Residential Market Report April 2024

Residential Market Report.

04. Market CommentA Collective Sigh Of Relief

08.

Sandringham Sales Statistics March 2024

12.

Auction Update with Cameron Brain

16. Property Management Market Comment

20. Marketing your property

06.

Article – Tony Alexander: The scene is slowly being set for some quick interest rate cuts

10.

Mount Roskill Sales Statistics March 2024

14.

Article – Ed McKnight: Interest rate deductibility: How much money will landlords be saving each year?

18.

LoanMarket: Did we get a hint of a change in sentiment from the Reserve Bank in the announcement on April 10th?

22. Ray White Sandringham & Mount Roskill team

Good News Is Good News.

A Radio NZ headline on March 28 said: “Lower interest rates getting closer – Reserve Bank governor Adrian Orr.”

Reserve Bank governor Adrian Orr said the tide was turning on inflation around the world and there was a clear feeling among central bank leaders he had spoken to recently that interest rates have peaked and cuts are getting closer.

Director of City Realty Group, Daniel Horrobin says: “At the same time, what we are hearing is that the major banks are easing up on lending criteria.”

Daniel adds “With our corporate office reporting a substantial lift in activity across the board compared to March last year, our own results reflect that”.

“March was a strong listing month for us with the number of properties taken to auction in that month showing a 75% increase on March 2023”.

“We were delighted with the publicity a $1 reserve auction in early March for a central city leasehold apartment attracted across a range of mediums” says Daniel. “The bidding opened with a bid of $1, then $2, then $5,000, then eight live bidders and 52 bids later, the property was declared sold for $62,000, much to the relief of our very happy client and needless to say, ourselves”.

“The highlight of the month overall was on March 21 when eight of the 11 properties auctioned sold on the floor” adds Daniel.

Seller engagement is gaining serious momentum. The number of Trade Me properties for sale in the central city continues to climb and is now well above 600 after diving below 500 as

recently as November last year.

At a property symposium held mid-month, a number of property/economic commentators agreed:

• It is steady as we go – no boom anticipated

• Investors are back

• Interest rates are steady

• Immigration is placing pressure on rents.

• It’s not all good news however.

OneRoof, NZ Herald’s property portal, said on April 1: “Last week, the Reserve Bank published the latest figures on the breakdown of the existing stock of mortgages. This showed that 59% of existing loans (by value) are due to reprice within the next year”.

The same OneRoof commentary reports: “But at least the inflation trend remains in the right, downwards direction, especially when it comes to firms’ input costs, pricing intentions, and overall inflation expectations”.

Though there could still be more pain to come for some, Daniel says: “The good news far outweighs any other. With seller confidence on the rise and bank lending easing, there is a quiet optimism in the market generally”.

“The highlight of the month overall was on March 21 when eight of the 11 properties auctioned sold on the floor”

adds Daniel.

Tony Alexander: The scene is slowly being set for some quick interest rate cuts

But the cuts may not come soon enough.

ANALYSIS: Last week I wrote about the deteriorating labour market and how people’s rising worries about employment are affecting housing. Because the employment cycle lags the economic cycle, even when we are initially out of recession and activity is picking up, the labour market will continue to worsen – probably well into 2025.

Does this mean the housing market will be weak well into 2025? Probably not. But until the Reserve Bank recognises it has over-restricted the economy and it cuts interest rates quickly, the current situation of a flat market is likely to persist.

Flat in the context of residential real estate doesn’t mean no change in prices but rather when looking past the month to month fluctuations there is little evidence of much

price gain. For instance, if we look at the average over three-month periods, we see that in the September quarter of last year Auckland house prices on average rose by 2.6%.

They then rose 2.5% in the December quarter but have now declined by 0.8% in the first three months of this year. In Auckland the number of properties listed for sale at the end of March was 23% higher than in July last year so buyers have extra stock to peruse at their leisure.

In fact things are so leisurely now for buyers only 6% of agents in Auckland responding in my monthly survey with NZHL now say that buyers are displaying FOMO. Back in September that was 45%. The pandemic frenzy peak was 90% in October 2020.

The net proportion of real estate agents

The Reserve Bank will need to consider whether or not it has over-restrained the economy with higher for longer interest rates. Photo / Doug Sherring

in Auckland saying that more investors are actively looking for property has turned negative by 5% from a positive 16% in September. The net proportion saying they are seeing more first home buyers has dipped from 56% to only 12%.

A key characteristic of this recent fresh period of market weakness is a backing away of young buyers to a greater degree than the backing off of investors. The only small investor change looks like it is due to not that many deciding to advance their buying anyway over the second half of last year. They are affected by large increases in some key costs such as for rates and insurance, debt servicing charges are cyclically high, and many may simply be ageing and looking to fund their retirement through selling their investment asset.

Independent economist Tony Alexander: “But now job worries are acting to rein in household spending and that is something the Reserve Bank will have to increasingly take into account.” Photo / Fiona Goodall

The young buyers have probably pulled back firmly from their earlier very strong interest because of the new development

running through the economy and discussed last week – employment worries. This is actually something quite important.

The negative impact on the economy and therefore eventually inflation has to date not been assisted much by the labour market. The unemployment rate has only gone from an unsustainably low 3.2% to 4% and wages growth has only minimally slowed down.

But now job worries are acting to rein in household spending and that is something the Reserve Bank will have to increasingly take into account as we advance through this year. It will be discussing whether the overall degree of restraint on the economy is turning out to be more than it think it needs, especially with a fresh deterioration underway in the outlook for world growth due to heightened tensions and actions in the Middle East.

The scene is slowly being set for some quick interest rate declines – but definitely not in the next few months.

- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz

Total Sales

March 2024

15

March 2023

There was a -6% decrease in the total number of sales year on year.

Total Sales Value

March 2024

$21,444,000

March 2023

March 2024

$1,222,000

March 2023

16 $21,771,000 $1,295,000

There was a -1% decrease in the total sales value year on year.

Source: REINZ

There was a -5% decrease in the total median sale price year on year.

Median Sales Price Median Days On Market

March 2024

45

March 2023

45

There was no change in the total median DOM year on year.

Sandringham Recent Sales.

Mount Roskill Market Statistics.

Total Sales

March 2024

28

March 2023

There was a -17% decrease in the total number of sales year on year.

Total Sales Value Median Sales Price Median Days On Market

March 2024

$31,670,500

March 2023

March 2024

$1,065,000

March 2023

34 $35,306,900 $1,003,000 45.5

There was a -10% decrease in the total sales value year on year.

Source: REINZ

There was a 6% increase in the total median sale price year on year.

March 2024

35

March 2023

There was a -23% decrease in the total median DOM year on year.

Mount Roskill Recent Sales.

The auction activity over

the past month has been a mix of outcomes, showcasing both promising and dynamic

market trends.

Among the notable auctions, one stands out as the highlight of the month: the auction held at 257 Sandringham Road, Sandringham. Marketed by Tracey Potter from our Ray White Sandringham Office, this auction drew significant attention and resulted in an exceptional outcome.

Property Details: The property in focus was an original 1940’s home situated on a corner site spanning 533m2. Its location in Sandringham, coupled with its unique characteristics, rendered it a compelling investment opportunity.

Auction Highlights: The auction garnered substantial interest throughout its campaign, attracting attention from prospective buyers keen on seizing the potential offered by this property. As the auction day arrived, the anticipation was palpable, with 15 registered bidders poised to participate.

Bidding Dynamics: The auction commenced with an opening bid of $700,000, setting the stage for a spirited bidding war. Over the course of 78 bids, the intensity of the competition escalated, reflecting the keen interest and determination of the bidders. Ultimately, the property sold for an impressive $1,575,000, marking a significant achievement and underscoring the desirability of the asset.

Outcome: The successful conclusion of

the auction at 257 Sandringham Road, Sandringham, represents a resounding success for all parties involved. Not only does it underscore the vibrancy of the property market in the area, but it also exemplifies the efficacy of strategic marketing and diligent campaign management.

Apartment Market Activity: In addition to the standout auction, the apartment market has also witnessed notable activity. Investment properties priced below $500,000 have garnered considerable buyer interest, indicating a buoyant market segment ripe with opportunities.

Conclusion: In conclusion, the recent auction activity reflects a dynamic and robust property market, characterised by moments of excitement and significant outcomes. The success of auctions such as the one at 257 Sandringham Road, Sandringham, serves as a testament to the resilience and potential of the real estate sector. As we navigate the evolving landscape, it is imperative to remain agile and proactive in capitalizing on emerging opportunities.

For more information and to view our current auction listings, please visit our website or contact our team directly.

Ed McKnight: Interest rate

deductibility: How much money will landlords be saving each year?

Tax rule change will affect some investors differently.

ANALYSIS: The National-led Government has brought back interest rate deductibility for property investors, which means some landlords are in line to pay less tax.

But the trouble with interest deductibility is that the tax calculations are complex and they will affect property inventors differently. Some will save tens of thousands of dollars a year, others will save nothing at all.

This is because the rules will vary according to property type, date of purchase and who is renting the property.

To illustrate this, imagine three houses next to each other. They’re all identical. All three are worth $800,000 and have a $600,000 mortgage. Each is rented out for $700 a week and the owners have the same interest rates.

The only difference is that the houses were bought at different times and are rented out to different people. Yet, one of these three investors will be $152 a week better off under the new rules, while another will be no better off at all.

House No.1

Peter and Sally bought own the first of the three houses. They purchased it in April 2021, directly after Labour announced it was scrapping interest rate deductibility.

Because of this, they have never been able to claim back tax on their interest rate payments. They’ve borne the brunt of the rules straight away.

The return of interest rate deductibility means some investors will be facing a much smaller tax bill. Photo / Fiona Goodall

They’ll get 80% deductibility over the next 12 months, which could save them $7896 in tax in the first year alone - that’s $152 a week.

Because Peter and Sally paid a lot of tax under the soon-to-be scrapped regime rules, they stand to benefit the most.

House No.2

Next door is the investment property bought by Kendra and Shae in February 2021, just before Labour announced the tax changes.

That means the couple have been operating under a slightly different set of tax rules.

Over the past 12 months, they have been able to deduct 50% of their interest costs when calculating their tax. As of April 1, this has gone to 80%, which will save them $38 a week.

They won’t save as much on tax because they didn’t pay as much tax to begin with.

House No.3

The last of the three houses is owned by

Deborah and Honi.

When they bought the house they decided to rent it out through the local Salvation Army, which is a social housing provider. That gave their property a special tax status. Deborah and Honi have been able to deduct all their interest costs, which meant they dodged the impact of the interest deductibility changes in March 2021.

Now the tax rules have switched back, nothing changes. They will continue to deduct all their interest costs, which means there is no difference in the amount of tax they pay.

The outcomes of the above scenarios might sound unfair, but the investors who will be better off are the ones who already faced the full effect of the rules to begin with.

Rather than creating an uneven playing field, these changes make the rules fairer. It means that no matter when you bought the property and no matter who you choose to rent it out to, the same tax rules apply to all property investors.

Opes Partners resident economist Ed McKnight: “The trouble with interest deductibility is that the tax calculations are complex and they will affect property inventors differently.” Photo / Fiona Goodall

Minnie Spend, Mighty Gain.

We welcomed a large bunch of new landlords and their hard working investment properties to our portfolio this month. One in particular stood out…

This poor old unit wasn’t just tired it was exhausted. It was clear that with a little bit of TLC we could improve the performance of the investment for our landlord. The previous tenants had been paying less than $300 per week.

Here at Supercity we have renovators, contractors, painters / decorators all on speed dial. So we were straight on the job.

Within two weeks the apartment was renovated, refurbished and re rented for $520 per week!

Allow out contractors to work for you too!

Is it time for a change?

Kurt Smith

General Manager

Jamie Maclennan

742 5227 jamie.maclennan@loanmarket.co.nz

Did we get a hint of a change in sentiment from the Reserve Bank in the announcement on April 10th?

The Reserve Bank once again left the Official Cash Rate (OCR) on hold for the sixth consecutive time. The last change made was back in May 2023, however there is some glimmer of hope that we might start to see an easing in the monetary policy with them reinforcing they do expect inflation to return to their 1-3% target range this year. (it currently sits at 4.0% - so we are very close now!)

We are also now starting to see more bank economists paring back their expectation of changes that the first cuts will be seen between August and November rather than into early/ mid 2025 like they have been saying.

Another really important factor for New Zealand is when the US starts cutting rates, once that happens, it opens the door for New Zealand to do that same. If we move before the US does, it will have a detrimental impact on the NZ currency.

This means there is a lot of pressure mounting on the Governor of the Reserve Bank in this latest announcement. Let’s hope they don’t become so driven on driving the economy into the ground before they make a move. We don’t think they will, especially given their poor judgement a few years ago that has led to the current situation we see ourselves in.

We still hold a strong view that fixing for 6-12 months is a good approach to take.

Based on the current interest rates, when is the best time to buy?

Whether it’s your first, your second or an investment property, the best time to buy is typically when interest rates are at their highest. Right now the number of houses on the market are at the highest

level in more than a decade, so it’s a buyers market. As interest rates start to fall later in the year, you will see a pick up in market activity and inevitably an increase in house prices, especially with the amount of people moving into the country and a reduction in the number of building consents being issued.

As always, feel free to give us a call if you wish to discuss anything.

Marketing your home.

A COMPREHENSIVE MARKETING STRATEGY TO REACH ACTIVE & PASSIVE BUYERS.

The marketing strategy is designed to reach the breadth of the active and passive buyer pool in the most effective manner, based on their Media consumption.

Our marketing strategy comprises of 3 key components; property portals, social and multi-channel digital strategy and print media.

Property Portals.

PRIMARILY ACTIVE & SOME PASSIVE BUYERS

There are 3 key portals, TradeMe Property, Realestate.co.nz and Oneroof.co.nz.

Property Portals generally attract active byers in the market, OneRoof has a unique position as it reaches both active and passive property buyers due to the diversity of information it has on the platform including property

Digital Marketing.

ACTIVE & PASSIVE BUYERS

The Ray White City Realty Group has introduced a state-of-the-art digital solution that is powered by artificial intelligence to reach the breadth of the active and passive buyer pool across social media and multiple digital channels, including news and other high traffic websites. The programme is fully automated in the back end, it creates an audience

Print Media.

listings, estimated property values, market news and commentary. It is important to run campaigns across all 3 to effectively cover the breadth of the active buyer pool and a part of the massive buyer market. None of the property portals have complete market coverage and each of these portals have a set of unique audiences.

segment of active buyers specific to the property as well as reaching the passive buyer pool. The campaign is structured to deliver quality leads for the property, and it auto optimises spend across social media and multiple digital channels, skewing the spend towards channels that are performing the best.

PRIMARILY PASSIVE & SOME ACTIVE BUYERS

Print continues to play an important role to cover the breadth of the market reaching quality and highly engaged audiences. It takes criteriabased search out of the equation with respect to the active market and is the most effective medium to reach the all important passive buyer

market. This is clearly evidenced by the fact that the New Zealand herald has seen a massive 48% increase in its print readership over the last 18 months and average time spent reading the paper is over 50 minutes. The value of print is also well supported by agent feedback.

Why choose us?

City Realty Group is the largest Ray White franchise in New Zealand with offices throughout Auckland. It is the group with the ‘family factor’ - we’re family owned and we treat people like family. We’re all about open doors and open minds. We encourage a unifying atmosphere where opportunities are created, individuals are recognized and everyone grows - from our team to vendors, investors and tenants.

Our experienced and established team service the market Auckland wide -from Residential, Luxury Apartments, waterfront properties and rentals. With a dedicated property management team and marine brokerage teams. City Realty Group has a strategic partnership with Loan Market to provide clients with the best mortgage advice and rates through brokers.

+64 (9) 281 4707

www.rwsandringham.co.nz

+64 (9) 308 5551

www.rwmtroskill.co.nz

Leaders in the Auckland Residential market.

Ray White Sandringham

Ray White Mount Roskill

Meet the team.

SALES TEAM - SANDRINGHAM OFFICE

Horrobin

Pauline Bridgman

Henson

Amy Tsai

Kate Jiang

Tania Greer

Tracey Potter

Tim Cai

Diane Goer

Emily Hu

Ivan Koulin

Yuhei Umezaki

Hugh Free

Daniel Chen

Jackie Zhang

Alastair Hubbard

Susan Woods -Markwick

Rosa Solano

SALES TEAM - MOUNT ROSKILL OFFICE

Damon Pooley Ethan Li

Jacky Mao

Jon Clark Justine Chen

Lisa Hui Mark Li

Nana Li

May Ma

Eva Yin

Benjamin Liu

Pantea Wilson

Sara Wang Tony Liu

Grant Harvey

Shubhrta Khanna

Ross Harvey

Maggie Liu

Anna Dong

LoanMarket Mortgage Adviser

Jamie Maclennan