Homeowners, potential home buyers, and investors – in fact, anyone with an interest in residential real estate are all asking the same, age-old question, “What’s happening in the real estate market?” Everyone has a different reason for asking this question, and for each person they ask, they are likely to receive a different answer ranging from slow to OK, to fickle, to uncertain, to buoyant to outstanding. The answers will vary not because the person concerned is uninformed but rather because the answers tend to vary between different locations and even within different suburbs in the same town or city. There are also a number of variables that affect the market and we will touch on some of these in this article and in particular, how we are finding the greater Wellington market; the market that we work in and know best.
Enough has been said and written about the unusual times we have experienced in recent months but suffice to say that some of the by-products of a national close down will have a direct impact on the residential real estate market for some time. For example:
Unemployment and business closures are a given. They are with us now and we suspect there will be many more to follow. Any dent in a family’s income has an impact on living styles and some casualties of job losses will be evident in forced sales. We hope the number of these will be minimal but being realistic, there will be some and these will create buying opportunities for others. Mortgage holidays will undoubtedly assist some homeowners but at the end of the day, the interest and principal payments still need to be paid. It’s a cruel world but a fact of life that in difficult times some will, unfortunately, succumb to the pressures of lost or reduced family income.
First Home Buyers:
Tommy’s is finding that the number of first home buyers in the market has increased considerably since the lockdown. There are a number of reasons for this, such as the removal of the Loan to Value Ratios (LVRs) and a perception that house prices are likely to drop. Mortgage interest rates are of course being offered at an all-time low level. The COVID-19 crisis was also the catalyst for a large number of Kiwis returning home from overseas. Many of them are back to stay, and their presence has been noticed in the housing marketplace.
Although Wellington and its environs have not relied heavily on tourism, the lack of overseas visitors will play a part in the level of market activity. Owners of a number of Wellington B&Bs have chosen to sell their investment properties as the decreased demand for short-term tenancies has impacted negatively on their rental income. The Wellington rental market has also noticed a reduction in demand in some areas and this may, in turn, reflect in an easing of rental costs.
In our time we cannot recall interest rates ever being as low as they are at present though banks are reportedly taking longer to approve loans and asking more questions than they have in the past. However, cheap finance makes borrowing attractive and supports the Government and business world’s plea for us all to spend up large to boost the economy. Both first home buyers and investors must surely take advantage of the current borrowing rates all of which helps to stimulate the market.
Supply and Demand:
There is still a shortage of available housing locally and nationwide and, as long as this situation exists, demand will be constant. It is interesting to note that demand has been high for low to medium cost inner-city apartments with good numbers being sold from plans over the last couple of months with completion and settlement still one to two years away. The Government is promising large numbers of new homes to assist in meeting demand but this has yet to come to fruition and at best, will be some time yet before being available.
Sales figures for Tommy’s in May exceeded expectations at a time when we expected the market to be flat and in recovery from the lockdown. Listing levels have increased and our expectations are for a good level of sales through June and into July. Despite the opinions of the merchants of doom, Wellington prices have held up to pre-COVID levels and our belief is that this will be the pattern over winter.
Open homes are generally being well attended with a high of around 70 persons or couples visiting one Tommy’s listing recently. While this is an exception, the enquiry is strong enough for Tommy’s to have confidence that there is an abundance of buyers searching for good properties. First home buyers, in particular, are active in the mid to lower price ranges.
As an overview, Tommy’s anticipate the recovery from the lockdown as it affects residential real estate, will happen quickly and we will witness a continuation of a market similar to 2019 and early 2020. We look forward to assisting our clients in meeting their housing needs in the months ahead.