The housing market is messy and lacks direction (Source)

According to REINZ, New Zealand’s median house prices have increased over the past two months with the September figure being $781,000. Sales volumes for September show a slight decline from 6015 in August to 5816 in September.

Seasonally the trends are similar to last year and there are expectations that sales will pick up in the lead-up to Christmas. The difference between this year and last is that this year we have 9276 new listings in September, and last year there were 7812, so an 18% increase. This shows enthusiastic sellers and selective buyers biding their time given the plethora of choice out there.

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Our view: There is a lot of choice for buyers at the moment market as it is a buyers market. With the reduction in the OCR and predicted further decrease next month, we would expect more buyers to enter the market moving forward, adding competition and ultimately reducing the amount of stock available. This is when we should see a further lift in sale prices.

Fewer properties on offer but the sales rate was steady at the latest auctions (Source) 

Auctions dipped over the school holidays, but even so, auction numbers are well up from where they were over the winter months with 119 sales over the last week (5 – 11 Oct) and an overall sales rate of 41%. As a comparison, the winter sales rate averaged between 30-33%.

Our view: With more buyers entering the market, auctions become a popular selling method. You often see at the peak of the market that most properties sell under auction. When the market is down there are more negotiations taking place. We would expect the number of properties selling by auction to increase heading into the new year.

Dubai's allure to expats is weighing on city's infrastructure (Source) 

There is an influx of expats moving to Dubai chasing high-paying jobs. This is boosting the local economy but also places pressure on the city’s infrastructure and schools. Currently home to 3.8 million, the city’s population is expected to surge to $5.8 million by 2040.

Since 2020 approximately 400,000 people have arrived in Dubai attracted by low taxes, safety, and proximity to major markets. The high volume of people has meant rents, property values, and public transport use have all increased and roading has all been put under pressure.

According to JLL, home values have increased over 16 consecutive quarters and rents have soared 86% since the start of the pandemic.

Data from Bloomberg revealed that property prices in Dubai have outstripped London and Singapore since early 2019 with about 90,000 new homes expected to hit the market in the next two years.

Dubai has ambitions to be one of the top three cities globally for standard of living. This is supported by the 2040 urban master plan to make the city more sustainable, with plans to expand the metro and drainage network alone costing $5 billion and $8.2 billion respectively.

Not overseeing a sector handling millions is illogical (Source) 

The regulation of the Property Management sector has been a point of contention for some time, and in May Housing Minister Chris Bishop announced the Residential Property Managers Bill would be axed. At the time, Bishop reasoned that adding more regulation to the rental property market wasn’t the way to open up more housing supply. This was not well received by the Real Estate Institute of New Zealand (REINZ), who for years have lobbied for regulation of the sector.

REINZ has accredited property managers who manage about 40% of privately managed residential housing stock. However, of the remaining 60% service standards vary.

It is important to understand also that Body Corporate managers differ to property managers. A Body Corporate manages the affairs of a unit title complex, keeping records, and handling money, while a property manager looks after individual properties. Body corporates operate under the Unit Titles Act, which requires them to act with due care and diligence and declare conflicts of interest. Property Managers do not fall under any required framework, so apart from those who are part of REINZ accreditation, the rest have no framework to follow. Some companies handle both body corporate and property manager functions and some are just one-man bands, which means they can oversee millions of dollars’ worth of assets. Property owners are then left with the manager’s word that the substantial funds collected go where it should.

Our view: This has been an ongoing issue for many years. REINZ has done a great job advocating for all property managers to be regulated. We made sure that when we started Point Property Management that the business was part of the REINZ accreditation. This is good for our clients but also good for us in ensuring we are following best practice.

Interest rates heading 50 points lower next month: economists (Source) 

There is an expectation by all NZ bank economists that next month the Reserve Bank will cut interest rates by a further 50 basis points to 4.25%.

Inflation has fallen 2.2% in the year to Sept 30. According to the NZ Institute of Economic Research, the latest inflation result meant we have pencilled in a 50bps cut for November.

There has also been discussion from some economists about a drop of 75bps on 27 November, but it is believed that chances of this are 40% and it would indicate that the RBNZ would be acknowledging a bigger misjudgment of holding rates too high for too long.

Our view:  The key here is that interest rates are trending downward. We know this leads to activity in the housing market with more people looking to buy, and some looking to build. The money starts to move around, stimulating the economy and providing a more positive sentiment. It will be interesting to see what 27 November brings. 

Have a fabulous weekend!

From the team at Erskine Owen.