Fear of missing out has been driving housing market activity in recent months but that fear is having unintended effects.
Joe Nidd, from Nidd Realty in Dunedin, says his market is moving so fast it takes agility to keep up – and a shortage of listings is making matters worse.
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Market growth in Dunedin hasn’t been anywhere near the “astronomical” levels seen in other big cities because they’ve got a great supply of property coming online, “but in somewhere like Dunedin we’ve got restricted building activity, a growing city with a scarcity of property”.
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Agents have reported that vendors are sitting on the side-lines because they are scared they might not be able to get property once they sell.
In the 12 months before Covid-19, Dunedin enjoyed strongest growth of New Zealand’s main urban centres – with values up 23.7 percent.
That momentum has evaporated post-lockdown, with the city’s housing market registering growth of just 0.6 percent on the OneRoof-Valocity house price index, for a new median value of $535,000.
Whilst sales trends appear to be reversing, sales volumes still remain significantly subdued, the result of many market participants continuing to sit on the side-lines.
First home buyers, capitalising on favourable interest rates, remain the most active buyer group, with their share of total mortgage registrations for last quarter sitting at 37.9 percent.
Economist Ed McKnight, from investment company Opes Partners, is not surprised that Dunedin property values have stopped growing.
“Dunedin prices had ramped up in recent years but that momentum tends to fizzle out, so it’ll be flat for some time,” McKnight said.
He said investors could find higher rental yields in Christchurch – around six percent compared to just under five for the Otago region.
“It doesn’t surprise me that investors are looking elsewhere. You can buy a house in Christchurch for less money and get better rent because there’s more demand for rentals,” he said.
Richard Stringer, Harcourts branch manager in Dunedin, said his agents had enjoyed their best winter in five years, with most properties attracting multiple bidders.
However, after a strong June, July and August, the market slowed down and flattened in September.
“Listings were lower than we would normally see. The market was taking a breather and election time always interrupts people's thinking.”
Things have improved post-election but stock was still an issue.
“Dunedin is still constrained by a lack of subdivision development and opportunities for people to build and I know of one subdivision of 70 sections coming up but it’ll be two years before it gets a title.”
About 80 percent of Dunedin buyers were from the area, the rest from out of town or expats.
"Investors are still there but now there’s an even playing field between investors and first home buyers,” he said.
The price of a first home had risen from around $350,000 to $500,000.
Stringer said a three-bedroom house with a CV of $405,000 in Brockville, on Grigor Street recently sold for $524,500 and was one of the first sales that exceeded half a million-dollar mark in that area.
“Six months ago, it would have been in the mid-400s and now due to the shortage of property the price it sold for is the norm,” he said.
Adam Gain, sales manager of Bayleys’ office in Dunedin, said his agents had not noticed a slowdown in growth.
“We are not finding a retraction or a drop in value at all. We are having multiple bidders for all our properties and all out auctions are selling well above reserve with time to sell being very urgent, around 21 days.”
The number of sales is tracking about the same as last year but stock levels are lower, Gain says.
“The stock is limited but it’s not significant. First home buyers' market is absolutely frantic,”
