If we could see into the future, buyers and sellers would be able to time sales and purchases to maximum advantage. We can’t foresee the future but we can learn a lot from the past.
Many buyers and sellers are asking will property prices continue to rise through this year. Some estimates put Dunedin house values rising up to 15% in the past 12 months. REINZ figures for December 2015 compared with December 2016 put the median house price increase for the Otago area at 10% (Read More). Buyers want to know how long the rises will continue because they face tough competition bidding for property, particularly in the $200,000-$400,000 range in which many are looking to buy their first home. It is the norm now for there to be multiple offers on well-presented and well-priced properties. In one case late last year, I took 13 offers, ranging over several tens of thousands of dollars on a property that sold in the $300,000s. Sellers want to know because, obviously, they want to maximise their sale price.
A recent news report, based on statistics from Quotable Value, suggested Dunedin could be the new hot property spot (Click Here to Read More).
So, how long will this current hot market in Dunedin last? Not untypically, Dunedin’s property resurgence has come well after the soaring market in Auckland which ran for more than five years. If we look at trends in the Dunedin property market going back at least 30 years, it can be seen that property rises and adjustments go in cycles of around five to seven years. The last big upward swing in Dunedin property prices ran from 2001 – 2007. After that sustained trend, prices levelled and, in some cases, fell till the market began to pick up again around 12 months ago.
As in the past, northern and overseas investors have looked outside Auckland for investment value when things overheated there. In terms of capital investment required and return, Dunedin looks attractive to buyers with strong cash or equity. Property investment, and thus prices for this type of property, have been tempered, however, by the imposition by the Reserve Bank of a 40% deposit requirement on investment property.
But inquiry, particularly from first home buyers, many with Kiwisaver funds, continues to be strong and there are no foreseeable factors that are likely to dent this demand for some time. Although in the long-term, interest rates are predicted to rise (Read More Here), they have been at historic lows, are still encouragingly low for borrowers and look to remain that way for at least the next 12 months. In addition, demand by first home-buyers in Dunedin is continuing to outstrip supply. As a general rule, when demand surpasses supply, mortgage rates are low and money is relatively freely available, property prices will rise.
So, using the above factors as guides, we can expect a continued strong residential property market in Dunedin for at least another 12 months. It is unlikely to reach 15% annual growth, but it will not be surprising if residential property prices continue to rise, at least moderately, for the next several years.