With the property market moving into a new phase today, following the easing of Covid-19 Level 4 restrictions, where in the country should buyers and investors look to score the best deals?
The key to getting a bargain right now isn't spotting what's cheapest or been slashed in the price the most but identifying what will hold or rise in value in the coming months and years.
Economist Ed McKnight, from investment company Opes Partners, says first home buyers would well to turn their eyes to the Auckland city apartment market, where many investors will be reassessing their portfolios.
“You’ll have a lot of investors who’ll be either turning their properties into long-term rentals or selling. Prices will be variable, creating opportunities for first home buyers,” he says.
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McKnight says just over half of Auckland’s Airbnb properties are in Auckland CBD and Waiheke Island, although he warns there is unlikely to be a flood of buying opportunities on Waiheke as the island's short-term rentals might be somewhat protected by domestic tourism.
Economics commentator Tony Alexander agrees there will be more opportunities in the apartment market this year.
"There are many first-home buyers that have secure jobs but just lost some of their KiwiSaver. Well now, the impact of that will be offset by the banks saying they'll accept less than a 20 percent deposit," he says.
Alexander predicts housing markets in tourist centres will feel the squeeze.
He says Wanaka is uniquely exposed, with the drop in tourist numbers inflicting pain on local businesses, which in turn will lead to an increase in debt. But it isn't just local homeowners who will come under pressure.
Many Wanaka and Queenstown "Airbnb" homes are owned by outside investors, who will be looking to sell if their income is unstable.
“The market of aspirational purchasers always falls away when the economy goes into a recession because who can justify buying a holiday home when their business is going under,” he says.
However, Alexander says long-time residents of Queenstown and Wanaka know their property market goes through cycles and that prices eventually come back again.
McKnight says neighbouring Mackenzie is in the same boat. The region has seen enjoyed phenomenal price growth in the last 20 years but will likely cool over the coming months. “Places that have had the most growth in property prices will become more affordable because they have further to fall and they have space to cool down,” he says.
McKnight believes there will also be opportunities in nearby Otago and Southland, both of which are reaching the peak of their property cycles, and the Bay of Plenty and Hawke's Bay, where property prices are currently sitting above the national long-term average.
He says Canterbury, Marlborough and Taranaki are at opposite end of the scale and may not see much in the way of price drops.
“The regions that are below the long-term average are the ones that have the most to gain and we don’t expect them to have as much of a dip in house prices,” he says.
Property prices in towns and rural areas where farming and produce is the main drive of the economy aren’t going to be affected as much either. “The world is going through times when everyone is buying a lot of food and farmers for example in Taranaki area will be doing absolutely fine," McKnight says.
