Residential demand surfs a wave of change to year-end

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PHOTO: New Zealand Summer is almost here. YOUTUBE

While New Zealanders continue to navigate the choppy waters of a global pandemic, this year we’re celebrating the wins – big or small, while looking forward to time spent with family and friends as we wrap up 365 days full of surprises.

Homeowners have been hit with a smorgasbord of legislative, financial and social disruption, much of which has been implemented to slow the freight train that is residential value growth.

Quarter one closed off with the Government’s sweeping changes to its housing policy, leaving many to wonder what’s next?

New rules saw the bright-line test extended from five to 10 years, while $3.8 billion in surplus funds contributed to a new Infrastructure Acceleration kitty, set to support the creation of new services and boost housing supply.

Most controversially, however, was the Government’s decision to ignore advice from the Inland Revenue Department (IRD) and persist with removing interest deductibility provisions for property investors that would end their ability to offset interest expenses against rental income.

While investors gave pause for thought, their market share dipping four percent in Auckland between quarter one and quarter two, an air of uncertainty settled over the market while we waited for clarification on the new rules not released until just before the October application date.

Despite change and the reintroduction of loan-to-value ratios (LVRs) for both owner-occupiers and property investors, data from the Real Estate Institute (REINZ) showed the national median sale price rose 13 percent in the first three months of the year.

This, off the back of 17 percent value growth in the last six months of 2020.

Record low interest rates, a supply-demand imbalance and the ‘wealth’ effect of a recovering economy and stimulatory monetary policy saw some Kiwis rush to spend their saved holiday funds on bricks and mortar investments.

Throughout quarter two, intensified chatter around rising interest rates and tightening credit conditions served to underpin residential sales activity, providing an impetus for buyers to enter the market before the housing winds changed.