Real estate: Property price growth ‘already halted’ in Whangārei as investors cool

The government’s forecast of stopping property price growth is already being felt in provincial centers like Whangārei, as investors’ interest has waned, according to real estate experts.

The Treasury Department predicts that annual house price growth will peak at 17.3 percent in June 2021 and drop to 0.9 percent in June 2022, in line with its economic budget outlook.

Treasury Secretary Grant Robertson said it was “a very sharp adjustment in house prices but a very necessary one” as the government came under pressure to arrest New Zealand’s runaway real estate market.

The government's real estate changes have caused investors to cool their interest in buying in places like Whangārei, experts say.  (File photo)

Liz McDonald / things

The government’s real estate changes have caused investors to cool their interest in buying in places like Whangārei, experts say. (File photo)

Provincial centers such as Whangārei, Waitomo, Ruapehu and Central Otago are already seeing a drop in property prices, firmly tied to the government housing changes announced on March 23, which are discouraging investors.

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Although investors may be the losers, early home buyers still don’t win as it takes them a long time to save the deposit they need.

While investors don't necessarily sell, fewer of them visit open houses.  (File photo)

Jennifer Eder / things

While investors don’t necessarily sell, fewer of them visit open houses. (File photo)

The March 23 changes include doubling the time the Bright Line test applies to investment property. This means that tax must be paid on capital gains if the property is sold within 10 years.

The interest deductibility for residential investments has been removed, preventing landlords from writing off mortgage interest costs against tax on their rental income.

The Reserve Bank’s restrictions on value creation were also introduced on March 1, which means most investors will need at least 30 percent equity for a property.

The result, according to Whangārei real estate agents, was that some landlords were selling their investment properties and far fewer investors were looking to buy at the moment.

House prices in Whangarei fell 7.6 percent from March to April.  (File photo)

itravelNZ / FLICKR

House prices in Whangarei fell 7.6 percent from March to April. (File photo)

From March to April, Whangārei’s average retail prices fell 7.6 percent to $ 670,000, compared with a nationwide drop of 1.8 percent to $ 810,000, according to the Real Estate Institute of New Zealand.

The price is still 29 percent up from April 2020, but New Zealand was on Covid-19 level four alert for most of the month. Whangārei’s sales volume also fell 15 percent to 104 sales for the month.

The vast majority of investors in Whangārei are from Auckland, said Mike Beazley, owner of Harcourts Whangārei, and while some are selling, it’s also because they can get a good price on their property.

The heating and insulation standards for healthy homes, which will apply from July 1 to any new or renewed tenancy, are also a reason for some to sell, he said.

Eves Whangārei real estate agent Richard Lyon says the door is opening for first-time home buyers.

Delivered

Eves Whangārei real estate agent Richard Lyon says the door is opening for first-time home buyers.

Eves Whangārei real estate agent Richard Lyon said he hadn’t realized many landlords were looking to sell and a number is now on hold due to the new Bright Line test.

Lyon said the number of landlords participating in open houses has fallen by 30 to 40 percent since the government’s announcement on March 23 – after a few days of rushing before the rules went into effect.

“I think this is an opportunity right now for early home buyers.”

Lyon predicts that some investors seeking long-term capital gains will come back to the market, albeit not as strongly as before.

But he said it is still a sellers ‘market, not a buyers’ market, as there are no offers and the number of days it takes to sell a home in Whangārei is at a record high.

“We don’t see any price drops.”

Ray White Whangārei director Vanessa McKenzie agreed that property prices are still stable, although the number of registered buyers at auctions drops from five or six to two to three.

“It definitely had a damper on the number of buyers.”

Vanessa McKenzie, director of Ray White Whangārei, said property prices are still high despite falling buyer numbers.

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Vanessa McKenzie, director of Ray White Whangārei, said property prices are still high despite falling buyer numbers.

McKenzie believed investor numbers will rise again as Whangārei landlords can still earn a 6 percent return on rent despite the tax changes.

However, first-time Auckland-based home buyers looking to get on the Whangārei property managers due to the availability of homes under $ 650,000 have been constrained by the government’s strict home loan and first home grant rules, she said.

Brad Olsen, senior economist at Infometrics, formerly Whangārei, said Northland has already seen a slight slowdown in sales and he expects this to continue for the remainder of the year.

He believed that provincial areas like Whangārei would find this “a little quicker” than other areas once the new rules came into effect and real estate investments became less profitable for those who were heavily indebted.

“We feel that there are signs of a slowing pace in the property market, especially if sales volumes decline and property prices stay the same.”

Olsen hadn’t expected prices to drop either, which means that first-time buyers may still be excluded from the market.

“Housing is still unaffordable relative to many people’s incomes, and that will be a challenge across the country,” he said.

“There may be less competition going forward, and we expect property price growth will slow. However, if you are a young person making a deposit this is a fair bit of money behind you.” have to.”

Research shows that it takes the average person 10 years to save a deposit, Olsen said. The share of first-time home buyers in purchases has fallen to its lowest level in three years.

And while Northland house price growth has slowed and sales have plummeted, it took until after a big high to return to pre-pandemic normal levels, he said.

“It’s just a fantasy that the real estate market is falling.”