Following a meteoric rise which defied the laws of a global health crisis and saw Kiwi homes collect between upwards of 30 percent in capital gain during the darkest days of the pandemic, the market is in the midst of a recalibration, frightening some, while others circle for opportunities.

Johnny Sinclair, Bayleys national director of residential

“During a downturn, the real estate market can present investors with unique opportunities to leverage equity at lower prices,” says Johnny Sinclair, Bayleys national residential manager.

“During a downturn, the real estate market can present investors with unique opportunities to leverage equity at lower prices,”

• Johnny Sinclair, Bayleys national residential manager

In the year to December 2022, data from Statistics New Zealand shows that household mortgage costs rose by approximately 45 percent, which pushed the cost of living up by 8.2 percent – certainly higher than the annual inflation figure of 7.2 percent.

This price shock saw many Kiwis halt best-laid plans for residential purchases while they adjusted household budgets and took stock of the impact of higher mortgage lending rates which squeezed their spending power and threatened to keep climbing well into the new year.

“Despite this, the global inflation outlook has improved recently, and we have seen mortgage lending rates begin to ease as wholesale swap rates fall, driven by international pressures.

“Whilst forecasting is still difficult, given globally tight labour conditions, the recent round of fixed mortgage rate cuts in Aotearoa has given borrowers hope that there is greater certainty ahead.”

And with hope, he says, is an undercurrent of confidence that encourages buyers and sellers to act now.

Kirsty Macky, Bayleys in the North, owner and director.

Across Northland, the residential sales market has largely followed the national trajectory, noting tremendous value growth in the decade to 2022 before easing amid the tightening financial cycle.

However, Kirsty Macky, owner and director of Bayleys in the North, which operates 11 offices across the region, says well-placed homeowners can use this pause in the market to reassess their options and reinvest in assets with a proven record of return to maximise the next market upswing.

“Homeowners can use this pause in the market to reassess their options and reinvest in assets with a proven record of return to maximise the next market upswing.”

• Kirsty Macky, Bayleys in the North, owner and director

“While the latest data from the Real Estate Institute of New Zealand (REINZ) shows a continuation of softer market conditions, the rate of value decline across our region continues to reduce, and feedback from our salespeople is that they’re fielding higher levels of enquiry with a greater element of positivity in the market.

“At the peak of the market cycle, circa November 2021, we saw frazzled buyers frustrated with a lack of listings, unable to secure necessary building reports and financial pre-approvals.

“The impact of calmer conditions now is that buyers have more space to find what suits their needs and lifestyles best.

“Sellers are more prepared to meet the market through negotiations, and we are seeing a greater satisfaction rate on both sides of the transaction as purchasers can take their time, and those who sell and buy again can leverage the capital gain accrued over several years to trade-up into a new home,” she says.

Mana Tahapehi, Bayleys Hauraki Gulf Islands, residential sales.

Despite more challenging economic conditions, enquiry for high-value properties, particularly across Auckland’s Hauraki Gulf Islands, has remained strong.

“There’s robust market participation from both resident Kiwis and expatriates seeking aspirational properties as an intergenerational investment. These purchasers see the greatest value in luxurious properties that become the backdrop for family occasions and a nest egg for future generations,” says Mana Tahapehi, Bayleys Hauraki Gulf Islands residential salesperson.

“Those investing in these properties are usually highly skilled and tend to look through temporary market blips at the bigger picture, and that is simply that there’s a scarcity across certain market segments that will always add to their value.”

“Those investing in high-value properties are usually highly skilled and tend to look through temporary market blips at the bigger picture.”

• Mana Tahapehi, Bayleys Hauraki Gulf Islands residential salesperson

Mr Tahapehi is talking about high-value properties in desirable locations such as Waiheke, Kawau and Great Barrier Island, which prove perennially popular, reflected in data recently prepared by Bayleys’ global property partner Knight Frank in its International Waterfront Index.

The index found waterfront property in Auckland, with views to the Hauraki Gulf, attracted an average price premium of 76 percent, compared with their inland counterparts.

Kirsty Macky, Bayleys in the North, owner and director.

Suzie Wigglesworth, Bayleys projects national director, and Auckland Central residential general manager.

“While there has been some negative media attention about inexperienced developers getting into financial trouble amidst rising construction costs and difficulties securing finance, Bayleys works with qualified and experienced operators, which continue to deliver quality products,” Suzie Wigglesworth, Bayleys projects national director, and Auckland Central residential general manager says.

“For purchasers investigating the option of buying a brand-new home off-the-plans, there’s a raft of benefits, including the potential to capture value uplift following construction and completion.

“Similarly, the government has worked hard to incentivise investment into new housing, providing lower loan-to-value ratios for new-build properties, which means your initial deposit to secure the property can be appreciably smaller than if purchasing an existing home.

“Evolving suburbs and new communities close to transport hubs and planned infrastructure projects are substantial growth opportunities for first home buyers and investors, and we will continue to see a greater number of new homes come online near light rail.

“Fewer new developments are being presented to the market, and opportunities exist for purchasers to invest in projects nearing completion. This will allow them to capitalise on current market conditions and benefit best when we return to the inevitable market upswing,” Ms Wigglesworth says.

Linda Greenslade, Bayleys Mount Maunganui, branch manager

Home and income properties in desirable locations will increase in value as tourism rebounds, says Linda Greenslade, Bayleys Mount Maunganui, branch manager.

“New Zealand’s tourism numbers are back to around two-thirds of the heightened levels recorded pre-pandemic, and the frequency of visitors entering Aotearoa from the United States of America has effectively doubled every month since September.

“These visitors look to regions like Waikato and Bay of Plenty for a genuine Kiwi experience, and the advent of home rental sites like Airbnb have completely opened up private hosting options providing homeowners with an opportunity to supplement their incomes,” she says.

Looking ahead, independent forecasters typically expect prices to stabilise in the back half of 2023. So, we will likely we will see a continuation of the downward or plateauing trend in residential values in the short term, particularly as the general election approaches in October.

Further regression is unlikely to be significant, and it is apparent that the market sentiment continues to improve. However, market players warn we won’t see a return to firm footing any time this year.

“There are many uncertainties persistent across the residential landscape. However, this can often be the best time to make a move. With strong competition removed, buyers and sellers are well-positioned to make investment decisions on their own terms,” says Mr Sinclair.

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