The government’s planned halt in house price growth is already being felt in provincial centers like WhangÄrei, as investor interest wanes, real estate experts say.
The Treasury predicts that annual house price growth will peak at 17.3% in the June 2021 quarter and slow to 0.9% in the June 2022 quarter, as part of its fiscal economic outlook.
Finance Minister Grant Robertson said it was a “very sharp adjustment in house prices, but very necessary” as the government is under pressure to stop the New Zealand housing market which is sinking. packed up.
Provincial centers like WhangÄrei, Waitomo, Ruapehu and Central Otago are already experiencing a drop in house prices, firmly linked to the housing changes announced by the government on March 23, which put investors off.
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But while investors may be the losers, first-time home buyers still don’t win because it takes a long time for them to save the down payment they need.
The March 23 changes include doubling the time that the light line test applies to investment properties, meaning that capital gains tax must be paid if the property is sold within 10 years.
Interest deductibility has been removed for residential investments, preventing homeowners from deducting mortgage interest costs from tax on their rental income.
The Reserve Bank’s loan-to-value restrictions also went into effect on March 1, meaning most investors need at least 30% equity in a property.
The result has been that some owners have sold their investment properties, and far fewer investors are looking to buy at the moment, according to WhangÄrei real estate agents.
From March to April, WhangÄrei’s median selling prices fell 7.6% to $ 670,000, from a 1.8% decline nationwide to $ 810,000, according to figures from the New Zealand Real Estate Institute.
The price is still up 29% from April 2020, but New Zealand was at Covid-19 alert level four for much of that month. WhangÄrei’s sales volume also fell 15% to 104 sales in the month.
The vast majority of investors in WhangÄrei are from Auckland, said Mike Beazley, owner of Harcourts WhangÄrei, and if some sell, it is also because they can get a good price for their property.
Healthy Homes’ heating and insulation standards – which come into effect on any new or renewed rentals from July 1 – have also been a reason for some to sell, he said.
Eves WhangÄrei real estate agent Richard Lyon said he hadn’t noticed a lot of homeowners wanting to sell, with a number now on hold due to the light line re-test.
But Lyon said the number of homeowners participating in open houses had fallen 30-40% since the government announced on March 23 – after a few days of rush before the rules went into effect.
“I think this gives first-time buyers a good opportunity right now.”
Lyon predicts that some investors looking for long-term capital gains will return to the market, albeit less strong than before.
But, he said, it is still a seller’s market rather than a buyer’s market, due to the lack of listings and the record number of days it takes to sell a house in WhangÄrei.
âWe are not seeing any drop in prices.
Ray White WhangÄrei manager Vanessa McKenzie agreed that house prices remain stable, despite the number of registered buyers at the auction dropping from five or six to two to three.
âIt certainly had a moderating effect on the number of buyers. “
McKenzie believes the number of investors will pick up, as landlords are still able to earn a 6% rent return in WhangÄrei, even with the tax changes.
However, early Auckland-based homebuyers, who were looking to scale up real estate in WhangÄrei due to the availability of homes under $ 650,000, were limited by strict government rules for its loan program. real estate and First Home Grant, she said.
Infometrics senior economist Brad Olsen, formerly of WhangÄrei, said Northland had already experienced a slight slowdown in sales, and he expected that to continue for the rest of the year.
He believed that provincial areas like WhangÄrei would feel this “a little faster” than other areas as the new rules took effect, and investing in real estate would become less viable for those with high debt.
“We feel there are signs of a housing market slowdown, especially for declining sales volumes and house prices to stay the same.”
But Olsen also didn’t expect prices to drop, meaning early buyers could still be shut out of the market.
âHousing is still unaffordable compared to the incomes of many people, and that will be a challenge across the country,â he said.
“There might be less competition in the future, and we expect house price growth to slow down, but if you’re a youngster putting up a deposit, it’s a fair bit of money. you must have it behind you. “
Research shows the average person takes 10 years to save a deposit, Olsen said. First-time homebuyers’ share of purchases fell to its lowest level in three years.
And while house price growth has slowed in Northland and the number of sales has plummeted, they did not return to pre-pandemic norms until after a major peak, he said.
“It’s just a fantasy that the housing market is going down.”