Kiwibuild reset finally drops, but leaves many underwhelmed, as do spring sales volumes.

Sales volumes have been subdued off the back of a wet finish to winter in many places and low listings.  Also underwhelming has been the KiwiBuild reset that failed to excite the market with it’s range of improvements, which were  aimed at enticing more kiwis out of rentals and into their first home.

KiwiBuild reset

The big news this month should have been the governments KiwiBuild reset, however it wasn’t the earth moving revelation many first home buyers were hoping for. There are improvements to the scheme for first time buyers at the margins, providing of course the reset can deliver a meaningful level of new homes.

The major talking point from the reset are 

• The 100,000 home target is gone!
• 5% deposits are in, with the deposit requirement for the First Home Grant (formerly called Home Start Grant) dropping to 5% from 10%. This also applied to First Home Loans (formerly, Welcome Home Loans).
• Buying with ya mates just got easier, with family and friends being able to combine their $10,000 First Home Grants together for a deposit.
• Rent to own could become a reality with 400 million allocated to support such schemes, albeit with no real detail announced around how.
• Your KiwiBuild home could become your first rental property too, with the live in requirement before selling or renting on 1 bedroom and studio apartments dropping to 1 year only.

Changes can be confusing and if you are trying to work out how this impacts you please get in touch, I can advise you.

Volumes

Sales volumes had shown a resurgence recently but August saw a reversal with a decrease of 6.1% on the same time last year, to the lowest level in 7 months.

Commentators are pointing to the wet August especially in the North Island as a contributing factor to the low sales. But perhaps a bigger player in the reduced volumes however is low listings. The past three months have seen the lowest number of new listings in any three consecutive months since records began in 2007.

Values

Volumes may have fallen but values keep tracking up with median house prices lifting by 5.5% to $580,000 in August, and the HPI (House Price Index) increasing 2.9%  to a new record high.

Median house prices in Auckland which have been flat now for what seems like an age dropped by 3.5% to $820,000 and the HPI fell 1.5% on this time last year but was up 1% from July.

Days to sell

Month on month this number continued to come down, dropping from 40 to 39 between July and August. However this is up on this time last year by 2 days.

Rents

Despite the government’s focus on legislation looks to improve living conditions and increase tenants rights and security of tenancy and recent tax changes, landlords are still experiencing strong returns in many areas.

According to Core Logic for about 18 months now, average weekly rents across the country have been rising more quickly than average property values, increasing rental yields for landlords after a period of time where yield returns were playing second fiddle to capital gains.

However this is always a two way street and tenants will be feeling the pressure with August’s rents rising by 0.3% from last July and a 3.4% on this time last year.

Where to now?

More OCR (Official Cash Rate) cuts are forecast and depending on the share of these cuts that are passed onto customers, further record low interest rates could crop up in the back end of the year.

However there are red flags to keep an eye on.

There is still a lot of uncertainty around the RBNZ’s capital review which could impact some lenders cost and availability of capital.

So it’s very much a sense of mild cautious optimism which there are enough positive signs to be encouraged but some uncertainties to keep a close eye on.

As always, I will continue to keep a finger on the pulse of the current and future economic climate, to keep you up to date with the things that are impacting the lending landscape.

If you’d like more information, on anything I’ve covered, please don’t hesitate to get in touch.

Alex Matheson – alex.matheson@loanmarket.co.nz – 021 022 16942