Continuing demand for properties should see house prices remaining firm.
Mike Bayley, Managing Director of Bayleys Corporation
There is a degree of caution in the residential property market - driven by the new loan-to-value ratio (LVR) restrictions and buyers bracing for an inevitable Official Cash Rate rise, and a rise in mortgage rates.
While the fundamentals of the economy have strengthened, timidity is prevailing at the lower end of the residential spectrum.
Meanwhile, we are seeing signs of a resurgence in activity in the CBD and city-fringe apartment market, particularly in Auckland. There has been a surge in land sales zoned for medium- to high-density residential developments, and this will affect activity in this sector over the coming 18 months.
We are budgeting for another year of rising prices for homes, although that increase will be nowhere near last year's double-digit growth. Somewhere around a 2 to 3 per cent price increase is more sustainable, and more palatable for the market.
Volumes are likewise forecast to be up on 2011 and 2012 levels, but not necessarily as rampant as last year. This year's rises in sales values and volumes may be tempered by the looming election and the 'wait and see' effect that has on the Kiwi psyche.
Auckland will continue to lead in terms of 'headline' reporting on market sales. New build stock will slightly ease the supply and demand 'pressure valve' but it simply isn't keeping pace with the number of people seeking dwellings in the city. This will underpin current values.
Hayden Duncan, Chief Executive Officer of Harcourts
Despite the LVR restrictions, Harcourts' sales consultants are reporting good levels of sales nationwide. First home buyers and investors are looking outside the locations they most desire to make savvy purchases. This is most noticeable in Auckland, where sales in the extremities of the city are booming.
Buyers are also finding ways around needing a 20 per cent deposit, with Harcourts' mortgage and insurance advisers Mortgage Express reporting more people turning to non-bank lenders, who are not restricted by the Reserve Bank rules.
The Reserve Bank is also expected to start increasing interest rates and this will affect house purchases for some. However, New Zealand's problem of low supply and high demand for housing will mean there is still plenty of activity.
Census statistics show all but one region in New Zealand grew in population since 2006. Regions that grew by 4 per cent or more were Auckland, Nelson, Waikato, Tasman, Taranaki, Wellington, Otago, and Bay of Plenty. Most other regions grew by 2 per cent or more.
Couple this population growth with limited development, and it is obvious why the property market is driven by high demand and low supply. The timely construction of new homes remains the only way of tempering rising prices.
In Auckland our figures show the average sale price for a residential property is sitting at $663,718 - the highest achieved after December's average ($674,374). This is up 23 per cent on the same time last year and shows demand remains at record highs.
Carey Smith, NZ Chief Executive of Ray White Real Estate
Sales volume and turnover for the real estate market in 2013 rose to a near record high of close to 90,000 sales, with the main areas seeing price increases of between five and 10 per cent. The last quarter showed a lift in prices and, in comparison to the same quarter 12 months ago, a lift in sales numbers.
LVR restrictions have influenced the lower end of the market, with data showing a drop in loan approvals and settlements for that segment. The restrictions potentially affect the first home buyer sector and this has seen purchasers look further afield because consistent growth from immigration means affordable housing is not always available in the main centres.
During the start of 2014 there have been signs of more properties coming onto the market. The past six weeks has seen a noticeable increase of properties listed. We expect this to continue and it should provide more choice for buyers, with prices probably holding in the coming months.
The Reserve Bank has indicated that it will look at increasing the Official Cash Rate. This may change borrowing capacity even further for people in the first home market. The sales market will remain similar over the next quarter with a slight increase of supply in properties. This will take some pressure off prices but buyers should be aware that good properties will remain desirable and low days on market for those homes will ensure competition.
Peter Thompson, Managing Director of Barfoot & Thompson
The Auckland housing market has made a strong start to 2014, and all indications are that we will continue to have an active first quarter.
After the traditional slowdown over the holiday period, the market is springing back into life with plenty of listings and buyers coming into the market. Demand for property in Auckland continues to be strong and it will inevitably increase pressure on prices over the next three to four months.
The expectation is that as we move towards the middle of the year we will start to see new stock enter the market as a result of the changes to the Resource Management Act; and this should go some way to easing some of the pressure in the Auckland market.
Should the much anticipated rise in mortgage rates come to fruition, it will have little short-term effect on the market but, alongside the election in the second half of the year, it may lead to a slight slowdown towards the third quarter of the year.
There is evidence that banks are showing a little more flexibility towards low deposit borrowers, with sales of homes for less than $500,000 accounting for 39 per cent of all homes sold in the first month of 2014. This is the highest percentage of total sales since the Reserve Bank restrictions on bank mortgage lending were imposed.
Keith and Sandy Dowdle and John Wills, Custom Residential
Early to mid-January was a time of recuperation for buyers and sellers. The first weekend of February brought buyer energy and strong open home attendances as high-quality listings came to the market. A number of these homes sold quickly for good prices.
This contrasts with the end of 2013, where buyers seemed fatigued, coinciding with a rise in listing volume in the final two months of the year. The result was a subdued run-up to Christmas with the average days on market extending and buyers carefully choosing properties deserving their attention.
Factors fuelling the market in 2014 are the seemingly unanimous view around business confidence and the well-publicised housing shortage. This will continue to put pressure on the supply and demand equation with no quick fix on the horizon to ease the Auckland housing situation. The pressure to secure a home is real. Negative forecasts regarding the LVR and interest rate rises are being taken into consideration by purchasers, but are not acting as a deterrent in the home ownership sector. How much these factors affect investment purchases remains to be seen.
Recent discussions with valuers, home stagers, timber merchants and interior designers reflect the positive mood. People are definitely already out there spending money in the property sector.
In the ever-desirable city fringe, the time proven adage "location, location, location" always holds up well, regardless of market fluctuations and trends.
Keith Niederer, General Manager of LJ Hooker and Harveys Group
The strong demand for all types of housing in Auckland will continue as more and more immigrants settle in the region. The majority are not interested in renting a property but are focused on owning a home.
Many of our offices within two hours' drive of Auckland are benefiting from its high price market as people sell up and move to smaller cities and towns. Technology is also contributing to the changes as many people can now work remotely. Rental prices will continue to increase as landlords endeavour to cover costs such as new insurance premiums, rates, and the risk involved with renting (e.g. P labs).
House prices in the preferred rural areas of Auckland have remained fairly flat over the past few years. However, more buyers are realising there is good value to be had in the rural market. The price differential between the city and country market will reduce as motorways offer easier access.
Interest rate rises will be gradual so owners will not be inflicted with a huge hike overnight. Mortgagee sales are now back to historical low levels with the higher prices being a saviour for the mortgagor after sometimes realising more than is owed.
The tempo in the market will continue with a real chance that the average sale price will continue its upward spiral. The cost of building and time associated with building completions is another reason why people prefer to buy existing homes.