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Supply and demand – THE economic factor determining price

Supply and demand – THE economic factor determining price

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.


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.


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


No. of properties on market vs sold in Rotorua


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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