Rising median or average prices have dominated recent headlines in New Zealand, we caught up with Joseph Laing of Stapleton’s and Associates, and property consultant for Medcapital and Become.nz to find out more.
In the market that we focus on here at Become.nz, which is brand new, turnkey properties, we are experiencing much the same as the rest of the market. High demand and low stock levels.
There is a shortage of available land for developers to build on, which is creating huge competition from the start to the finish and subsequently pushing the price of land up, which is then having a knock-on effect on the final price that we sell for.
The property market is certainly experiencing record highs and lows at present, with purchase prices at all-time highs, and stock levels at all-time lows.
Many commentators are mentioning we are experiencing the lowest stock levels ever, with an estimation of 80,000 properties needed to meet the demand of the general population. In simple economics, this will continue to result in one thing whilst the high demand is there, and that is increased prices.
The great thing about Become.nz and the stock we have access to for our clients is that it is often exclusive to us and therefore allows us to offer it to clients without competition from the rest of the market. This can make the whole buying process a lot easier and much less stressful.
The bank predicted house prices to rise by 1% but they have risen by over 5%. Why do you think this is?
I do think that Grant Roberston was being rather hopeful when in May he said the house price increase would fall to 0% shortly, as the underlying issue of low stock has not been, and doesn’t look like it will be, solved anytime soon.
Whilst we still have this shortage of available properties, prices are likely to continue to increase.
In August this year, there were 36% fewer listings available than in August 2020, whilst arguably the demand for property has increased in this time. This is coupled with the fact we are experiencing other variables that are having an impact on prices, low-interest rates, COVID (resulting in people wanting security during uncertain times) FOMO, and that people are wanting to secure the property before interest rate rises and further capital growth gains occur.
New Zealand has recently hit an average house value of $1 million, and it wouldn’t be surprising to see it not drop below this again.
What levels of "FOMO" are you seeing in buyers and how do you think this is contributing to the housing prices?
There is a high level of FOMO, and “fear of not finding anything” that is contributing massively to the housing prices.
People are certainly worried they will miss out on the record low interest rates, the capital growth before things slow down, and securing a property before the Reserve Bank looks to further restrict the lending that is available from banks.
FOMO both impacts buyers and sellers, as some sellers will not list their property until they have secured another property, this of course impacts the stock levels further, creating a cycle. According to some stats across the Real Estate network, agents are seeing a 71% level of FOMO amongst their clients of late.
It is likely that it won’t be until interest rates increase and more stock becomes available that we will see FOMO starting to cool off.
Do you think they will keep rising?
Simply, yes. I don’t think that the current rate of price increases is sustainable, and I don’t believe anyone would argue this either.
However, I see prices continuing to rise because of the previous points mentioned. I think we will start to see a reduction in the percentage increases that we are seeing but this will almost certainly remain positive.
Due to the latest round of lockdowns and the restrictions this places on being able to sell property, it is likely that this will further impact the low stock levels, whilst people either absorb all of the current stock, or sit tight in their existing property until there is more certainty. Therefore, it is very likely to continue the upward pressure on prices.
I’m looking to buy, what advice do you have for me?
Historically property prices have always increased, with the odd blip here and there, but typically this sorts itself out quickly and then enters a BOOM cycle. Therefore, if people are considering purchasing and can do so, I would absolutely encourage you to secure something as soon as you can. As the old saying goes, ‘there’s never a better time to buy than yesterday’.
Therefore, if you can secure something today, at today’s price, it should arguably be the cheapest you will ever purchase that property for. I would say don’t let those who fear-monger stop you from securing your future.
People will always have a fear of a market crash and are holding off buying because they think this is going to happen, however, the opposite is usually what happens. The property market of course comes with risk like all investments, however, there’s a huge difference between acting with caution and being too scared to do anything!