Low supply high demand push prices up in Rotorua
The real estate market in Rotorua has continued its trend of low supply and high demand and prices continue to increase.
Some interesting facts about the Rotorua market are:
- June recorded the highest median price for Rotorua ever at $440,000 up from $385,250 the month before.
- There have never been less properties on the market in Rotorua (since we started tracking this in 2003)
- The number of days to sell is relatively low, but not at its lowest point
- There continues to be strong demand for properties with a recent home attracting 10 offers.
- The rental market continues to be tight with low supply and high demand.
Let’s have a look at each topic in more detail…
Prices continue to climb steadily
I have often tackled the “statistical price fluctuations” in previous analysis and without boring you with the detail, in brief prices continue to increase but not at the same rate as a couple of years ago. It’s true that if comparing the median sale price to last year it would suggest an increase of more than 20% in the last 12 months, but using the same methodology for May, the price increase would only be 8%.
The reason for these fluctuations is due to the spread of properties sold in comparison to the relative low number of sales from a statistical perspective, which they refer to as a small sample size. A month with many sales in a high-end suburb can throw out the actual statistic to determine “price increases”. Looking at all available statistics, including the growing gap between average sale prices and average government valuations (the only constant in a 3 year period), we can clearly see an increase in prices.
They probably remain at around 15-18% compared to a year ago and my prediction is that this trend will likely continue as per my previous predictions of 10-15% in the next 12 months and likely 5-10% in the years after that. Based on last month’s median sale price I might be wrong with my prediction, however looking at the individual properties that have sold, I do believe this was not a comparable “sample” to previous months which is the reason behind the anomaly.
What does this mean to you?
There’s no harm in holding onto your property as the prices aren’t likely to drop but are more likely to increase. How much they’ll increase by and what the demand will be in 6-12 months might however change.
Very few new properties to the market
There is a seasonal impact on the number of properties on the market, lower in winter, with this year being unusually low. If no new properties would come to the market and the same number of properties would sell as recent months, we’d run out of properties to sell within two months. In 12 years of real estate I have never experienced that. My prediction previously was that stock levels would increase in the next 6-12 months but that doesn’t seem to be the case yet. Based on the economic factors affecting the market and looking at all trends, it remains the most logical prediction moving forward, however it certainly isn’t the case right now and I might have to eat my words.
One month to sell a home
Whilst this is not the lowest number of days to sell (it took 25 days on average in July 2016 and 21 days in a few months in 2005) it still is a very short timeframe. Some properties generate a huge number of interested parties (10 offers for one property advertised for two weeks last month) whereas others might only get a couple of offers. Purchasers are being more choosy at the moment, appear more educated about what they consider the value to be and are not in as much of a rush in comparison to a year ago. They do more due diligence to make sure the property is right for them. It is without a doubt still a seller’s market. Buyers have to compete most of the time and the enquiry level remains high. This is no surprise with the low number of properties they can choose from.
Rentals are also in high demand
Rental properties continue to be in high demand both from a tenant’s perspective and investor’s perspective. The big change is the number of tenanted properties that are now being picked upfirst home buyers. The market has been tight for quite a few years, buyers’ expectations have changed and they’ll now look at properties even if they require a bit of work or are in an area outside of their preferred suburbs. This means fewer properties remain in the rental pool creating more pressure on demand and thus rental prices.
My recommendations for homeowner remain the same
There’s no hurry to sell now if you are going to purchase again – make sure that you have a solid plan in place for your next purchase as it might take some time before you find something suitable that you like. Selling your house won’t be the problem. The question is more about how you ensure you get the best result in your timeframe. I’d happily help you put that in perspective according to your personal circumstances.
If you own investment properties it depends on your intention:
- Keeping them long term continues to be a great choice of investment in my opinion. There are changes on the horizon with insulation requirements and new wood burner bylaws that will restrict the use of old wood burners (installed prior to September 2005).
- Due to the changes as indicated above and whatever new changes might be introduced (such as building wof for rental properties and the like) it may be a good time to upgrade your investment portfolio to higher quality properties. By capitalising on today’s market, your properties are more likely to attract first home buyers than a few years down the road.
- If you’re looking to put your money elsewhere in the near future (ie within the next 12 months), now might be as good as any time to sell. You should make the decision based on your timeframes and what suits you best, but the changes looming with new regulations might mean any increase in value could be diminished by the additional work required during that period. A lot will depend on what your intentions are once you sell and for some it may make more sense to wait for a bit longer for a slightly higher price, whereas for others it might be smarter to make a move sooner and have the certainty of a good price in a seller’s market.
If you need advice feel free to call me 0800 424 368. Till next time, Hielke & Team Oppers