Tired from 24-months of over achievement and weary of the regulations which have threatened to hamper growth, New Zealand’s residential property market is bracing for the latest challenge
The upcoming general election, says Bayleys national residential and auction manager Daniel Coulson.
According to the Real Estate Institute of New Zealand’s (REINZ) latest data, Auckland and Northland have been affected by slowing sales in the year to June 2017 – a trend which looks set to continue.
Despite lower sale volumes, prices have continued to increase as the median sale price in Auckland rose $20,500 compared with June 2016 and Northland rose $65,000 during the same period.
There’s also been a greater trend toward bare section sales across Auckland, Rodney and further toward Northland.
This illustrates that there’s a very strong appetite for home-ownership and buyers are still looking for more creative ways to finance their aspirations.
While lower sale volumes across the region point toward seasonal variables and traditional pre-election uncertainty, it is pleasing that sale values are holding, with economists and ‘those in the know’ touting the market at its worst as stable.
It begs the question - is pre-election uncertainty a true phenomenon? Is there validity to the notion that property sales are set to soften up to, and immediately after the new Government is announced?
In the build-up to this year’s September 23 election, housing has emerged as a front-running discussion topic. However, the sector’s close relationship with immigration, infrastructure and monetary policy goes some way to explain why some buyers are said to adopt a ‘wait-and-see’ approach to purchasing property.
To sort fact from fiction Bayleys Research has investigated sales trends during the last five election periods to assess the degree of impact that the general election 2017 will have on our residential property market.
The research, conducted in conjunction with sales data released by the REINZ looks closely at sales trends surrounding the dates of elections in 2002, 2005, 2008, 2011 and most recently 2014.
Surprisingly, the research revealed very ordinary movement between the months to election dates.
In fact, the results show that property sales lifted during the election quarter.
History has shown that the majority of those adopting a ‘wait-and-see’ approach are property investors – a group which have held less influence over 2017 as lending regulations, interest rates and rising costs start to bite.
By contrast, the decision by owner occupiers looking to enter the market tends to be driven by changes in personal circumstances – such as marriage, children, work or retirement.
Once these factors are at play, the decision to purchase a new home is less likely to be delayed for economic reasons such as an election.
This, contrary to the belief that residential sales activity takes a dive in the months to the election.
The data also looked at sales activity immediately following the general election, finding that sales in fact lifted more significantly once the results had been announced.
While post-election sales lifted noticeably in 2008 and 2014, it is interesting to note that there are several variables at play.
In 2008 for instance, the election fell in November – with the final quarter of the year marking a particularly low point in sales activity post GFC (Global Financial Crisis).
The 2014 general election marked a period of significant buoyancy for the residential property market, where a number of targeted policies took aim at affordability.
Investor behavior is more likely influenced by an upcoming election if the housing policies of the major parties vary significantly.
In 2014 the Labour Party for instance proposed a 15 percent capital gains tax and restrictions for non-residents, the effects of which were closely watched by property investors.
While it appears a number of factors contribute to a spike in sales activity, following the 2014 election there was little question as to the National Party’s stance on housing – giving both buyers and sellers the confidence to return to the market almost instantaneously.
The prevailing message illustrated by the data is the importance of identifying the right buyer for your property.
If yours is best suited to a family or owner-occupier, the research shows no evidence to suggest delaying the release of the property to market.
In fact, the evidence weighs in favour of a pre-election sale.
On the other hand, if the potential purchaser is more likely an investor – delaying the release of a property to market (until immediately after the new Government has been formed) shows the possibility of achieving a more favourable result.
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