Yoda. I'm Chelsea Daniels and this is the Front Page, a daily podcast presented by The New Zealand Herald. For better or worse, house prices have been a cornerstone of our economy for decades, but a rise in prices now put home ownership out of reach for many kiwis. This could be changing though. Wellington City is a new rateable valuations show that on average, house values have plummeted twenty
four point four percent since twenty twenty one. It comes as the city, which once made headlines for its hotly contested rental market, is now seeing landlords fighting to fill their homes. So is this a nationwide phenomenon? And it is the dream of owning your own home becoming more of a reality Today on the Front Page, co host of Opus Partners, the Property Academy podcast and Mcknightter's with us to run through the latest in property add a twenty four point four percent decrease is a big drop
in any market. Why have the property valuations fallen so much in Wellington?
Well the main reason is they were last set when property prices were really, really high. So Wellington City last updated their CVS around about mid twenty twenty one, and since their property values have really really fallen. In fact, from their peak to their trough, Wellington City house prices dropped closer to twenty seven percent.
How big of a difference is there between property and market valuations? Are different things considered?
Yeah, So the way these cvs are set is a lot of councils, and there are sixty seven different councils around the country who set these cvs. They usually hit up a company like qv which is a government owned company, and they run a couple of algorithms very similar to a Hobes dot co dot ed Z or a one roof and they just spit out a whole heap of
property values. Now, the way they figure that out, well, the way that algorithm runs is they look at what properties are selling for right now, and that gives a sense of okay, well what might your house actually be worth.
Have we seen this drop happen nationally? I remember when we last spoke, you mentioned a big eighteen percent drop right after COVID. But where does that set long term?
Yeah, so if we think about the country, it's eighteen percent down from the absolute peak to the absolute trough. Now, if we think about Wellington. Wellington got hit so hard, and I'll tell you the reason why. It's because right up into that peak in twenty twenty one, Wellington went through two booms. So it actually started back in twenty sixteen. Now that was the good old days if you were buying a property in Wellington City because house prices had
been flat for like nine years. But what happened in twenty and sixteen as Wellington property prices started taking off, and they took off in most of regional New zeal Then in twenty twenty, what happened where had the COVID lockdown's interest rates came down? Wellington basically got a second boom, and property prices just went up and up and up and up.
And that is the.
Reason why from peak to trough, Wellington City prices they dropped twenty seven percent, which is more than that eighteen percent average around the country. Lower Hut they had it even harder. They dropped thirty percent, and Upper Hut dropped about twenty nine percent.
So Wellington region as a whole they.
Have really borne the brunt of this property value decrease. And it's mainly because of what happened in the years leading up to it. From twenty sixteen to twenty twenty one, we had that double boom.
What's Auckland done differently to Wellington to keep valuations pretty consistent?
Well, two things happening there.
First of all, Auckland house prices didn't go up by quite as much of the preceding years, so little property history lesson. From twenty twelve to twenty sixteen, Auckland house prices boomed. They were really recovered after the GFC, and then the Reserve Bank came out and introduced the LVR restrictions and that slowed down the housing market in Auckland because the Reserve Bank actually had tougher rules for Auckland compared to the rest of the country. Then we saw
house prices slowed down and flatlined for four years. So during the COVID boom, Auckland didn't have that same double boom that we saw. But the other thing you've got to remember is Auckland house prices still have been hit really really hard. From pitt to Trough, property values fell just under twenty four percent, but you might not see the cvs are just quite as much where those new values come out, just simply because it's all about, well,
when did the council last rerun those cvs. So if you are in Wellington City, an area where the council last set those cvs, where property prices were really high, well you really notice it now because property prices are full of lot. If you're at a different area, Totoga comes to my BELI believe that they last set their CVS with property prices words is close.
To the peak and so you don't observe that same drop.
And the latest Auckland property valuations were done in October twenty twenty four, but have now been delayed into at least May this year. Why do you think this might be? Is something to be worried about.
I wouldn't necessarily be worried about it, and I often encourage people to not worry too much about the CV because you've got to really understand what is this all about. Your CV doesn't really tell you what your house is going to sell for today. Because even if we think about these Wellington CVS that have only just come out, they were done in September twenty twenty four, they're five months old, and the property market moves month to months.
So just because some algorithm five months ago said your house was worth X, it doesn't mean it's actually going to sell for that today. And even if you think about some of these algorithms, they're not that accurate. So if we think about stuff like homestock code on endz, where you go online you see the homes estimate, even
though that is updated every single month. In fact, I believe sometimes maybe even fortnightly, only about just over fifty percent of properties will sell within ten percent of whatever price that's show.
Now let's put that into context.
Let's say that your logo that says your property is worth a million bucks, Well, you've only got just over a fifty percent chance, just over a coin flip chance of your properties selling for somewhere between nine hundred k and one point one million dollars. And then you go, ah, that's not that high a chance. It's actually not that accurate. So the CV doesn't really impact what your house is going to sell for, even though some people will try to use it as a bit of a negotiation tactic.
Real estate agents offered here this idea, Well, I don't want to pay above CV, but where it does affect you is just the proportion of the rates bill that you actually pay. So what some people think, especially when cvs are going up as oh well, the council just wants to put up a CV so that they can collect even more rates and sped more money.
That's it's not actually how it works.
Because everybody at Wellington City you're seeing your CV go down by twenty four to twenty five percent. Your rates bills not going down by twenty five percent. It's probably going up by ten to fifteen percent something like that. All the cvs are used for is to divide up the share or to determine how much of the total rates are you paying.
And the council basically.
Says, if your house is worth a million bucks, well you're probably a bit richer, so you're going to pay more rates. If your house is worth half a million bucks, well you don't have as much money as this other guy, and so you're not going to pay quite as much rates. That's what cvs are really used for. And I do think that here a hell it do we read a little bit too much into them.
For years we've said that there's not enough housing and so there's been a lot of pressure on that in the last government.
Rather than kind of fix the supply issue. They focused on the demand. So they did.
They introduced policies that were kind of anti lenl right there, interested up to bill their roles. They made it tougher to be a landlord, healthy homes, and trying to sort of soften that demand from the investor side so that it kind of took some of the heat out of the market. Now this government's going on a different approach. They're saying, well, actually, the way we fix it is supply.
One of the big issues in this country for decades has been housing supply, or lack thereof. Take your pick of any random Auckland street and you'll come across about ten townhouses where there used to be just two. How much has that supply increased and how is that impacting house prices?
Well, it's increased quite a lot.
We had a massive building boom during the COVID years, and I like to think of it in terms of new buildings per person of this country because our population's going up. So the long term average is about every year we built six houses for every one thousand people.
That's the average.
And during that big COVID boom, we got up to ten houses per thousand people here in New Zealand, and so you're like, okay, that's actually quite a large increase. We were building two thirds more houses than normal during that period. And the other reason there's a lot of supply at the moment is if we look at those dwelling consents and we match it up with sales, how
many properties are real estate agents actually selling. The number of properties sold in New Zealand peaked in June twenty twenty one.
Now, at that point.
As real estate agents stopped selling quite as many properties, what did developers do. Did they think, oh, wow, there's not as many properties being sold, I better not build as many properties. No, they kept on buying land and consenting properties and applying to build even more townhouses.
And it happened for about a year.
We still saw developers going like the clappers, having all of this confidence, even as the market started to drop away. Now two three years later, that's the reason why you might see a lot of townhouses going up, and they might might not all be full, they might not all be sold right now. It's because developers two years ago was still building even though the market was weakening.
So given that these new builds are not slowing down at all, at least not in Auckland. Could we get to a point where we actually have more supply than prospective buyers.
So what I think we'll see is this period where there's quite a lot of supply is going to be temporary. Because it takes time to build a house somewhere between twelve months and twenty four months, depending on the development for apartments, it's going to be much longer than that. And what we are still dealing with is the hangover of all of that consenting that was happening in twenty
twenty two through to maybe early twenty twenty three. Right now we are actually just back at that long term average and have been for the last couple of months of six new dwellings consented per thousand kiwis. And so I'm pretty confident that if we move two years into the future, you won't have that same supply of new builds that are on the market and developers are really
struggling to sell. One of the other issues you have at the moment, and why there is a little bit of supply is some developers are not able to meet the market. And what I mean by that is they bought land when it was really expensive, they took out loans and now they've built those houses, but they can't sell them for what would be a fair market price. And that's because they would take too much of a hit.
And so you've got some developers who are holding on to completed stock and they are not willing and not able to lower the price to a point where it would actually clear the market.
On the other side of the coin, obviously, is renters. Going back to Wellington, I remember when UNI students and public servants were fighting each other to get into some moldy, leaky garden shed just to have a roof over their heads. Ports in the last month of seeing landlords offering grocery and patrol vouchers to try and get people to move in, what's changed there.
Oh, there's been a huge change to the rental market, just massive. So if I take it back to twenty twenty three, if you looked at the surveys of landlords, way more landlords would say actually, it's really easy to get a tenant, compared to those who say, actually, I'm
finding it a bit tough at the moment. At the moment, a net twenty percent of landlords are saying actually it is really tough to find a tenant, so way more landlords are saying it's hard compared to those who are saying it's easy, and we are seeing that turn into either flat rents in most of the countries, so christ Church, Auckland pretty flat at the moment. We're actually seen in some parts like Wellington, rents just slightly decreasing.
At the moment.
There'll be some landlords who are increasing rents still some who are decreasing it, but the average is falling.
Awey bit. This is really coming down to a couple of things.
First of all, that supply question, where we saw way more properties being built and so that supply is coming onto the market. I think the other thing as well is all of these keywis moving over to Australia. Seeing so many keywis move over, that means they're leaving properties that perhaps they've rented, and we are still seeing more people arrive in New Zealand compared to those who leave.
Our net migration is positive in other words, but those people coming in maybe they don't rent straight away, maybe they stay with friends, so we're not seeing that have that same impact on the rental market. It's not that rents are massively declining, but it's that they are flatlining compared to the average increases usually kind of four to five percent, and so that is a sign that the rental market is very soft.
Right, So are we seeing favorable renter conditions like this around the country.
Across most of the country. Yes, But this is a good point just because things are going poorly if you're thinking about from a landlord's perspective at Wellington or Aukland, or just because conditions are very very favorable for renters in Auckland or Wellington. That's only part of the country. So if I take you down to Southland, we are seeing really strong rental signals down there. At the moment, rents are going up by above that long term average.
In parts of Otago you were seeing that as well, and so at the bottom of the South Island you're seeing quite a strong rental market for most of the rest of the country. If I look at trade means data, what we see is that the number of searchers, the number of people logging on and try to fight a rental property, it's kind of plus or minus two percent year on. Yes, some regions are a little bit up,
some are a little bit down. It's basically flat. The supply of rental listings though the number of properties on trade me on one roof on realestate dot co dot NZ, those are up sometimes twenty five even thirty five percent, depending on the month.
You're looking at different story.
Down in Southland we're actually seeing yep, rental listings might be up by five percent, but rental demand those searchers are up like ten percent. So it's that demand supply story that means that Southland strong, but the main centers are pretty weak at the moment.
The thing that jumps out when you have a good look at cropper market in New Zealand is that there is no such thing. Yes, the property market in New Zealand, it's been quite expert. We don't explicitly forecast different regions, but when I look at some of the drivers, I think you can see at the moment signs that the housing market, in particular in the South Island is tighter than it is in other parts.
Of the country.
So if you look at canabury Otago houses selling will rapidly that are tighter in terms of demand versus supply and sales to listing ratios and things like that. So my senses that we will see those markets perhaps perform a little bit more strongly than the average.
Core Logic reckons property sales volumes will rise from about eighty K to ninety K this year, citing lower mortgage rates. Of course are the anticipation of a growing economy as well, but they do mention further job losses on the horizon might dampen the market a bit. Despite that, though they say no doubt it will be a busier buying year. Do you agree, Yeah.
We're seeing that in the data.
It depends what Every time you quote property data, there are kind of three or four companies that put out numbers, so I'll say numbers that are slightly different. When I look at sales reported by real estate agents. There's definitely been a rebound. We bottomed out at about fifty eight thousand sales a year. That happened kind of early twenty twenty three. That is way down from the peak. Like the peak was like one hundred thousand properties sold in a year, a lot of houses sold. Our long term
average is about eighty thousand. At the moment, we're sitting just above seventy thousand, so we are below average. We've curtedly recovered from the bottom, which was in twenty twenty three. We are seeing more property transactions that probably will start to go up towards that long term average of eighty thousand. You know, maybe we'll get up to ninety thousand. I probably don't think will happen there that this year. But what's really fascinating as we are seeing those property volumes,
those property sales recover and recover quite strongly. It's up thirteen percent year on year, but we are not seeing that translate into higher prices for most of the country. Now that's really good if you're a buyer because there's a lot of stock out there on the market, so there's a lot of listings online, makes it much more likely that you're able to find that property that you like and you're able to stag it at a price that is pretty close to the bottom of the market.
So it's a great time to buy a property. In fact, I wrote a piece late last year for One roof talking about the reasons I was buying a property to live in at that specific time because there are a lot of good buying signals at the moment but what's fascinating is as we are seeing those sales recover, we're not seeing prices move just yet. And I think first home buyers especially have a real opportunity.
Right, So, overall, ed, what would your predictions be on house prices, rents, housing supply, all that jazz for twenty twenty five.
So at the rest of gee the ball wrong.
I'm going to give you numbers anyway, because that's what most people want to know. I think that we will see moderate house price growth. Now, what does that mean? Kind of five percent? Six percent is what most economists, most banks are kind of thinking.
That's where most of our heads are at.
In terms of housing supply, In terms of new dwellings consented, I expect it will be a bit flat. If not, i'd expect it to actually drop down just slightly, because I know that developers are still struggling from a couple of years ago. There are also a couple of new rules out in Auckland, which of course is over a third of our population. There are new rules that are making it much more difficult to develop water care who
manages all of the water pipes. They've got new rules where they're saying, well, if you build in this area or that area, Yeah, you might have resource consent, but we're actually not going to let you connect to the toilets to our pipes until you do a few things. So it's becoming more expensive for developers. That's going to scare some of them off in our largest city. So I would expect new dwellings to either kind of stay flat go down a bit in terms of total listings
on the market. There is a backlog of properties that need to be I think they will start to drop down, but I don't think there's going to be huge pressure for buyers in terms of lots and lots and lots and lots of competition because we've got a backlog to
work through. Just to put that into context, if a single property was not listed on any of those online platforms, trade me one roof for the next half a year, it would still take that half a year to clear and sell all of those properties that are currently listed online, because that's how many there are. There's about twenty four weeks worth of inventory or inventory depending.
On how you say it, available online.
That compares to a ten year average of about eighteen weeks.
Thanks for joining us, ED No trouble, happy to be back any time.
That's it for this episode of the Front Page. You can read more about today's stories and extensive news coverage at enzadherld dot co dot MZ. The Front Page is produced by Ethan Sells and Richard Martin, who is also our sound engineer.
I'm Chelsea Daniels. Subscribe to the Front Page on iHeartRadio or wherever you get your podcasts
And tune in tomorrow for another look behind the headlines.