Winter: the season to put on your coat and sit in front of the real estate market until you’re nice and toasty again. Let’s see what’s causing all the heat, shall we?
Insulated or not, housing is still hot
Said realestate.co.nz in their monthly report-back on the property market, “buyers are still out and about and keen to find a home. However, their eagerness to buy is not being met with a consistent and sufficient supply of new listings.”
Having said that, the record high mean asking price of $454,795 is just an increase of 1.7%. Figures just released from Barfoot & Thompson back up this slow upward glide; their house prices are up less than $2000 on April and $1500 less than in March. And figures from REINZ yesterday rate last month as the busiest May in six years (although still quieter than 2004-07, as Alistair Helm pointed out).
As Peter Thompson says, “Auckland remains a market where there are too many people chasing too few properties.” There are fewer listings available than last year, and nationwide the property inventory has fallen 29% to a new low of 25.4 weeks.
Winter is usually a time of partial hibernation for real estate, so it will be interesting to see if the gulf between demand and supply continues to widen.
So, how about that local Housing Accord?
The relationship between the Government and Auckland Council is a little frostier than when we last checked in.
After the two signed the Auckland Housing Accord, the government went away and drew up some legislation to rush their stated dreams into reality.
And that’s where the fun begins. The Herald reported yesterday that Auckland will be asking Wellington to remove from the legislation clauses that allow the latter to take control of housing developments in the city. Councillor Mike Lee is even complaining about the use of the word ‘accord’, labeling it “demeaning”.
What they call the agreement is, frankly, the least of most Aucklanders’ worries. The big question is, will the accord work?
Housing Minister Nick Smith reckons it will, and has no plan to remove the override clause from the legislation.
It’s a clause the Government plans to use elsewhere. Areas with urgent housing needs where this could happen were identified by Dr Smith as Tauranga, Christchurch, Wellington, Queenstown, Nelson and Marlborough.
Some will be unhappy about this usurping of power from locals. On the other hand, without this stick to shake, house building may continue to stall – with nationwide implications.
Home deposits: more proof that we’re right, darnit
You may recall our earlier post on why loan to value ratio (LVR) limits are ineffective and unfair. If not, have a read then come back.
Welcome back. Now, last week Governor Graeme Wheeler gave a speech where he indicated he was more than willing to use his new tools gifted to him by the government to deal with housing without raising the Official Cash Rate, which would hurt the fragile economy.
The biggie, as ASB might call it, is the LVR limits they’ve already announced. David Hargreaves of interest.co.nz spelled out recently, based on his own experience, why he considers it hurtful for first homebuyers:
The one good thing we had going for us was that we might have been savings and asset-poor but we were strong on cash flow, both earning much higher than the average wage. And that meant we could keep the wolf from the door every month and meet the commitments. We were on the “housing ladder”.
I’ve got no reason to believe the 20-and-30-somethings of today are any different. They will do what it takes to get a house. And that’s what worries me.
…Even if our first-home buyers are able to get in somewhere below the median price, say at NZ$400,000, they might need a deposit of NZ$80,000 under the new LVR limits policy. That sounds like a lot to save.
The worry is that the final composition of that NZ$80,000 for many couples might actually be NZ$40,000 of savings, NZ$20,000 advanced on the never-never from the in-laws, and NZ$20,000 borrowed from some second-tier lender at possibly exorbitant interest rates that the primary lender – the bank – will not be told about.
It is a recipe for disaster, potentially.
Amen to that.
What do you reckon?
Is the market stalling? Who knows best – local or central government? Will LVR limits mess with your house buying aspirations? Should we just invest that money into beanies and socks instead? Let us know below or on our Facebook page.