What’s in store for the property market in 2020? As the upcoming election approaches, it will be a key feature influencing New Zealand’s property management companies. But how will the upcoming NZ affect interest rates for investors? A few signs have been spotted and predictions have been made by property experts for the year ahead. However, market conditions and situations can change in the blink of an eye and what seemed to be a reasonable prediction at one time can end up becoming a dropped matter overnight. This doesn’t mean the entire outlook isn’t positive, a number of significant property deals are predicted to take place early in 2020 which is expected to set the pace for a bullish growth in the property management agency. Having said that, here are 7 predictions related to the overall market.
RISING HOUSING PRICES
After two years of crashing house prices and slow growth in Auckland, the housing market has turned and there is now a seasonal lift in prices in Auckland. Which leaves housing experts with predictions for the year. Considering the annual price inflation has reached 5.6 per cent, there are predictions that it will get as high as 7 per cent by April 2020. There are also expected changes in a home mortgage.
Prices should increase as banks have become more willing to give out home mortgages. Earlier, banks were only opened to giving out loans to those that were capable of making mortgage repayments even if the interest rates got to 7 per cent. This requirement is changing slightly and making way for improved growth in the property market.
INCREASE IN HOUSING SUPPLY
Although the government fell flat on its efforts to establish 100,000 kiwiBuild homes, building industry experts are enthusiastic about the latest development taking place. A new bill has been put forward to parliament proposing future homeowners would take care of the expenses associated with road construction, water pipes and other required building equipment.
A programme is already in effect in the north of Auckland, where private investors and government bodies will collectively raise about $91 million to kick-start the project to build 9000 new homes. Potential homebuyers can consider this as their first investment property and one of their best real estate investments where they will pay a yearly fee of $1000 for up to 35 years in order to repay the debt.
Without this development, developers would have to wait for up to 10 years for the Auckland council to generate the required amount of money for the infrastructure. While experts conclude that the bill is still in its early stages it also holds the potential to reveal large plots of land in Auckland for faster housing and will eventually reduce the low availability of houses and keep prices low.
RETURN OF INVESTORS
Investors had been dominant buyers during recent housing surge, but the strict lending rules that were set in place slowed them down back in 2016. These regulations included a requirement for landlords and rental management companies to ensure all rental homes were insulated by the year 2019 and to get them up to standards of healthy homes by the year 2021. Nevertheless, there’s a potential for an uptick in investor buying properties. It has appeared that the decrease in returns on other assets such as interest rates and also the desolation of the capital gains tax were the key factors influencing these smaller class of investors. Other influencing factors include term deposits, body corporate levies, lower interest rate as well as banks’ willingness to offer more loans. Individuals with three or four properties were among those willing to invest back in the market.
VACANCY AND SUPPLY CONSTRAINTS
Considering the reduction in industrial vacancy rates in the main cities and regions, housing industry experts predict that there’ll likely be an increase in the demand for land and the greater measures towards new-build construction. The markets whose supply constraints that can meet up to demand within a suitable interval will more increase in price growth.
EMERGING RETAIL GAP
As customers become more selective in their spending, some changes are expected to take place in the retail chain. There’s an expected growing divide between their preference and dislikes. Large format retail, open centralised luxury retail and flagship shopping centres are becoming popular amongst consumers which will, in turn, provide positive results for owners.
BIG DATA INFLUENCE
Another rising factor in retail is a technical approach. The power of technology allows for an increase in customer data capture in order to provide improved levels of personalisation and enhanced user experience. In addition, with regard to the potential of the 5g network, there could be new initiatives to explore. They range from improved delivery to more immersive customer experience and improved back up of data.
RISE IN SECONDARY STOCK
The industry still tried to maintain its ground during the hard times in the market though it also showed true strength during good times. This makes it a likeable asset class for the majority of investors. Rental growth and environmental farm plan practices are expected to continue in 2020. This creates an opportunity for more investors to go into secondary premises where more profits could be generated.
INCREASING LEVELS OF IMMIGRATION
The yearly net immigration is gradually declining, reducing to about 50,000 back in 2018 from a previous total of 72,400 in 2017. But this rate is still on the high side based on past numbers. This decline will continue in 2020 creating an increase in local housing prices.
Although migration from international locations is a contributing factor to population fluctuations, there are no established facts that the inflow of foreign-born immigrants to a particular location are tied to the increase in local house prices. On the other hand, there is a binding relationship between the migration of new Zealanders residing abroad into a new location and the progressive increase in local house prices.