In their latest press release pertaining to the real estate market, the Real Estate Institute of New Zealand (REINZ), reported a decline in real estate activity in March; an opinion supported by factual market data and shared publicly by a number of other market commentators. To quote from the REINZ press release, “The number of residential properties sold in March fell by 12.9% from the same time last year to 6,938 (down from 7,964). The last time sales volumes fell this much on an annual basis was 17 months ago. The 6,938 recorded sales was the lowest number of properties sold for the month of March since 2011!” Wellington regional sales were slightly below the national average with sales numbers down 10.2%.

Market followers will not be surprised by this downturn as we all know that the real estate market is cyclical and historically has fluctuated, markedly at times. Seldom do we see a market where supply equates with demand, so the downturn in March is not unexpected. However, Tommy’s is positive about where the market is likely to head in the coming months and we have dedicated this article to share our reasons for this positivity.

  • Despite recent sales numbers being in decline, there was evidence in March of an increase in the number of properties being offered for sale and this trend is likely to continue during April and May as homeowners offer their properties for sale before the onset of winter. A greater selection of properties for sale will be welcomed by waiting buyers and seems likely to stimulate the market.
  • With the threat of a 33% capital gains tax now totally discarded by Government, there must surely be a resurgence of buying interest from property investors. Property investors provide a significant percentage of New Zealand’s rental accommodation and are vital for the contribution they make in housing a large and growing number of tenants. Demand for rental accommodation has never been stronger, returns to landlords are good and capital gains are likely over the medium to long term based on past performance.
  • The Official Cash Rate (OCR), which has a major influence on mortgage interest rates, has been constant at 1.75% since November 2016 and there is every indication that it will remain at this level or even below 1.75% in the foreseeable future. This gives confidence that interest rates will remain at or about their current levels for a further period.
  • Those of us who can recall mortgage interest rates in excess of 20% find it difficult to believe some lending institutions are currently offering finance at below 4%. With the current stability of the OCR, supported by the Reserve Bank’s indication of a further reduction being possible, this must surely give confidence to those contemplating significant borrowing? Competition among finance providers is strong and the major lending institutions are competitive in their quest to gain borrowing customers.
  • The NZ Herald recently reported that first-home buyers were purchasing one in four homes around the country and nominated Porirua City, Hutt City and Upper Hutt City as being in the top 10 hotspots in New Zealand for first home buyers. Firstly it is encouraging that this market sector remains as active as it is, and secondly, every sale to a first home buyer has the potential to create a chain reaction involving other properties and property sales. Tommy’s see no reason why this market sector shouldn’t continue to flourish in the months ahead.
  • Some people can time their entry into or exit from the property market, but there is always a portion of the public whose work, social or family commitments leave them little in the way of timing options. Being the capital city with its cultural, educational and business opportunities, there will always be a reliable and steady flow of home buyers and sellers operating in the Wellington real estate marketplace irrespective of other considerations.
  • Where better to invest than in the property market? The country as a whole has seen some huge capital gains in recent years. There was a time when million-dollar sales were a rarity – but not now! In March there were 1029 sales in NZ in excess of $1 million, 1128 in excess of $750,000, and 2113 in excess of $500,000. We urge buyers to get on the property owning ladder now and share in future growth opportunities. Buying or selling; call Tommy’s for guidance and assistance.

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