New Zealand house prices are unlikely to suffer a decline any time soon, with the country’s economy and job market both growing in strength.
Describing the current surge in the housing market as constituting a boom, economist Tony Alexander said demand for property would likely continue on the back of low interest rates.
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“If I was describing this situation to somebody, I’d say conditions are booming at the moment so I find myself defaulting that we are in the boom,” he said.
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Alexander was taking part in the OneRoof Property Report live debate today, along with Barfoot and Thompson managing director Peter Thompson, Valocity CEO Carmen Vicelich and Real Estate Institute of New Zealand CEO Bindi Norwell.
He said the number of Kiwis who had been sitting on the side-lines of the housing market before Covid-19 struck must have been far greater than anyone had anticipated.
They had all jumped into the market post-lockdown, buoyed by low interest rates and the removal of the loan-to-value-ratio restrictions. The pandemic and predictions of house prices declines had increased hopes of grabbing a bargain, but prices post-lockdown had done the opposite.
Norwell expected the hot streak in the market would continue as long as demand outstripped supply.
“Auctions are up, open homes are up, prices are up, volumes are up. Unless we can solve how to build more houses at scale, we are going to have a supply issue long term, short term and medium term," she said.
Vicelich agreed that there would be no coming down from the boom as long as there were challenges around supply.
But she said building the right product – affordable and suitable for first home buyers – was the answer, not expensive-to-build four-bedroom homes. “We have to go up or out, and must have the planned infrastructure to build for a growing population.”
Referring to recent reports that the LVR restrictions could be reintroduced, Alexander said the Government would likely propose solutions but added: “There’s no solution. If you break your arm, what’s the solution? It’s broken.
“Already we’re back into shortages of carpenters, electricians, labourers on site and even if the Government tried to facilitate for a rapid construction of houses, the builders aren’t there and the supply side will still remain constrained.”
Peter Thompson, managing director of Barfoot and Thompson, said disappointed buyers may need to temper their expectations in order to get ahead of the market.
“Get in an area you can afford. You’re buying for today, not for what you want in five or six years, or where you finish up in 20 years.
“Do you look at an apartment rather than a three-bedroom house on a section? The apartment living gives you a different style or perspective especially for young couple or people in middle to later life.
"We all still like to think that the house on a section is the ultimate dream.”
Thompson said buyer frustration was understandable, saying that there had been an uptick in complaints from buyers frustrated at the amounts they were spending on due diligence done, only to be out-bid at auction.
“But sales are going through, there are buyers making good deals.”
All four panellists urged would-be buyers not to skip due diligence like valuations or building inspections to save time or money, as that could end up costing tens or even hundreds of thousands of dollars.
“Get in the market, you can’t buy the perfect for the first home, there needs to be an element of realism. Then once you’ve decided, deep dive into the three or four suburbs so you can act fast when something comes into the market,” Vicelich said.
Alexander’s advice to frustrated buyers was to compromise and maybe come back to options they had originally rejected as the market would not be easing up any time soon.
