Current stats from Realestate.co.nz show the number of available listings at their lowest level in five years. At open homes I am consistently hearing from buyers that there just isn’t a lot to choose from. Basic rules of supply and demand dictate that when supply (i.e. available properties) is low and demand (number of buyers) remains constant, prices can only go up. While we’re yet to see this fully translate into huge spikes in average sale prices, on the coalface we’re seeing properties selling in a matter of days with multiple offers submitted or with competitive bidding at auction.
The graph below shows a relatively flat trend in terms of sales volume since 2018. This combined with the drastic drop in available properties is only going to push prices up. Compared to January 2018, there are 575 fewer properties on the market. Simply put, the buyers are still there but they have a lot less choice in the market place.
While the media tends to focus on monthly stats and median sale prices, these can jump around a lot. While helpful in painting a picture of what is happening in the market at that particular point in time, if you look longer-term to the 12 month medians, you can see a slight upward trajectory in the city’s median sale price. Even when looking at the REINZ Housing Price Index (which makes adjustments for the different types of property sold), Christchurch values are again approaching their 2017 peak.
With retail home loan rates as low as 3.39%, there’s no question that money has never been cheaper in recent times. Of course, the Reserve Bank is using other levers such as loan to value ratios and new capital requirements to act as a handbrake on lending. However, with Kiwis’ continued confidence in the property market, these attractive interest rates are only going to add fuel to the fire. This is expected to remain the case for 2020, with economists predicting a further cut to the official cash rate in May.
ChristchurchNZ forecasts 615,800 residents will be living in Greater Christchurch by 2028. This means growing the city and surrounds by some 10,000 new residents a year, three-quarters of them through immigration.
Brendon Harre, housing activist and blogger, says for Greater Christchurch's population to reach 615,000 people – considerably more than Wellington – the city will need 46,000 new homes by 2030. This would mean building homes at a much higher rate than seen in the past decade. Unless we see significant structural changes in resource management and in the construction industry, the supply of housing will struggle to keep up the increased demand, again translating into higher property prices.
Taking all the above into account, I think it would be fair to say that we’re going to see the market shift in favour of the seller over the coming year. Yes, we have an election to worry about in September, but I believe this will only create a temporary blip (if at all) during the campaign period.
If you’re a seller looking to take advantage of these current market conditions, we’d certainly welcome the opportunity to discuss with you how we can help you get the most out of them.