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For Sale signs start to stack up

For Sale signs start to stack up

A backlog of properties are waiting to be listed after the new two-year bright-line rule kicked in two days ago, writes Sally Lindsay.

By: Sally Lindsay

3 July 2024

Many landlords struggling to sustain their rental properties in the face of high interest rates and having to top up mortgage repayments, some by up to $400 a week, are now expected to sell. 

Regulatory changes this week also include new debt-to-income ratios (DTIs) and loosened loan-to-value ratios (LVRs). Earlier, interest deductibility was also reinstated. All these could impact the market, says property website realestate.co.nz.  

Chief executive Sarah Wood says the new regulations and existing market conditions should make buying an investment property attractive, but with a big supply of rentals available, new investment buyers will need to understand rental demand in their area. 

“Understanding your local market will be more important than ever now that DTI ratios will cap how much a buyer can spend at six times their income.” 

She says those investors choosing to sell also need to price realistically. Some may struggle to get their desired price, especially if they bought at the peak of the market and potentially face selling for less than they purchased.   

There is a glut of properties on the market. Total stock was up in all regions, increasing nationally by 28.6 per cent year-on-year in June. The amount of stock available is at a 10-year high while prices fall. Although stock was down 2.6 per cent compared to May, the total number of homes has remained above 30,000 for five consecutive months. 

New listings also rose 25.5 per cent year-on-year during June. However, this is a return to normal after low listing levels in 2023. 

Southland top of its game

Southland had the biggest increase in its average asking price of any region, up 12.1 per cent year-on-year. After holding the title of the most affordable region for three consecutive months, Southland was overtaken by the usually low-cost West Coast in June.

The West Coast’s average asking prices dropped 13.6 per cent month-on-month to $476,892 after staying above $500,000 for three consecutive months. 

In Wellington, average asking prices returned to normal, rising 10.9 per cent month-on-month to $818,352. This increase brought the capital’s average asking price back above $800,000 after an unusual dip in May. 

Nationally, and in the Bay of Plenty, Manawatu/Whanganui, Waikato and Wairarapa, prices remained static between May and June, with changes of less than one per cent.  

“Prices have fluctuated between $860,000 and $890,000 since November 2022. That’s a year and a half of buyers and sellers facing some level of certainty around prices, which is a silver lining in an uncertain economic environment.”  

Choices aplenty for renters

Renters had plenty of choice last month. Compared to June last year, new rental listings were up nationally by 26.9 per cent. Despite a 10.4 per cent decline from May’s unseasonal new listings jump, this is the second consecutive month of high new rental listings. 

Wood says financial pressure on investors could be driving the surge in new rental listings, perhaps leading them to convert short-term rentals and Airbnbs into longer-term rentals.  

“While some landlords may have planned to sell with the new bright-line rules kicking in, they have reconsidered after evaluating average asking prices, opting instead to place their properties back on the rental market.” 

Up 5.9 per cent to $653, the average weekly rental price increased nationally and in all regions year-on-year, except Wairarapa, where it dropped 1.2 per cent.  

Month-on-month, the national average rental price remained relatively unchanged, down just 0.9 per cent from the all-time high of $660 in May. Notably, Waikato reached an all-time rent high of $572, marking record rental prices for the region in three of the past four months.

Wood says the increase in new rental listings has not yet impacted average rental prices. “Landlords report a challenging environment. Even after lowering prices, some have found interest from potential tenants remains low, indicating a softening rental market.”