Back to Home

MARKET UPDATE MAY 2017

 

Latest Market Data
- Alex Keys

The Taupo Property Market remains active on the back of 18 months of strong growth. Early 2017 has seen the number of sales for the first three months drop 20% compared to the same three month period last year. Sales volume is now in the range of 70-90 sales per month down from 2016 highs of 100-114 sales. This decreased sales volume has not affected values due to the limited housing stock available.

The median sale price is currently $428,000 this is well up from 2016 figures. However this is a combination of a general market increase and partly due to the price range that is currently selling well.

The continuing strong market performance is linked to a shortage of listings combined with strong demand.

 


Putting it in perspective!

- Mark Apperley

While the market has slowed we would still describe the Taupo property market as strong, as we still have good sales volume in historic terms (see chart above). Yes we have come off the highs of over 100 house sales per month, with the current volume in the 70–90 range still providing a strong market particularly given the low number of listings (see chart below) keeping competition from buyers high.

The early signs of the market slowing we reported on in December has now been confirmed through the drop in sales volume. We have however, also observed the number of listings coming to the market now slowing (see chart right), this is providing buyer competition. While listing numbers remain low we would expect competition for properties to remain high.

 

Have we reached the peak?

Nobody can say with any certainty if we have reached the peak, you really only know where the peak of a market is after you have been passed it, until then it’s an educated guess at best.

What we do know is that while market fundamentals are strong i.e. interest rates are at record lows, net migration is at historic highs, supply is still very low and with strong demand from buyers, prices are more likely to remain under upward pressure.

What is having an impact is credit supply. Loan to Value (LVR) restrictions have been impacting purchasers, and we are increasingly hearing reports of banks reluctance to provide funding particularly in the Commercial and Development area.

What are we watching?

Uncertainty and risk are present, market participants need to watch general market sentiment, political policy changes, Reserve Bank changes to the OCR, and tightening credit supply from Banks. While on the macroeconomic side watch policy changes resulting from Trump’s victory and Brexit, and also issues around North Korea.

Our advice to clients remains to take professional advice and make prudent purchasing decisions. The market has slowed and there is downside risk for over optimistic purchasers exposing themselves to future market fluctuations.

Land Developments!

A number of new residential subdivisions are under construction or in the planning stages. We have estimated that there are around 200 sites being developed or about to be developed with potentially many more possible if future stages are undertaken. Developers will need to watch the strength of demand prior to committing to large scale subdivisions.

Commercial Property

The Industrial and Commercial property sector in Taupo has seen an increase in activity during 2016 and into 2017. Several commercial properties have recently sold with yields ranging from 5.7% to 7.8%. Yields are coming under downward pressure due to increased demand. Purchasers coming from regions where yields are well below these levels are seeking better returns.

While yields are well below what we have experienced for many years, investors see value in Commercial property in comparison to the returns currently available from bank deposits, with commercial owners often having the majority of the operating expenses of a property paid for by the tenants.

Issues around earthquake prone buildings remains a major factor for both leasing and selling, with purchasers generally seeking buildings with an NBS rating of over 67%. Buildings requiring earthquake strengthening work are more difficult to sell and are often sold at a discounted level.

 
 

What’s my house worth?

Keys Valuers Ltd can provide you with the current market value of your house, so you can make informed decisions when buying or selling in this changing market. Often a home is a persons largest asset so whether buying or selling a home, establishing its current market value is crucial.

Read More >>

 

Coming up in the next issue:

In the next issue we will be undertaking our annual Retail Vacancy Survey which will be due out next month.