Tremains Real Estate hosted a breakfast at their Tauranga offices on 21 June in conjunction with the Tauranga Business Chamber to talk about the state of the local real estate market.
Bay of Plenty Business News spoke to Tremains’ sales consultant Deborah Peake and managing director Anton Jones after the event. Deborah was the main presenter and was pleased at the turnout for the early morning breakfast.
“About 30 people attended and there was a good cross-section of professionals, from finance and banking executives to insurance companies and law firms.
“Having those interested parties in the room meant there was a good energy,” she noted.
This year has seen the first significant dip in property prices in the Bay of Plenty in the last 14 years.
Huge growth of Tauranga, along with limited land supply, increased building costs and increased interest rates have made navigating the market seem like a bit of a mine field for buyers and sellers.
But Anton suggested it’s not all bad: “It’s a changing landscape and that change certainly has been dramatic in the last two years. As interest rates have risen we’ve all been bought down to earth. But that is only temporary, and median prices now are only back to January 2021 levels so there is certainly some cause for optimism.”
Deborah provided a general overview of the market’s growth, particularly over the last 5-8 years, which only really slowed briefly with the arrival of Covid, before picking up again quickly.
The current correction began 18 months ago, with the Credit Contracts and Consumer Finance Act (CCCFA) changes, rising interest rates and inflation, but Deborah was quick to point out that despite the correction, the house price index on the whole is still trending up when we look back to pre-Covid levels.
“When measured over the last couple decades, the house price trajectory is still moving upward – that’s a positive message I’m giving to those who may be feeling despondent,” she said.
According to Anton, “The government’s removal of interest tax deductibility, then the implementation of healthy homes regulations effectively added significant cost for investors.
“Recent interest rate hikes have exacerbated that situation and in 2020-21 many started selling their rental investment properties, due to the lower return against higher values.
“On top of these pressures, first home buyers have also been daunted by increased interest rates in the last 18 months.
“Fortunately, we’re now seeing more first home buyers starting to enter the market again,” he noted cautiously.
Deborah pointed out that the tightening of the CCCFA lending rules at the end of 2021 didn’t help home buyers, but recent easing of those requirements has provided more stimulus. She said interest in the first home buyer segment is strong at present.
Are we at the bottom of the market yet? “While some buyers are effectively speculating that we are and starting to buy again, we can’t say definitively that we’ve reached the bottom of the market until months after that point has been passed.
“That’s the conundrum we must all face,” concedes Anton.
“Although listings across the market are down right now, something we often see seasonally as winter kicks in, the election and the advent of spring will undoubtedly affect things later in the year meaning more of a plateauing of the market from here instead of large falls or rises.”