been my experience. In recent weeks, I have had a number of such properties sell after just a few days on the market.

The number of sales in the city was 583, almost 25 per cent higher than a year ago, while sales were up 16 per cent to 934 across the region. Within Christchurch the highest median price was $656,000 in the hill suburbs, followed by $635,000 for Fendalton-Merivale-Ilam. The cheapest area was $233,500 in Linwood-Bromley-Bexley-Aranui.

It’s important to note that for the month of April, only seven sales were completed in the hill suburbs – thus the median is heavily influenced by the small sample of sales.

My own local area, north-east Christchurch (which encompasses Avondale, Avonside, Burwood and Parklands) had 35 sales for April, with a median sale price of $322,500, compared to a median RV of $316,000.

So what’s the big deal about needing a larger deposit?

Isn’t it a good idea that the Reserve Bank is making sounds about requiring higher deposits for bank loans? At the risk of sounding like an old codger, back in the day  when I bought my first home you needed at least 20 per cent deposit (some of which could be a government Home Start Loan that you had saved a portion of) and no more than a 1/3 of your income in debt servicing. Are we now allergic to saving money and has it just become the norm to buy everything on tick including houses?

Some sensible comments from REINZ chief Helen O’Sullivan:

Encouraging people to have a decent deposit when buying a property was a good thing, and that a loan-to-value ratio limit might help prevent future house price bubbles.

The reality for all first-home buyers is that it’s always difficult to get the deposit. But the less equity you have, the more at risk you are to variations in your personal circumstances.

One can either afford to buy a home or not and saving a decent deposit is the biggest step toward to affordability! And let’s not forget about the lessons learned from the US subprime mortgage crisis…

Get started now, it is never too late.