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Early Spring 2021 newsletter

Dunedin Property Update – Early Spring 2021

Welcome to our Early Spring 2021 newsletter.

Who would have thought we would end up in lockdown yet again? Well, to be honest it was inevitable as keeping a virus out, let alone eliminating it, is a tough ask in anyone’s language.

Sadly, lockdowns are extremely tough on businesses and therefore New Zealand’s earning ability, and this has no upside although, ironically it has made the Reserve Bank back down on expected interest rate rises in the short term. This reprieve is only temporary however, and we will see interest rates go up. When the rates go up, we will likely see the market level off and we will likely witness this in the next 12 months.

Whether you are buying, selling, looking to invest or perhaps downsize, we have some useful information for you to consider.

In this edition we cover:

  •           Extremely low sales volumes
  •           One million dollar homes
  •           First home buyers
  •           What are investors up to?
  •           Are you trading up?
  •           Are you trading down?
  •           Will the market fall?

We look forward to helping you with your property journey - feel free to pick up the phone and give us a call to discuss your options – (03) 489 4455.

 

Trends in the Market


Extremely low sales volumes

Sales volumes since March 2021 have reduced from 230 homes to 129 during July 2021, so volumes are currently extremely low, but likely to increase sharply post-lockdown and with the warmer weather of spring.  

Prices still trending up: Prices are still on an upward trend rising from a median house price in Dunedin of $514,500 in July 2020 to $650,000 in July 2021. That’s a whopping 26.3% in 12 months. Over three years since July 2018, the price of a Dunedin house has increased 60%. Indeed, unsustainable given the economy, so expect a slowdown on the horizon.


One million dollar homes

With an increasing market, there will inevitably be more homes selling over that $1M mark. In the first seven months of this year compared to the last seven months of last year, the number of homes in Dunedin selling for over the $1M level increased by 26%.

 

103 Dunedin homes sold for over $1M between January 2021 and July 2021.


First home buyers

The bulk of first home buyers have been left behind by the prices that a typical first home now fetches and, although there are definitely first home buyers in the market, there are fewer, and they often tap out at a price of $650,000.

If you are a first home buyer and you can afford a house – buy one now! Make sure it has good bones and if it needs a paint or new wallpaper, so be it. This home won’t be the one you are in in seven years’ time, so buy it, improve it a bit, pay down that mortgage and move on to your next house when your deposit has grown.

 

It is a vehicle to something better, that’s all – don’t fall in love with it too much. Buy and secure lower interest rates as soon as you can.


What are investors up to?

Investors are noticeable by their absence in this current market. The Government’s changes to tax deductibility and Brightline thresholds introduced this year have made buying an existing residential home as an investment quite unappealing for an investor. The taxation playing field has been angled such that new builds are made to look much more appealing to investors and we are certainly witnessing numerous apartments and townhouses being purchased by investors.

Ultimately, however, there are not enough rental properties being acquired by landlords to satisfy the demand from tenants, and what is already a chronic rental housing shortage is going to be worsened severely in the short- to medium-term.

 

Investors who have a long-term view will hold their current properties and wait it out. They will likely sell a few of their poorer performing properties, as is currently happening now, but they are betting on a future administration reversing many of these taxation laws as currently they are unworkable for providing adequate volumes of housing.


Are you trading up?

If you are trading up this year, do it now! The interest rates are likely to go up, so why would you not buy and secure a favourable rate for a longer term than you may have been used to?

There will be an increased selection of homes to buy in the spring months ahead and a market keen to pay very good money for your old home.

 

Because there are plenty of the ‘average buyer’ who wants the ‘average house’, that ‘average’ house ends up selling for a price that most would argue is too high. We have all witnessed this, but this is supply and demand. We have low supply and high demand, so prices will stay up there but may level off as mentioned earlier due to interest rates and availability of credit from the banks.


Are you trading down?

There are both the older couple trading down and those who are wanting to downsize their mortgage, and both find this a very hard transition as it is always more expensive than what you had hoped.

The older couple are wanting to buy a smaller home and release some money out of their older family home. Unfortunately, the new two-bedroom standalone townhouse is upwards of $800,000 and not a bargain at all.

The couple trying to down-size are competing in the middle of the market with first home buyers and end up paying too much for that transition and not reducing the mortgage enough to make the money savings they have hoped for.

There are no real solutions to this problem of trading down and many folks end up moving further out of town and buying a cheaper home, but the cost of transport can negate the gains too.

 

Some older folks opt to get a gardener in and stay put and, consequently, the city has hundreds of family homes with only a couple left inside who want to downsize but can’t.


Will the market fall?

A great question indeed! First home buyers would love for this to happen, and many people advise them to wait until it does. All we need to do is look at the demand, which is huge and insatiable but even this can be quelled with interest rate rises; so, will it fall?

The market will likely hold on its lofty plateau. Historically in Dunedin this has been the case. After the 2007 financial crash, we had eight years of stable prices until prices took off again in 2015.

 

The increases of the last six years have been extraordinary, they can’t continue and, indeed, we need the market to level off and for homeowners to settle down and reduce their debt.


Buying or Selling? Do It Now!

If you are buying a home, whether that be a big one or a small one, interest rates are under pressure to go up, so buy now and secure a good rate.

If you are selling a home, buyers want a good interest rate and you need to get sold while they remain confident. Confidence is the key in a housing market, and we still have this, and the arrival of spring with the summer ahead is certain to shore up peoples’ resolve in the market.

 

Remember, September and October are wonderful months to market and get sold, so call one of the team and arrange a time to meet up and make your plans spring to life – excuse the pun!


Disclaimer: The thoughts and actions expressed herein are solely those of Living Corporation and you act on such information of your own accord and no act of recourse shall be enforceable against Living Corporation for the actions you take, or otherwise.