As we embark on another year shadowed by Covid news, many property owners and buyers will be wondering where the real estate market is headed. It seems an Omicron wave is about to sweep through in the next two or three months. Is it a good time to buy or sell? What is likely to happen to the value of property investment? These are questions I am hearing now.

Firstly, if you can afford to buy, property is always a good investment provided you regard it as a long-term investment. Like buying shares, timing is crucial but if you hold on to property long enough you are likely to always come out well ahead. Certainly, there is now regulatory encouragement to hold real estate long term. Brightline regulations have meant quick profits from buying and selling are taxed on properties -- other than the principal family home or new builds -- if they are sold within 10 years of purchase. New builds bought as an investment are subject to a five-year brightline rule. https://www.ird.govt.nz/property/buying-and-selling-residential-property/the-brightline-property-rule

This and LVR restrictions have dampened investor interest. Newer property investors especially seem to be struggling to meet the 40% deposit requirement. I have seen few at newly launched properties that would have been popular 12 months ago. Unfortunately, higher deposit requirements also seem to be tempering first home buyer activity. Newly launched properties that we would have expected to see 20-30 groups lined up to view on the first open home are now attracting only a handful of buyers, though they are usually well prepared and ready to buy.

We are also seeing a long-awaited increase in listings. Numbers in Dunedin are now into the 500s, more than double what they were a few months ago. Beware the lag in statistics but even so, normally at this time of year, we would expect the market to be very active.  Now we seem to be in a market in which supply is increasing and demand falling. Confidence has taken a knock. Under these market conditions prices are likely to stabilise. Any falls are likely to be relatively minor compared with recent gains. At the very least, it would be safe to say the property price boom experienced since 2015 is over. Annual price increases of 20% or more are unlikely to be seen for several more years.

Ordinarily, that would be good news for buyers but in these tough lending times that’s hardly the case. Just have a chat with your mortgage broker to bear that out. The Government’s inquiry into lending rules introduced in December might bring relief, but governments are usually reluctant to address legislative mistakes let alone address them appropriately. What it means for vendors is a heightened importance of employing an experienced agent who has been through this kind of market before and knows how to maximise your sale price. There will be many agents who have only worked a hot market in which sales come relatively easily. Expect the going to get tougher through 2022. My advice to vendors wanting top dollar: don’t put your faith in the trends of last year or hopes of increasing numbers of Kiwis returning from overseas or North Islanders escaping south. Instead rely on the experience and steady advice of a proven real estate professional.