We have been through tougher markets than the current one but it’s always a challenge for those in the middle of market decisions to remain positive in the face of disappointing news. The past few months have been a tale of sale prices trending downwards – bad news for vendors but good news for buyers.
Overall, though, we need to bear in mind that the past decade has been one of unprecedented price and sales growth. Really, even now, we are still ahead of where the market was pre-Covid, just over three years ago. Some commentators believe we are now either at or very near the bottom of the market as far as prices are concerned. Estimates of price falls in the Dunedin residential market over the past 12 months range between 10 and 15%. The median sale price has fallen from $631,000 in April 2022 to $570,000 in April this year. But that should be viewed with caution, as the largest buyer sector in that time has been first home buyers mainly buying in the lower price bracket.
In winter, sales numbers are often unspectacular but there are modest signs of improvement over last winter. First home buyers are especially active. In April last year there were 125 sales compared to 127 in April this year. For many, winter is a good time to buy as activity and competition slows. Against this, there have been a couple of announcements that some are hailing as great progress. From June 1st, investors’ equity requirements dropped from 40% to 35%. My reaction is that this is mere fiddling rather than a significant change. The few investors looking now are stand-offish and this change is unlikely to mean a flood of new investors. For example, a $600,000 investment property would still require equity of $210,000, compared with $240,000 previously. Well-heeled investors will benefit slightly but new and young investors looking to use equity from their first home will hardly be encouraged.
Those welcoming such tweaking of market regulations could perhaps be viewed as overly optimistic. If there is a change of government in October, however, and restrictive investment rules are eased we could expect more activity in the slumbering investment market – particularly from owners waiting to sell. Promises to reduce the brightline rule and reinstate the ability to claim interest costs on investment property are possible tipping points.
But the other change this month, allowing banks to increase the percentage of their loans to buyers with less than 20% deposit, will be more helpful to first home buyers. There’s a significant difference between a requirement for a 20% deposit and one of 10%. For a $600,000 property it means first home buyers would need just $60,000 instead of double that. Certainly, mortgage brokers I’ve spoken with are seeing most of their business from first home buyers. Brokers are also seeing clients coming off mortgage interest rates of 2% to 3% and advising them, if they haven’t already, to stagger loans so there’s not so much of a burden moving to higher rates.
I’m always happy to offer realistic real estate advice and appraisals. If you need help or advice on any property matter, don’t hesitate to contact me.