Market update: Goodwins’ Managing Director Catherine Goodwin ponders the market forces at work

It’s been a mixed year for residential property owners and investors across the country, according to figures released by the Real Estate Institute of New Zealand.

Annual rental growth in Auckland increased by just 3.4% over the 12 months to June 2022, and it is now reported (on the 21st of October 2022) that Auckland’s median weekly rent for residential property has not moved in six months, while the number of rentals has skyrocketed. Auckland’s annual yield continues to sit at a very modest 2.7%.

Across the country, more rentals were listed on Trade Me than any September on record, with a 31% year-on-year jump. In Auckland, the number of rentals listed rose 51% year-on-year, the biggest increase in all regions. Wellington was not far behind with supply spiking 49%. Trade Me property sales director Gavin Lloyd says more options for renters are reflected in both regions’ stagnant rent prices.

The REI’s most recent Monthly Property Report has shown that whilst October saw an increase in enquiry and open home attendance in some regions, rising interest rates have caused hesitancy amongst buyers across New Zealand. Prices continue to ease, sales activity remains down and properties are taking longer to sell than in October 2021, according to the latest data and insights from the Real Estate Institute of New Zealand (REINZ). Auckland’s median price decreased 12.7% compared to October last year, from $1,249,000 to $1,090,000. The region has recorded six consecutive months of annual median price decreases for the first time since August 2008 to January 2009. All seven Auckland districts had negative annual median price movements; North Shore had the greatest decrease, down 18.2%, followed by Papakura, down 17.3%.

Jen Baird, Chief Executive at REINZ says, “This year, several compounding factors have created uncertainty and hesitancy in the market where there was confidence and urgency last year — rising interest rates and the cost of living, tax legislation and property regulation, tightened lending criteria, and global events with macro-economic impacts. We are seeing downward pressure on prices and the pace of the market has come down. However, over the last couple of months, salespeople have observed an increase in the number of enquiries and a noticeable increase in the number of first home buyers back in the market.”

However, what is painful for some presents opportunities to others.

Recent research published by independent economist, Tony Alexander, and suggests first home buyers are back in the market.

But, whilst investors are perhaps more reticent, according to mortgage advisors surveyed, good luck picking the market bottom! Trying to pick the bottom of a market is pure folly – those who say they can have probably missed it. As the saying goes: economists have successfully picked 10 out of the last three recessions.

There is no question that tightened lending criteria, interest rate increases, and inflation fears are putting a squeeze on demand. But bear in mind recent comments from Jo Rae, Head of Property Management at REINZ: “As the market continues its current trajectory, with the median property price moving at a more moderate pace and with more stock available, we may see investors return to the market enticed by moderating prices and the opportunity to diversify their portfolio”.

This is certainly my personal experience, with experienced investors now tentatively back in the market and looking to buy.

Keep talking to your financial advisors and, when you’re ready to move on an investment property, get in touch to organise a pre-purchase rental assessment to ensure your investment delivers the returns you expect.

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