It’s All a Matter of Timing and Money
Money supply and confidence in future earnings are what will shape the market this year. Along with buyers’ perceptions as to where prices are heading.
Our town is now a substantial mature residential hub surrounded by masses of planned residential development. Just up the road Paerata Rise will have some 4,500 houses. Infrastructure work will also soon start in Drury for the longer term provision of 20,000 houses. Already there are substantial numbers of new homes in the Belmont development and pre-sold sections for the planned 700 houses. Houses priced from the mid to high $500,000s through to the lower $700,000s. These Belmont builds are direct local competition for much of Pukekohe’s pre-existing homes.
More homes are entering the market as some landlords are quitting their rentals. Typically these are ‘Mum and Dad landlords, who usually own one or two rentals. Decisions triggered by the negative impact of new Government’s policies. Capital gains provisions are going to change. Rental accommodation standards are to be raised and the ability to offset rental property losses against tax liability on other income is to be removed.
While owner occupiers and retiring landlords may choose to wait and wait for their price; builders and developers do not have the same latitude. Month by month their holding costs eat away their profit, which is often tight to begin with. And when valuations are prepared for that mortgage the valuation professionals do not differentiate between owner occupier properties, ex rental properties or new builds. Each sale price agreed between unrelated parties is the market price. Sell decisions taken by building companies shape the price available to others who are selling.
Money supply rather than housing supply is now the critical factor limiting sale numbers and constraining house prices. Perhaps even edging prices down. The LVR policy shift allowing retail banks to hold up to 15% of their mortgage portfolio in sub 20% deposit loans is a 50% improvement from the previous 10% limit. However real buyer numbers (someone making a buy decision in the next 4- 6 weeks) are still down. This may simply be a matter of timing. Policy shifts were made late last year. Seasonal holidays have only just ended. Money supply is however a blunt instrument and the choke on money supply has seen some development and building projects put on hold or cancelled.
All buyers have new options closer to Auckland’s CBD and commercial employment hubs. The Papakura / Karaka developments and those inner city suburbs where prices have dropped provide choice to buyers contemplating both ‘affordable’ and our higher priced homes. Presently local buyers in the sub $750,000 market are spoilt for choice. The nett effect for Pukekohe is that buyers feel able to take leisurely buy decisions.
Nevertheless January sales numbers are giving an early indication that buyers are now more ready to negotiate and sign purchase contracts. The trend identified in June of house sale numbers trending downwards appears to have reversed. Nonetheless while post-election flat lining could well be over properties are still taking longer to sell.
Overall Pukekohe has a highly competitive residential market and has become extremely sensitive to price positioning. Not only in the sub $750,000 market but in all price segments. It is a delicate market which requires a deft hand to firstly attract then wrap up those selling opportunities that are presented.
