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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

 

What’s happening in the market and how does this affect me?

Welcome to our Autumn Realty Perspective with the latest information about the Rotorua Rotorua Realtor_Hielke Oppers, Harcourts Rotorua
Property Market. We help you navigate through the wave of “exciting” headlines that are claiming sales are up one month and down the next. It is important to put things in perspective and make it relevant to your individual situation, which is exactly what we do.

“What’s happening in the market and how does this affect me?” The question I get asked more than any other.

We have seen big increases in house prices in Rotorua. Reading the newspapers, we are told that the average or median price increase compared to the previous year is 7.8% one month, and 23% the next.

Pretty confusing, right? We hear about these differences because the number of sales are relatively low AND they use different statistical methods to calculate increases.

If you are comparing 100 sales in one month with 100 sales the same month of the year before, you can get huge fluctuations if one month included lots of expensive properties and the other month lots of low-value investment properties. Over a three month period we are still seeing these fluctuations, but not to the same extent. The price increase in the last 12 months on this basis is 18%, which is quite significant.

WHAT WILL LIKELY HAPPEN IN THE FUTURE:

The biggest driver of increasing house prices is low supply & high demand. With multiple purchasers being interested in most properties we bring to the market and the supply being at its lowest level in the last ten years, I believe that we will continue to see prices increase.

There are a few more subdivisions in the pipeline and a number of sections available at the moment, however, based on the cost to build and the increasing number of people seeing Rotorua as a destination, increasing property values in the coming 12 months is likely.

These price increases will be at a slower rate in comparison to previous years so depending on your situation, it may affect whether it is better to hang-on to your property or sell.



If you are waiting for the market to reach its peak then now might be as good as any other time to sell. The main factors that I believe contribute to this are:

  • Rental prices have increased significantly in recent years and it looks like this has topped out. It is unlikely that rental prices will continue to rise much in the next few years.
  • New regulations will affect the attractiveness of investment properties from a cash-flow perspective. Most property investors are investing to enjoy Capital Gain over a long term period, which will not be affected much by the new regulation. Property investment continues to be a great avenue to grow wealth and I don’t see it changing in the near future, however, the benefit of holding onto a property for just another year, is not likely going to see you benefit much financially.
  • New Insulation requirements come into force in July 2019.
  • Interest rates will likely increase in the next one to two years which will affect how much investors are prepared to pay for properties as this will negatively affect the cashflow and purchasing power.

Although the prices will continue to climb, I don’t believe these increases will outperform the holding costs of property in the short term.

Long term I believe property continues to be a great part of any investment mix and the only thing that you might want to consider is moving from a low-quality portfolio (i.e. neglected properties or old, poorly insulated properties with higher maintenance requirements) to a higher quality portfolio. This will minimise the affect new regulations will have on your portfolio and makes your portfolio more future-proof should you decide to sell something in a slow market (better quality properties can be marketed to investors and home buyers).


There has been a significant change in how properties are bought and sold in recent months due to the low number of properties on the market and (in my opinion) the market coming within 20% of its peak on the “Growth Curve”.

What I mean with that is that based on market movements being cyclical, we are approaching the peak but aren’t quite there yet. Even though the number of properties on the market is at its lowest point in 10 years, purchasers aren’t rushing into buying and are doing more due diligence than a year ago.

We also see more sellers accepting offers subject to a purchaser’s property selling, which would have been turned down a year ago as there would typically be a cash buyer willing to pay the same. These are all indications that price increases are leveling off somewhat.

Being able to purchase something subject to selling your own house is one of the biggest developments that will assist many home owners in moving forward without too much risk.

If you are in a home and are considering moving, you could get the marketing of your property organised today, start looking for a house tomorrow and have all your ducks lined up to start the selling process as soon as you have found the right house.

What approach should you take in 2018 with the changing market?

What approach should you take in 2018 with the changing market?

People are quick to give real estate advice, but at the end of the day, it needs to be put into perspective. What is right for one person, might not be right for you.

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People have different thoughts around our current position in the property cycle, but most people agree that we are nearing the “top”. So, if you have been thinking about selling and want to time it well, the next 12 months (and maybe right now) could be the right time to sell.

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Landlord responsibility will affect cashflow. With new rules coming into effect, and with outside influences changing the risks of property investment, will make a difference to the cashflow position in the coming years. Meth contamination, Rental WOF, Tenant’s rights under the Tenancy Act, etc. are all a part of the overall mix that affect the return on investment. Many investors and columnists talk and write about these extra costs being covered by the tenant through higher rents, but I don’t believe that to be realistic. The cost of housing in NZ is very high and there is not a lot of room for further increases without serious social issues arising.

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If you want to stay in the property market and you have a property that is not up to date with the current standard, this might be the time to consider selling and reinvesting in a low-maintenance and more modern property.

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Blog2The Bright Line Test will increase from two to five years within the next month or so. This isn’t a huge problem for most investors as the majority of investors have the intention to hold onto property for a longer period of time and typically are working towards a retirement fund. But if you are an investor who actively buys and sells property, the new timeframe might make a difference.

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Many people want to know whether to buy or sell first. It’s not an easy question to answer as there are many things to consider. So, let’s have a quick look at the options:

Buy first – then sell. This is a good option if you have all your ducks in a row and are well prepared. It is important to be organised and know with certainty what you will likely be able to sell your property for and in what timeframe. Finally, what will happen if it doesn’t quite work out – i.e. do you have a plan B?

Sell first – then buy. The risk with this is that in a rising market with limited properties available, you might not be able to find the right property soon after selling. This could have a huge impact on your financial position and create stress:

  • You might end up moving twice
  • If you buy a year after selling, you will have to pay a higher price for the property and would have sold in a market where property prices were less, moving you backwards from a purely financial perspective
  • You might end up buying something that is not quite right for you “just to get back into the market”.
  • Or you might be lucky and find the perfect place shortly after selling ☺

As we are moving into a different market, there will be more opportunities coming up where you can buy a property subject to yours selling. This is the ideal situation for homeowners looking to move. We are seeing an increase in contracts “subject to a house sale”, but it will take another 12 months or more before this will generally be acceptable to sellers. There are simply too many buyers with cash in their pockets who are looking to purchase now.

Blog12There’s no perfect solution that suits everyone but we can help. By predicting what is likely going to happen we can find out what the best solution is for you based on your personal situation and depending on the level of risk you are comfortable with.

Give me a call if you’d like to find out what might work best for you.

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Its beginning to look alot like Christmas

Blog2Only 5 days to Christmas and the Rotorua property market is still hot like the weather at the moment. There has been a few changes since my last blog with a shift in buyer activity.

 

 COVERED IN THIS UPDATE

Blog3  Christmas and Real Estate – is Santa going to bring you a special price? Or not?
Blog3  A Labour government – 30 days into their “100 day”- promise
Blog3  Supply and demand – THE economic factor determining price

With Christmas just around the corner, many people are gearing up for their summer breaks and planning their trips away. Rotorua is a popular summer holiday destination, causing buyer’s enquiry to change quite significantly from “local enquiry” to “visitor enquiries”.

Is there merit in putting your house up for sale in the Christmas/New Year period, or are you better to wait?

The answer depends on the kind of property and your timeframes. There are still people looking to buy, however, there will be fewer people in general. This means that the opportunity to create competition amongst buyers will be smaller and this may affect the chance of selling for a premium.

If you have a property and a marketing campaign designed to specifically target the visitors to Rotorua, it makes sense to market your property for sale during this period.
As a general rule of thumb, if you can wait till the New Year to start a marketing campaign, it is better to launch a campaign to the “whole market” as opposed to a fraction of the market.

Is the LABOUR government affecting the market activity???

Labour has campaigned hard in the last election on housing affordability and promised a number of changes. Their current slogan “taking action in our first 100 days” is promising a range of new policies to be implemented within the first 100 days of governance. The “100-day deadline” would be 15 February 2018.

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Let’s take a closer look…

What are Labour’s promises and how will they affect the housing market and affordability in Rotorua?

Blog5Ban overseas speculators from buying existing houses. The government has introduced the Overseas Investment Amendment Bill last week, which makes all houses “sensitive” under the act. It would affect and largely stop, all foreign buyers who have no NZ or Australian citizenship or residency.

How would this affect the local market? Rotorua has some overseas purchasers, but the majority are Kiwi or have residency here. There are a fair amount of Australian investors in NZ, however, it looks like the new “ban” will exclude our neighbours. I believe it will likely affect the major centres in NZ, but only have a very small change to what is happening in Rotorua. In reality, most buyers in Rotorua wouldn’t be affected by it.

Start work to establish the Affordable Housing Authority and begin the KiwiBuild programme Both the Affordable Housing Authority and KiwiBuild are designed to provide more affordable houses, where the government runs (part of) the development. These properties will likely come in the form of townhouses or duplex-style developments to keep cost down. Every publication I have read regarding the 100,000 homes that are going to be built, appear to be in the major centres such as Auckland, Hamilton & Tauranga.

Whether Rotorua will see a development like this, will have to be seen and the first question locally would be “Where in/near Rotorua can this be done?”

“It would be great to see a new development that provides first-home buyers with a genuine opportunity to buy a new house at an affordable level, which would also ease the pressure on the supply of property.  However, the questions remains whether Rotorua will see this, and whether it will be in time to make a difference. “

Supply and Demand

In real estate we often talk about changes in house values and number of sales in a specific period. These at times can give you a wrong indication of what the market is doing, if taken out of context.

The best gauge is comparing the Supply of properties with the Demand for properties. For the last three years we have had a low supply of properties, and a high demand, which pushes prices up. In the last 3 months, supply (number of properties available on the market) has somewhat increased and the demand has dwindled a little.

How does this affect homeowners wanting to sell?

If you look at the graph below, you can see that the supply is still significantly lower than 2014/2015 (the orange line). There are a few more properties available compared to its lowest point in August this year but only marginally.
The number of sales has gone down a bit and sits around 100 per month, however, we are still experiencing great buyer activity with our marketing strategies generally attracting multiple buyers competing for property.

Median Sale Prices in Rotorua

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No. of properties on market vs sold in Rotorua

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Looking for patterns, we can see the following trends:

  1. Investors are still very active – possibly because they are trying to buy properties before the 5-year “capital gains tax” rule comes into place whereby any capital gains made within 5 years of buying will be subject to income tax (currently it is set at 2 years).
  2. Upgrading/Downgrading – the market remains active with people selling and buying in the same market. The biggest factor here remains that there are relatively few properties available to choose from, which means many homeowners are staying put to wait for more properties to come to the market.  We are seeing more people buying “subject to their house selling” which is a perfect solution to this problem. More sellers are open to consideration of this if there is no cash-buyer available at the time.

  3. First home buyers are more cautious – they don’t feel the market moving away from them and many are waiting for the right property to come along at the right price. Fewer hasty decisions are made and they are doing their due diligence again. This is not a bad development. Many people still believe prices are likely to come down in the next few years, which I think is unlikely to happen. Price increases will be less, but they will still increase.

The market continues to be strong and well marketed properties achieve great results. A changing market will affect certain properties more so than others. Feel free to call me for a no-obligation chat about your property and situation so that you are prepared and
ready for any change in the market. Till next year I will leave you with…

Market stats for November 2017

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What’s happened to the property boom in Rotorua?

As we gear up towards Spring, traditionally the most popular time to get a property on the market and sold, there are a lot of questions amongst buyers and sellers about what has happened to the real estate market in Rotorua.

  • Has it gone from BOOM to BUST?
  • Is this the end of the UP-cycle?
  • Is it just winter and politics?

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Hielke-Oppers_Blog2There aren’t as many people buying compared to a year ago, both locally and nationally. Real estate agents are desperately trying to convince the market that the slow-down doesn’t mean anything and the Real Estate Institute of NZ is trying to convince the Reserve Bank that lending restrictions should be eased or lifted all together.

Here in Rotorua, there is still an abundance of buyers, but there is a change in their attitude. A year ago, buyers rushed into the process because there was a fear of missing out. At times, buyers would not carry out their due diligence and make really high offers to beat other buyers. This happened with all types of properties in most price brackets.

Today, buyers are taking a more sensible and balanced approach. Well maintained and presented properties are still attracting very good activity and often multiple interested parties as long as it has the right marketing campaign. We have sold several properties in recent weeks with multiple willing buyers and even when there was a contract in place for the sale, multiple willing buyers as backup interest.

With the number of properties currently on the market still being very low, and buyer activity high, you would expect there to be a continued increase in property values and activity. So why is it that sales volume has almost halved?
That’s the next point>>>>

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Hielke-Oppers_Blog4Buyers aren’t feeling the risk of “missing the boat”. Some buyers see the drop in sales volume as a sign that things will slow down and there is less pressure on time frames. Some even thinking that property prices will fall – the chances of this happening in my opinion are very small, but not everybody will have the same opinion.

“Only if we would have a similar financial crisis like we had a decade ago, will we see property prices in Rotorua go down. With the introduction of much “safer” lending restrictions (Loan-to-Value Restrictions now and maybe Debt-To-Income ratios in the future) it is very unlikely that we’ll experience another major financial crisis.

Although a drop in prices may be more likely elsewhere, Rotorua is still relatively affordable and hasn’t increased as much as other centres.

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Sellers’ and real estate agents’ expectations are still based around the activity level of 6 months ago. This can create an expectation of price that may be higher than what buyers are prepared to pay right now because they’re not feeling the pressure as described in my previous point. Properties where the price expectation is too high, might sit around for longer.

Hielke-Oppers_Blog6Finally, in a buoyant market with very few properties on the market, it is a perfect time to sell a “mediocre” or “less-than-desirable” property for a reasonable price. We see that some of these properties traditionally would sell at a lower price and/or sit on the market for longer, due to its condition/characteristics in comparison to other properties. In a market where buyers are “Picky” because they can be, these properties sit on the market for longer.

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Hielke-Oppers_Blog8The reason why property sales are down in Rotorua is because homeowners are affected by the “lockdown effect”. There are plenty of willing sellers who want to sell, but many aren’t in a position to do so.

I come across lots of people through open homes every week, and many home owners are asking me:

“Is this still a good time to sell?”, or “Mrs W from XYZ Realty told me it’s a great time to sell. Do you think it is a good time for me to sell?”. Remember every real estate agent will tell you that it’s a great time sell regardless of the state of the market because this is their livelihood.

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The more important thing is whether this is the right time for you to sell? Many homeowners want to sell, but are afraid of not being able to find something in time because there are so few properties on the market. At the same time, home owners are wary of committing to the purchase of a home and then being on a tight timeframe to sell their current house before they take over the new house.

The most sensible solution to this is buying a property “Subject to the purchaser’s house selling”. We’re seeing a few more of these types of contracts, but most home owners are not interested in a lengthy condition like this and for nicely presented houses there will always be another purchaser around the corner who doesn’t need to sell their house. This is what is causing the “Lockdown”.

So if “Subject to house sale” doesn’t work at the moment, what is the solution?

What to do if you’re “Stuck” to your house?
If you’re stuck because, like so many others, you’re not wanting to sell without having found your next home and you’re not sure how you’ll have a fair chance to buy when you finally find the right house, consider the following:

  • Hielke-Oppers_Blog10First, you need to get some really good advice
    about your property and its value so you know exactly
    what your financial position is. Not on the basis of what your house “Might be worth” but on the basis of what you’ll be able to get with absolute certainty. A good marketing campaign will take care of the rest and find the best buyer for your house.
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  • Secondly, get as ready as you can get so that when you see the right house, you are ready to make a move. Getting ready means having your finance organised, but also getting your house ready for the market.
  • Hielke-Oppers_Blog12Finally, have a good plan in place so you know how you are going to make this work, and you have a solid Option B in place. You can’t rely on one solution every time without risk, so having a good second option will give you more confidence.

If you’re wanting to discuss your situation and work out a plan that works for you, don’t hesitate to call me. Whether it is a long-term plan to get you into a new home, or just to get a feel for the value of your home, call me on 0800-424 368 for a chat.