Ray White Now New Zealand - September Edition - Page 23

Housing Supply
It has been said for many years that New Zealand simply hasn ’ t been building enough houses . While development has ramped significantly up in recent months , this construction can take many months or years to complete , meaning that the immediate demand continues to remain unsatisfied . Compounding this issue is the delays to construction that COVID related lockdowns have imposed . In addition , any vendor that chooses to delay putting their property on the market due to the outbreak also adds to the shortage of available stock . This is why we have seen those listings coming to the market in the past seven days achieving increasing levels of engagement from interested parties .
Interest Rates
Interest rates were cut to record low levels during 2020 and have remained so ever since . In fact , many had been predicting the Reserve Bank would increase the Official Cash Rate , and in turn , lenders had started to see those lending rates on offer creep up ever so slightly . However , with the RBNZ announcement due the day after the nation returned to Alert Level 4 , the OCR was left at an all-time low of 0.25 per cent , meaning that while the cost of borrowing is low , the ability to purchase at a higher price also remains .
Cost of building
Due to many factors , including global supply chain issues , the closing of timber mills labour shortages , and COVID related building delays , the actual cost of building a home has continued to increase . In a recent Stuff article , NZ Building Industry Federation Chief Executive Julien Leys​was quoted as saying , “ Almost all building products – from sink tops to wood planks to glues – were increasing in price by 5 to 30 per cent this year ” he added “[ New ] house prices will absolutely go up .”
While the cost of building or renovating a home continues to rise , the price of an existing one , in comparison , will also see price growth as home purchasers consider both options .
LVR Restrictions
At the end of April last year , with the uncertainty of the pandemic , many borrowers looked to put their mortgage on ‘ payment holidays ’. The RBNZ , in an attempt to avoid the unintended consequences of borrowers ending up with less than 20 per cent equity due to their payment deferrals , removed the previously implemented LVR restrictions . What then occurred was that the removal restrictions meant that owner-occupier borrowers would no longer require a minimum of 20 per cent deposit when purchasing a home , and investors could also leverage much more highly . This added significantly to the housing sector ’ s confidence and momentum , and although those restrictions have now been reinstated , the market confidence remains .
While it remains difficult to predict what the market may look like in the near future , what we can look at this time around , is what happened during last year ’ s restrictions and what is happening right now . As you have already read in this document , heightened levels of buyer engagement at online auctions and increased enquiry give us confidence that if you are considering selling , talking to your salesperson to discuss preparing your home for launch is important to take advantage of the level of engagement we are currently seeing from buyers .