Scouting the Market: Your Fortnightly Rental Market and Investment News Roundup | July 28th 2023
Welcome to our Fortnightly Rental Market and Property Investment News Roundup for July 28th, 2023! We've gathered a number of the latest key updates to keep you informed about the ever-evolving property investment landscape in New Zealand. From rental market trends to property investment insights, we've got you covered.
National Party's Proposal Regarding Kiwisaver for Bond Payments
The National Party's proposal to allow people under 30 to use KiwiSaver funds for rental bond payments has received criticism from financial experts. While the policy may make it easier for young renters to secure accommodation, it is seen as a "stop-gap" measure that dilutes the long-term savings objective of KiwiSaver. Experts recommend exploring other options before accessing KiwiSaver funds early and emphasize the importance of building cash savings for retirement. Critics worry that complicating KiwiSaver with such policies may lead to higher fees for providers. The National Party plans to amend the KiwiSaver Act if elected to implement the new policy.
The Greens' Persistence with Rent Controls Amid Controversy
The Green Party continues to advocate for rent controls, proposing to limit rent increases to 3% per year. This proposal has been met with ridicule and anger from landlords and economists. Critics point to historical failures of rent controls both in New Zealand and abroad. Rent controls, when implemented in the past, led to reduced rental housing stocks as private investors sold their properties. Despite opposition, the Greens persist with this policy stance, seeking support from extreme left-wing voters. Property investors face challenges due to increased costs, leading some to exit the market and exacerbating rental demand pressures.
Examining Nuances in the Rent Control Debate: A Plea for Informed Discussion
The Green Party's recently unveiled "Pledge to Renters," including a proposal for annual rent increase limits, a rental warrant of fitness, and a national register of landlords, has sparked diverse reactions. While critics argue against rent controls based on past experiences of "first-generation" rent controls, according to Tom Baker in a guest post for Interest.co.nz, there is a need for a more nuanced approach to the debate. Research suggests that "second and third-generation" rent controls, which allow for limited rent increases under specific circumstances, can be more effective and tailored to local contexts. Advocates argue that the Greens' proposal, resembling second-generation controls, should be examined carefully for its potential benefits in addressing rental affordability and wealth distribution disparities in New Zealand's housing system.
Property Investors Express Top Five Concerns Amidst Housing Crisis in New Zealand
During a pre-election housing panel, property investors expressed their top five concerns about the current housing situation in New Zealand. The issues that fired up the audience the most were:
Loss of interest deductibility, extending the bright-line test, and reforming tenancy law, leading to a sense of unfair treatment towards landlords.
The removal of landlords' ability to give 90-day "no cause" termination notices, making it harder for landlords to deal with anti-social behavior issues.
The cost of regulation, with investors expressing concern about how increasing regulatory requirements and building standards might impact housing affordability.
The need for more stability in housing policy, as frequent short-term policy changes from political parties create uncertainty for investors.
The surprising issue of providing curtains in rental properties, with some landlords expressing surprise that there is no legal requirement to provide curtains, while others felt they already provide them.
The panel also discussed the importance of boosting housing supply and the need for better planning and infrastructure. The housing crisis remains a significant concern, and investors are seeking more transparent and stable policies that promote fairness for all participants in the housing market.
Property Investment Updates
Stabilising Property Market?
The New Zealand residential property market is exhibiting signs of stability, albeit cautiously, as it navigates through the winter months. Although it may be too early to label it as a full-fledged recovery, there are positive indicators worth noting. The total number of residential properties available for sale stood at 24,676 at the end of June, marking a decline for three consecutive months and returning to pre-Covid-19 pandemic levels in 2019. This reduction in housing stock is attributed to a modest improvement in sales and a decline in newly listed properties. The difference in asking prices and selling prices suggests that vendors are becoming more realistic in their price expectations, leading to increased sales activity. However, those unwilling to accept current pricing are refraining from listing their properties, contributing to the decline in new listings. Looking forward to the spring season, the market's performance will largely depend on the extent of new listings and buyer demand.
House Price Declines Showing Signs of Easing
House price declines in New Zealand are showing signs of easing, with the average national house price down 1.8% to $891,585 in the three months to June. While the rate of decline is slowing in many parts of the country, experts warn that the market will remain volatile over the coming months due to low sales volumes. Some areas have experienced quarterly increases, particularly where entry-level prices are more affordable to first-home buyers. However, cautiousness among "movers" and investors continues, and the market is not expected to rebound quickly. The ongoing economic uncertainty and high mortgage rates are likely to maintain downward pressure on the market, despite increasing demand for housing.
Decline in Home Renovation Volume Amid Rising Costs
The volume of home renovation work in New Zealand has decreased by 8.2% in May compared to the previous year. The total value of building work, however, increased marginally by 2.5% in the 12 months to May this year, reaching $2.264 billion. The rise in value is attributed to the increasing average value of building work per consent, surging by 11.9% to $91,711 over the same period. Despite the decline in the number of alteration consents, the passion for home renovations among New Zealanders remains strong, with current consent numbers exceeding pre-pandemic levels by 5.3%.
That concludes our Fortnightly Rental Market and Investment News Roundup for July 28th, 2023. Stay informed and ahead of the game by subscribing to our mailing list today to receive these updates and other valuable content directly to your inbox. Subscribe now