Property Apprentice Podcast

Market Insights: From Home Renovations to Summer Travel Booms

• Debbie Roberts • Season 3 • Episode 43

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 Hi everyone, I'm Debbie Roberts, owner and financial adviser at Property Apprentice. Join us today for the Week in Review where I talk about current events for the everyday investor and home buyer. Our topics for this week, topic number one from   📍 RNZ on the 12th of November, average house values little changed from the start of the year.

 Topic number two from   📍 Oneroof on the 13th November Tony Alexander: Where Kiwis plan to splash the cash, now rates are falling.  Topic number three from   📍 RNZ on the 13th of November, wanting to sell your house? It may take seven years before you don't face a loss.  Topic number four from   📍 Good Returns on the 14th of November, government takes risk based approach to deposit guarantee scheme.

 And topic number five from   📍 Interest. co. nz on the 14th of November, housing market warms over spring but it's not exactly tropical.   

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 So first up this week in review, and all the links are in the, in the description below if you're watching this on YouTube, RNZ on the 12th of November, average house values little changed from the start of the year.

House values in New Zealand remain mostly unchanged through October, with minimal growth seen since the beginning of the year, according to the latest QV House Price Index. Nationally, average home values decreased by 0. 8 percent over the three months to the end of October, a milder decline than the 1. 6 percent drop reported in the previous quarter.

QV's operations manager, James Wilson, explained that the housing market has remained flat, with only a slight 0. 3 percent decline in the average home value since January, now at $902, 231.  Despite recent interest rate cuts, Wilson noticed that economic headwinds continue to limit housing market growth.

Most major urban areas experience minimal change, with small rolling declines in Auckland down by 0. 8%, Christchurch down by 0. 2%, Hamilton down by 0. 6%, and Tauranga down by 1. 6%. Wellington saw an improvement with the rate of home value decline slowing to 2. 3 percent from 3. 2 percent in the previous quarter.

Wilson attributed the sluggishness to factors like job insecurity which is particularly felt in the capital. While some cities such as Nelson with an increase of 1. 3% Queenstown with an increase of 1. 2 percent and Whangarei with an increase of 0. 3 percent showed slight growth. Wilson pointed out that ample property supply and rising unemployment is keeping prices subdued.

However, he noted increased consumer optimism amid expectations that the Reserve Bank might further reduce the OCR, the official cash rate, in their announcement on the 27th of November.  First time homebuyers remain the most active in the market, though investors and owner occupiers are also gradually returning.

Still, housing affordability is a persistent challenge as potential buyers balance lower interest rates against concerns over job security and rising unemployment, but in my opinion, Still a buyer's market, plenty of opportunities out there. If you're in a position that you can get lending to purchase the property that you're after, and it makes sense for you in your financial position, this is a great time to be getting your foot on the property ladder.

So I'm pleased to see that there's a number of first home buyers that are making up the largest chunk of the purchases in the current market.  

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Topic number two from OneRoof on the 13th of November, Tony Alexander, where Kiwis plan to splash the cash, now rates are falling. Every month, five surveys are conducted to offer real time insights on economic and housing market trends.

One survey focuses on people's spending plans for the next three to six months, providing useful data for sectors like retail and home renovation. These insights are especially timely now as businesses await the effects of recent interest rate cuts. Five months ago, a record 42 percent of nearly 700 respondents intended to cut back on purchases for the rest of the year.



This sentiment has since improved with the latest survey showing a balance, just as many people now plan to spend more as those who plan to spend less, yielding a net 0%. This is the best outcome since December 2021. Two specific areas show noteworthy trends. First, a net 13 percent of people report plans to increase spending on home renovations.

That's up from June's net 11 percent reduction. Renovation projects, often costly and risky, typically indicate strong consumer confidence. This result suggests a robust improvement in sentiment and willingness to spend on major expenses. Also, tradies out there that aren't working at capacity at the moment.

So it's a good time. If you're in a position to get some renovations done It's a good time to find some tradies to do it for you Secondly, there's been a significant reduction in plans to cut back on dining out with only a net 11  percent planning to spend less compared to 44 percent in May  Though still slightly negative, this trend may soon turn positive.

However, the remaining caution suggests potential closures of dining and drinking venues may continue into summer. Other findings reveal a slower recovery in vehicle purchases, with 10 percent of respondents still planning to spend less, which is a slight improvement from May's 16%. This points to ongoing challenges for car dealerships.

Travel, however, shows positive signs. For international trips, a net 10 percent now plan to travel more, and for domestic travel, a net 9 percent are planning more local trips, compared to 17 percent reduction in mid year. This trend bodes well for summer tourism, boosting demand for local accommodations.

Regarding the housing market, while buyer demand has risen, it's not causing a frenzy, as property listings have also increased. A net 7 percent of respondents have no plans to buy an investment property. That's an improvement from 19 percent in June, but it's aligned with the long term average. Similarly, a net 4 percent plan to reduce spending on a primary  residence, an improvement from June's 10%, but still showing the restrained demand.

Overall, while housing activity is on the rise, it remains moderate. And I suspect in a few years time, there'll be people regretting their decision to delay entering into the property market in 2024 or 2025.  If you'd like to learn more about investing in property,   📍  📍  📍 join me at one of our free events called How to Succeed with Property Investing.

I'll discuss strategies for successful investing from my perspective as an experienced investor and a financial adviser. And these events are available live, online or in person.  Check out propertyapprentice. co. nz for upcoming dates and register today. We don't sell property, so it's all about increasing your knowledge to reduce your risk.

  📍  📍  📍 If you've already been to one of our free events and you'd like to find out more about how we can help you to reach your financial goals, you can also book a no obligation phone call or meeting with my husband, Paul Roberts, via the website. Propertyapprentice.  co. nz.  

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Topic number three from RNZ on the 13th of November.

Wanting to sell your house? It may take seven years before you don't face a loss. CoreLogic reports that homeowners who bought at the market's peak may face a wait of up to seven years before they can sell without incurring a loss. According to the latest Pain and Gain report, 9. 8 percent of property sales in the third quarter of 2024 were Loss-making, rising to over 16 percent in Auckland.

This is up from 8. 2 percent in the previous quarter and marks the highest rate of Loss-making sales in nearly a decade, though it does remain below post GFC peaks.  The median loss on these sales was $55, 000, while profitable resales saw a median gain of $269, 000. Loss-making properties had typically been held for nearly three years nationwide, with Auckland's median hold period slightly higher at 3.

3 years, sorry. By contrast, properties sold at a profit were held for about eight and a half years. Kelvin Davidson, CoreLogic's Chief Property Economist, noted that the market now favours buyers who had more bargaining power after the extended peak of 2021 when 99 percent of resales were profitable. He explained that the decrease in both the frequency and size of gains reflects ongoing softness in the housing market. 

Davidson pointed out that the longer hold periods seen in profitable sales indicate more cautious selling behaviour. He expects the current trend to persist as ample listings could take several quarters to clear from the market.

Properties held for shorter periods are particularly susceptible to losses. A trend amplified by price drops of up to 20% from peak levels in some areas. Davidson noted that while few intend to buy and resell quickly, unforeseen changes can necessitate early sales. House price growth traditionally at 6% annually, may average closer  to 4% in the coming years.

Davidson compared the current market cycle to the GFC recovery, which took five years. He suggested that full recovery from the 2021 peak may extend to 2027 or 2028.  I would like to point out that We are now back to median values, the same as where they were two months before the peak at the end of November 2021, and that last two months period before the actual peak at the end of November, the property market increased significantly in value and then obviously had a significant decrease after that.

So we're right back where we were two months before the peak of the market. So this is obviously going to hit those who purchased right at the peak, the hardest, um, people who purchased a couple of months or three months before the peak might not be so bad.  Investors have been hit harder than owner occupiers,  with 11.

1 percent of investor sales incurring losses in Quarter 3, up from 8. 5 percent in Quarter 2, making a decade high. I suspect that those were properties that were purchased either off the plans, where they paid full purchase price and then had a significant correction with potential rent changes over time as well.

You know, so people buying off the plans, new build developments, and then the market settled down into a different section. So yeah, it's a difficult time to be buying property off the plans at the peak of a boom. It is certainly the highest risk stage to be doing that at. Meanwhile, Loss-making resales for owner occupiers rose to 8.

8%. Davidson linked this trend to cash flow difficulties, especially with mortgage rates still high, and noted that some investors may be cutting their losses to focus on better performing assets. The report also highlights a substantial gap between apartment and stand alone house performance. 35 percent of apartment resales incurred a loss, compared to only 8.

9  percent of houses.  Apartment values are, they do tend to be a bit patchier with capital growth over the long term and we certainly saw a significant correction in values during COVID. So yeah, there are times where things are quite dire for the apartment market, but potentially you'd be buying at the bottom of the market if you were buying in the current apartment market, especially in Auckland at the moment.

Davidson explained that while investors are often drawn to apartments for their yield, these properties are more vulnerable to market shifts. Despite higher loss rates in apartments, there's no sale, there's no sign, sorry, of fire sale pricing, with many investors choosing to absorb losses rather than hold underperforming assets. 

Among major centres, Auckland led in Loss-making sales at 16. 1%, that's up from 12. 9 percent in quarter two, while Wellington also saw an increase reaching 9. 9%. 

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 Topic number four from Good Returns on the 14th of November, government takes risk based approach to deposit guarantee scheme. The new Depositor Compensation Scheme, DCS, will use a risk- based funding model.

Placing most of the cost on New Zealand's four largest banks, while smaller institutions will initially pay a flat fee, Finance Minister Nicola Willis announced. Levy amounts for banks, credit unions, building societies and finance companies will depend on their size and risk level.  The levy is calculated based on total deposits covered by the scheme, with the four largest banks shouldering about 75 percent of the total cost. 

Set to launch in July next year, the DCS will protect depositors up to $100, 000 each in the event of a deposit taker's failure. Treasury projects that the scheme, with a fund amounting to 0. 8 percent of protected deposits, could require up to $1 billion in initial payouts in such cases.  Smaller institutions like credit unions and building societies will pay a temporary flat levy until 2028, allowing time to adjust under evolving regulations.

The government's decision reflects a Commerce Commission recommendation to avoid overburdening smaller entities until the DCS impact is clearer.  The scheme is also anticipated to boost competition. As Willis noted that New Zealanders may feel more comfortable switching deposit takers, knowing that their deposits are protected in case of failure.

The DCS's effect on competition will be closely monitored over time.  And the last topic for this week in review, topic number five, interest. co. nz on the 14th of November. Housing market warms over spring, but it's not exactly tropical. In October, the housing market appeared to show signs of strength with the Real Estate Institute of New Zealand, REINZ, reporting 6, 681  residential sales, which is a 10 percent increase from September. 

The national median selling price also rose by 1. 9 percent to $795, 000. These figures suggested a positive market heading into the summer months. However, a closer look at the data raises some doubts about the market's overall strength. While the raw sales numbers were up, seasonally adjusted figures actually showed a 2.

6 percent decline. This drop could partly be attributed to the extra Saturday in October this year, compared to last year which may have affected sales timing. Moreover, although the median price rose by 1. 9%, the REINZ House Price Index, or the R E I N Z House Price Index, which is a more reliable indicator adjusted for property mix, showed a modest increase of just 0.

5%. This suggests that while prices are rising, the pace of growth is still relatively slow.  Which is great for buyers. The most significant change in the market was a 7. 7 percent rise in new listings compared to September, leading to an increase in total stock. Ryan's chief executive, Jen Baird, noted that buyers are cautious due to high interest rates, which has made them more strategic in negotiations.

The increase in available properties offers buyers more choices, allowing them to take their time and find options that better meet their needs. I think it is important to point out that at the moment, the only interest rates that are above the long term average is the floating interest rate and six month rates.

The long term average interest rate in New Zealand over the last 20 years, leading up to the period where interest rates were slashed during the COVID pandemic, long term average interest rates are 6. 33%. So, you know, we are starting to get below average now. Thank you. I think people still compare the interest rates that we've got at the moment to COVID pandemic at 2.

99%, which is abnormally low for the New Zealand property mortgage market.  Don't miss out on this valuable opportunity to get expert insights and proven strategies for property investing.   📍  📍  📍 Register now for How to Succeed with Property Investing, and these events are available both online and in person, and they're free to attend.

Whether you're a seasoned investor or just starting out, These free sessions will equip you with the knowledge and tools to make smarter, more informed decisions. Join us to stay ahead of the curve and take the next step towards achieving your financial goals. In our free events, we'll also tell you more about how we help our clients to achieve their investing goals.

So if you're interested in finding out more about what we do, visit propertyapprentice. co. nz today and sign up for one of our free events.  If you've already been to one of these free events and you'd like to know more about how we can help you on your journey,   📍  📍  📍 book a no obligation phone call or meeting with my husband Paul Roberts through the website.

That's propertyapprentice. co. nz. Thanks for listening.  

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Debbie Roberts

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