Naturally, New Zealand
After a rocky two years, Kiwis are regaining confidence in their housing market, reports Rosanne Barrett
It is known for its isolated beauty and Middle Earth landscapes. New Zealand has crisp, clean air, and offers up a range of lifestyles from big-city living in Auckland to vineyard farming in Marlborough and extreme adventures in Queenstown. But even this small collection of islands was not spared the recent global financial crisis or the ensuing negative impact on residential property prices. The slump came after a tremendous boom in residential property prices during the 2000s – the median house price rocketed from NZ$177,000 (HK$887,000) in 2002 to NZ$340,000 in mid-2008.
Now the market is again gaining strength, with prices inching back up to their early 2008 levels. And with “green shoots” taking root across the world, New Zealand property prices look set to become even more lush. Average sale prices crept up in July, transaction volumes are starting to increase and optimism is returning. Government valuations agency QV says although the market remains sluggish, more people are willing to test it out. Valuations manager Glenda Whitehead says sales are “solid and there is increased buyer optimism and activity.”
And real estate agents agree. The usual New Zealand winter slowdown was not as pronounced this year according to the Real Estate Institute of New Zealand (REINZ). “In fact, there has been a slight rise in median prices,” REINZ president Mike Elford says. The rise brings prices back up to the June 2008 level of NZ$340,000. And although sales volumes remain low, he says properties are being snapped up increasingly quickly.
“The overall faster time to sell shows that the buyers are out there, and the prices being paid show the money is there, but there’s still a reluctance on many people’s part to put their home on the market in what they perceive as a buyer’s market,” Elford says. “Shortage of stock remains the biggest issue facing the industry at the moment.”
But international real estate listing company realestate.co.nz believes the market is already rebounding. In a recent report the company found overseas searches for property sales in New Zealand had jumped 14 percent, while rental searches had increased 17 percent. CEO Alistair Helm says the crisis prompted people to reconsider migrating abroad and New Zealand remains a popular destination. He says the number of Chinese browsers investigating home sales is up a whopping 211 percent.
While agents are optimistic, the overall market is cautious.Increasingly though, people are beginning to believe that the worst of the downturn is over. And the fine balance of supply and demand may fall in the sellers’ favour in the near future, according to a QV report. “There has been an increase in the number of people intending to buy in the next 12 months, but fewer who intend to sell, which may lead to further shortages of properties for sale,” the report said. “The changing balance of these buyer and seller sentiments will shape the market over the coming months.”
Local bank ASB also found increasing investor confidence in the quarter to July in its Housing Confidence report “Onwards and Upwards”. It singled out first-home buyers as being particularly active, saying it is now a “far better time to buy a house than two years ago. Prices have fallen, enabling cheaper entry, and the risk of further price falls has reduced. Pivotally, low interest rates have dramatically changed debt-servicing costs.” But the bank warns against over-confidence, saying the recovery will be “only a shadow” of the 2002-2007 house-price boom.
New Zealand’s property market is most developed in Auckland, its biggest city, with other regional centres including the capital Wellington and tourist hotspot Queenstown. In the last quarter, property values have rebounded the most in the major centres, but overall prices remain lower than at the same time last year.
In June the median property price in Auckland was NZ$483,397, an increase on the May median of NZ$489,444. In Auckland City, the Central Business District, you can buy a modern 52-square-metre one-bedroom apartment with great views for less than NZ$200,000 (listed by City Property Management). In the more exclusive eastern beaches suburb of Mission Bay, prices are higher but bargains are still available, particularly for unrenovated properties. A two-bedroom 55-square-metre townhouse with a north-facing deck is listed for NZ$299,000 with Crockers Realty. At the higher end, a 258-square-metre, four-bedroom house with 400 square metres of land is listed for NZ$775,000 with City and Bays Realty.
Property prices in the political centre of Wellington are also recovering. Prices are generally cheaper than in Auckland with a June average sale price of NZ$366,500. But for a special property, visit the New Zealand Property Council Supreme Award-winning complex, Chews Precinct. Developed as a project to revitalise inner-city Wellington with cafés, bars, boutiques and galleries, the apartments feature two or three bedrooms, all with floor-to-ceiling windows. One 78-square-metre, two-bedroom unit with a 38-square-metre terrace is listed with Remax for NZ$499,000.
In the adventure capital of Queenstown, the views over Lake Wakatipu to the craggy mountains behind are spectacular. Boasting this magnificent view are the Highview Apartments in Central, Queenstown, where you can buy a two-bedroom, two-bathroom unit for NZ$419,000.
Overseas residents are able to buy property in New Zealand. If the property is worth less than NZ$10 million or is classed as heritage land no official clearance is required. Transaction costs are low amounting to between 0.21 percent and 0.74 percent of the property’s value. Rental taxes are charged on a sliding scale but there is no capital gains tax. The New Zealand Reserve Bank also recently released an authoritative new house-price index in conjunction with REINZ to better track economic movements. Changes to legal contracts, to make them “plain English” were implemented in July.
Kiwis are hoping the worst is over and it may well be so. A recent report for mortgage insurer QBE LMI predicted house prices would rise by 24 percent on average over the next three years, including a huge 11 percent rise by June 2010. In Auckland, the predicted rise is even higher – almost 30 percent over three years. Chief executive of QBE LMI Ian Graham said there was increasing demand and with record-low interest rates, “the motivation for first-home buyers and investors to enter the housing market has never been more compelling”.
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