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Economic stress and changes in legislation are causing a slowdown in the early winter market

Press release – LJ Hooker

The latest market trends from LJ Hooker Group have noted a slowdown in the real estate market in June. Despite fewer listings and sales, the auctions have produced results across the country.

The latest market trends from LJ Hooker Group have noted a slowdown in the real estate market in June. Despite fewer listings and sales, the auctions have produced results across the country.

LJ Hooker Group Head of Network NZ Campbell Dunoon believes the downturn in the winter property market started earlier this year.

“Winter is usually a quieter season for the real estate market, but the bite has hit earlier in the season as economic pressures and regulatory changes have caused buyers and sellers to take precautions,” Dunoon said.

“Despite a slower month of June, sellers at the LJ Hooker and Harveys network have noticed some optimism in the market as they prepare for a hopeful rise in interest rates later this year. Although investors have been cautious, the changes to interest deductibility and bright-line rules are creating fewer obstacles. “

Auction strength

While the market has been quieter, there has still been competition for properties, with 26 per cent of LJ Hooker and Harvey’s June sales using auction.

“The success of auctions in our national network shows that there is still competition in the market. When real estate sellers meet the market and price their property correctly, the right marketing campaign can still drive interest, Dunoon says.

Rule changes

On July 1, 2024, a sweeping number of rule changes were introduced that may affect the real estate market and the opportunity for owners and investors to buy real estate. The changes included lowering bright-line rules to two years, easing loan-to-value measures and introducing debt-to-equity caps.

“The coming months will reveal whether there is an increase in property holdings from investors, particularly mum and dad investors who may be feeling the pinch from interest rates now that the bright line rules have changed. At this stage, it is too early to say.

“It will likely take some time to see what effect debt-to-income (DTI) caps will have on the market with interest rates remaining high. As interest rates begin to fall and more buyers enter the market, we will likely want to see the effect of DTI caps.”

New housing growth targets

On July 4, Housing and Resource Management Act 2024 reform minister Chris Bishop released details of the government’s Goes for housing growth policy. The policy aims to release land for development and encourage development opportunities in key urban areas.

Dunoon welcomes the new housing regulations, but raised concerns about whether it will deliver vibrant communities where people want to live.

“It’s great to see new measures being introduced to increase housing opportunities in New Zealand, but there is concern about whether the infrastructure needed will keep up. Infrastructure is a major weakness in our societies, which does not effectively connect the regions, where people want to live, to our cities, where people want to work, says Dunoon.

“Better access between cities and regional communities will open up opportunities for new residential areas. Many people want to move outside the big cities, but the options and current transport links are negative, putting more strain on our cities and homes.

“Maximizing existing modes of transport and creating incentives to build along major corridors with existing, functional bus and rail connections would be effective places to start development.”

For this to be a success, the government needs to look beyond the development of new homes, without the communities they create. They must work to ensure that there is access to all the services and necessities that families need in a safe community, creating a high quality of life for all residents.

“Every day Kiwis want to live in a place they are proud to call home, and that extends beyond the front door, they want an environment that has service and a sense of community. People want to walk the streets and be among thriving local businesses and have suitable leisure activities for families.

“Vibrant communities raise our quality of life and make our cities more alive. Taking action to improve the quality of our communities helps attract visitors and tourists who spend money and support local economies.”

Looking forward

With much change in the real estate market and milder winter conditions, there are many variables for buyers and sellers to consider. An easing of financial pressures could be faster than expected with a softening of the language from the Reserve Bank in the latest monetary policy committee statement.

“Property owners seek financial relief from high mortgage interest rates. While banks have cut fixed mortgage rates slightly, recent comments from the Monetary Policy Committee have the big banks predicting the official cash rate could be later this year, with Kiwi Bank expecting a cut as soon as October. While private lenders have lowered mortgage rates, this will ease the pressure further, Dunoon says.

“With all of these policy changes and market factors to consider, the real estate market we’re seeing at the moment will likely become more active as we head into the spring and summer. Even so, there are still opportunities in this housing market. Your local real estate agent will be able to help you understand how to successfully market your property or buy a home during this season,” concludes Dunoon.

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