Residential property market taking a breather
It’s still a buyers’ market, and auctions have now become pointless. Most purchasers want set prices and who can blame them? It removes a lot of the pressure.
House prices are consolidating. The media are right that the median price has fallen, but this is mainly because there are fewer expensive homes being sold. The media are beating it up unnecessarily. What’s happening right now is a slight self-correction in the property market. Nothing to worry about.
At Lochore’s we’ve just enjoyed two good months of sales in December and January. There are more good properties out there than we’ve had in many months.
When the Chinese buyers return to the market then auctions will pick up again. The Chinese Government has taken a tougher stance on Chinese nationals taking funds out of China. Although right now there’s no sign of the Chinese returning to the real estate market, it could happen at any time once they find alternative means of getting money out of China.
Chinese money laundering
The NZ Government has put measures in place which will reduce the amount of Chinese money laundering through property. Foreign buyers must now have an IRD number and pay tax. Previously there’s been a lot of inter-family trading to bring money out of China. Six months ago we’d see profiteering within Chinese family circles. Typically a Chinese family group would jointly bring funds into New Zealand, buy a property, on-sell it to another family member and on and on, with everyone clipping the ticket along the way. It’s a good thing this has been stopped.
Who is buying right now?
The bulk of our sales are usually to property investors. But this has shifted in recent months. Now 40-50% of our sales are to first-home buyers in the $500-$700,000 price range. These properties are around if you know where to look. And we do.
Rental property shortage
The rental property market has gone mad. There’s a huge shortage of rentals, but then there always is in January and February. This is partly driven by the demand from students about to resume their studies. First-home buyers snapping up rental properties also account for the acute shortage. Plus the demand from new immigrants, who mostly choose to live in Auckland.
Council consent processing still a major issue
One of the key underlying problems with increasing housing stock is, as usual, the Auckland Council. The slowness of the Council to process consents is still unbelievably bad. Until Council staff change their attitudes and the Resource Management Act changes, building will always be expensive in Auckland. I constantly hear complaints of Council consent staff being arrogant, inefficient, rude, with a ‘couldn’t care less’ attitude, demonstrating no sense of urgency, no desire to speed up. It’s outrageous. Why should Aucklanders have to put up with this? Where are the streamlined efficiencies we were promised with amalgamation?
The RMA was designed to slow down building and it’s succeeded. The Resource Management Act is still costing developers arms and legs to get building approvals by adding substantially to the time it takes to secure consents.
Shortages of labour and materials
Add to this a chronic shortage of builders, electricians and plumbers and the Auckland housing shortage will remain a huge problem. Furthermore, big developments in Auckland’s CBD, such as the City Rail Link, the International Conventional Centre, and several office and apartment towers, are sucking up construction labour.
Cost of resource consentstoo high
The cost is currently $60-80,000 per average home. And why? Because the Council hasn’t got the capacity to service the demand. Builders and property developers are tied up in knots with Council red tape. The additional costs of engineers, architects and other professionals increases on each project. Plus there’s the cost of bridging finance and delay of payments of interest on loans. It is typically taking two to three years to get resource consents for most development sites.
Not good enough.