OPINION: House price malaise lifting

OPINION: The upcoming general election may be one where the cost of housing and rental accommodation may not be one of the “burning” issues.

Housing will still rate moderately highly, probably among the top 5 issues, but for once the public see other challenges as of more relevance.

One of the main reasons for housing falling down the list of issues is the sustained level of new builds that has occurred over the past 4 to 5 years with Stats NZ estimating that more than 200,000 new dwellings have been added to the housing stock during that time.

This brings the number of dwellings in the country to some 2.1million, of which about 73,000 would be social housing.

Theoretically, that is sufficient to house the current population although in reality house location and population distribution are not necessarily in harmony, and the last census showed that some 10% or 210,000 houses were unoccupied. 

The increase in the number of homes built in recent years is now showing up in the level of homes for sale. At the start of June, we had more than 6000 homes for sale  - the highest number we have had at the start of June in a decade and twice as many houses as we had for sale at the start of June 10 years ago. 

Those 6000 homes represent the equivalent of about 6 months of sales at our current clearance rate.

I disagree with those who label the market as ‘over stocked’. Current stock levels give buyers excellent choice and that choice is at a level sufficient to keep the edge off prices rising aggressively. 

Well-presented property, priced at where the market is at, continues to sell. 
Contributing to housing remaining a low-key election issue is relatively low mortgage interest rates, which have been sitting between 4.5% and 5.5% for the last few years. 

Putting aside the ultra-low mortgage rates of 2020-2021, today’s rates are pretty attractive compared to the long-term average of around 7% for most of the past 15 to 20 years.

Based on our experience of managing and renting more than 22,000 properties on behalf of landlords, I can confirm that the strong increase in the level of house building that has taken place over the past 5 years has had a major and beneficial impact on the rental market.

Stats NZ estimates that about a third of the recent new builds (some 65,000 dwellings) will have ended up as rental accommodation.

In addition to increasing the choice and quality of the rental market stock, this influx of rentals has acted as a hand break on rents.

In Auckland, the average weekly rent for a 3-bedroom property across Auckland is now $702 a week, with weekly rates varying considerably between different parts of the City. The lowest priced area is semi-rural Franklin, at $587 a week, with the highest being Central Auckland at $952 a week.

The average weekly rent for a 3-bedroom home has increased by $15 a week over the past 2 years. Without those new properties reaching the rental market, that increase is likely to have been much higher.

According to Stats NZ, even though home ownership levels have increased marginally in recent times, nearly a third of all privately owned homes are rented out. This statistic shows the important part private landlords continue to play in housing the country’s population.  

As for where the housing market goes for the remainder of this year, I sit firmly in the camp of those that believe that a modest revival will follow on once the stutter caused by the Middle East conflict is behind us.

The grip the current house price malaise has had over the housing market for some 4 years now is slowly lifting.