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The Covid-19 pandemic upended elements of the New Zealand housing market changing the marketplace nearly overnight. The national lockdown slowed down both buying and selling activity due to the restrictions placed on the industry and the inability for ‘business as usual’ to function in the real estate market. Now that the country's real estate sector is open for business again, where do the property values stand within the South Island and what does this mean for those looking to buy or sell?
In many regions, the New Zealand housing market is currently seeing higher house prices, rising rents, falling homeownership, and a lack of available housing. But just how large is the housing shortage that we continually hear about and are values going to fall as has been predicted? New estimates from Infometrics point towards there being a shortage of about 40,000 homes nationwide and while other sources show a drop in pricing is there evidence to suggest that a shortage of supply could coincide with a drop in prices?
According to Scoop, online property listing platform TradeMe said that there were a number of positive signs that showed buyer interest was up in May 2020. “May was a very busy month for prospective property buyers and we saw a spike in activity on Trade Me Property. Views for May 2020 were up 11 per cent on April and up 69 per cent when compared to May 2019. We also saw increases in the number of email enquiries and watchlist adds from our members.” said spokesperson Aaron Clancy.
So what is happening in the South Island regions? Was there a similar market movement and are things as bad as they seem? Below we will outline the main regions in the South Island that are seeing big shifts in the market and how Genius Homes can help the housing crisis thanks to a range of affordable and fast-built prefab home options.
During the month of June 2020, the number of properties on the market sat at 1,130, this is an increase in listings compared to May 2020 which saw 1,107. The average property asking price in Canterbury is currently $539,329. During the peak of the Covid-19 lockdown, (April 2020) only 202 homes sold in according to the Real Estate Institute of New Zealand, this was down massively compared to April 2019 which saw 847 sales. However, post-lock-down Canterbury has seen a spike back in the number of both listings and sales which is looking positive. Therefore it might be reasonable to assume that uncertainty around the pandemic, how long lockdown would last and the inability to view homes could have contributed to this slowdown.
With more New Zealanders moving home thanks to international travel restrictions easing, Christchurch is now seeing an influx of people moving back to what is known as a more affordable “big city”. The average house price in Christchurch is currently sitting at $516,677 which is nearly half that of Auckland's $958,274. Christchurch is historically known for having more affordable house prices compared to other regional cities in the South Island.
The Canterbury region is also seeing steady growth with new subdivisions popping up in many key locations. Christchurch is seeing 1000m² residential multi-staged sections on the market from $195,000 and by putting a new build home on a newly developing suburb, you’re more likely to see a higher yield compared to new build property in other major urban centres. According to Opes Partners, “The median gross yield across Christchurch suburbs is 4.6%. That compares to 3.8% in Wellington and Hamilton and 3.0% in Auckland. Right now, the highest yielding suburbs in the Christchurch property market are Aranui, Bromley and Bexley. These suburbs achieve a gross yield of 6.2%. Fendalton, Strown and Bryndwr have the lowest gross yields, at just 3.1%.”
These are great figures if you are looking to invest in the property market. This focus on new builds is also worth bearing in mind when housing availability is low. Rather than compete for a ‘previously loved’ property in a hot buying market why not build a low-cost home in 20 weeks with a brand new prefabricated home?
In Southland, the average asking price was up 18.4% on the same time last year to $415,094 – tipping over $400,000 for the first time since records began in 2007. In a single month from May 2020 to June 2020 the average asking price increased by a huge $34,310 and there is also no sign of this slowing down any time soon. Southland is currently seeing a huge seller’s market happening, which is bad news for people looking to buy into this region. Southland, as a region, is also seeing a decrease in the number of homes available on the market. The property trading site realestate.co.nz has released figures for June, showing that Southland had 213 new property listings, which is an increase of 33 listings versus May 2020 which only saw 180 listings recorded. Even though listings are increasing slightly month on month these figures are simply not matching the demand.
According to the Property Guide, Southland has some of the cheapest homes in New Zealand With the median house price currently $369,000. But it seems like this once remote part of New Zealand is seeing its own bubble form and has not avoided the rising house prices seen in most parts of the country. Gore has also seen prices rocket by around 27% which may make purchasing land and building a financially viable option.
Otago’s property market is made up of 5 districts, which include Dunedin City, Central Otago, Queenstown-Lakes, Clutha and Waitaki. The most expensive suburb in Otago is Arrowtown, which has a median house price of $1,388,350 and the least expensive suburb in Otago is Ranfurly, which has a median house price of $253,400.
Otago had some of the biggest drops in the country for numbers of houses sold in May. Figures from the Real Estate Institute [REINZ] show 269 fewer houses were sold in Otago in May compared to the year previous. According to realestate.co.nz in June 2020 Otago’s property asking price currently sits at $505,975, this is up from $251,000 10 years earlier.
Queenstown-Lakes was one of only two regions in the country to get an increase of listings versus the same time last year, up by 21.8%. That means that the median Otago property increased in value by 7.24% each year, or $25,410 on average.
As the tourism tap was turned off by Covid-19, and with the local economy dependent on tourism, Queenstown looked to be the worst affected by the Covid-19 pandemic. With the negative impact around the tourism industry, this means that many buyers are reluctant to commit at present, especially with fewer local workers and tourism to rent vacant properties and with many homes still seeking higher than comparable pricing. If we were to put a spotlight on Otago from an online perspective, Scoop Business reported that TradeMe spokesperson Aaron Clancy said there had been some interesting changes in parts of the Otago regions property market over the past month as most expected to see Queenstown-Lakes District and Wanaka’s property prices to be the hardest hit due to their strong tourism industry.
“It was interesting to note last month that we saw demand grow faster in these parts of the country than other regions. In May, demand continued to rise for property in the Otago region with the number of views increasing 95 per cent month-on-month and 105 per cent year-on-year. This may be a case of Kiwis on the hunt for a slice of paradise at a discounted price but it’s good to see interest in the region is still there for anyone looking to sell at the moment.”
What we are seeing, due to these unprecedented times, is that there is an even greater focus on property and what the markets are doing. Between people making their way back to New Zealand and looking to buy a home as well as those who spent a long period in their home over lockdown realising their house is no longer suitable for them. However, supply is not keeping up with this demand, at least not in the areas where job opportunities and stability are present. Investors too are ideally looking at property as a safe place for their money as it isn’t subject to the volatility of the share market which has seen a tumultuous few months. And with more secure interest rates in things like term deposits yielding a very low return, it seems that one of the safest places for spare cash is in property. The idea of a reduction in rents would ideally be offset by the benefit of lower interest rates for a longer period of time.
This is where Genius Homes can help. If you’re looking for a new home, but also don’t have time to wait 12+ months to go through the design and build process, or don’t want to compete with other buyers for a limited supply of housing then why not try something different? Secure the land and we’ll do the rest! Rather than juggle dozens of subcontractors and shifting schedules we can work with you to build an ideal home and have it delivered on-site on time. At Genius Homes a brand new home can be built and delivered to your site in the South Island in as little as 20 weeks.
So why not beat the bubble and bypass the stress by building a brand new home for the site of your choice. Discover your new home by downloading our brochure.
With available land in New Zealand becoming increasingly scarce, it’s common for those who are interested in building a home to compromise on their ‘ideal...
Genius Homes designs and builds prefabricated and transportable homes for delivery across the South Island of New Zealand. From small studio homes to large 4 bedroom prefabricated houses we can be relied upon to deliver your next home.