Whether it is an obscure issue that only specialists can understand or a housing question that affects everyone, if it matters to you, ask us. YIJU New Zealand will find professionals to give you clear, thorough answers!
Speaking of renovating older homes, in 2022, the global housing market entered a deep freeze, while New Zealand’s property market continued to fall, recording its largest decline in 30 years. What questions about New Zealand’s property and construction sectors matter most to you in 2023?
Policy changes? Investment opportunities? How to choose? In this issue, YIJU New Zealand has selected 4 of the most representative questions from the 25 received and invited four professionals from different fields to share their views.
Specialist field: building and planning
Professional: John Yan
Planning team leader at design consultancy Envivo
Sarah holds a bachelor’s degree in international finance, a master’s degree in economics and a postgraduate diploma in business administration. With more than 20 years of experience in finance and business, a diligent approach and a commitment to her clients’ interests, Sarah has become a key member of the Bayleys Remuera team and the Bayleys agent with the highest total transaction value.
Meizi, a reader of YIJU’s WeChat account, asks: What policy changes will there be in building and planning in 2023?
Answer: Over the past three years, the outbreak and spread of Covid-19, together with the ensuing public panic, lockdowns, economic recession and other problems, have left many people facing the anxiety and challenges of the unknown and uncertain. As 2023 arrives, we seem to be entering an era of greater certainty.
New Zealand’s property market has changed dramatically: after house prices surged in 2021, they fell steadily through 2022. According to the Real Estate Institute of New Zealand (REINZ) House Price Index, the national average house price has fallen 13.7% from the market peak in November 2021. Wellington house prices have fallen 20.8% from their peak and Auckland prices 18.4%, with every region recording some decline.
As rising interest rates create growing uncertainty, buyers are becoming more hesitant and the number of unsold homes continues to increase. By the end of 2022, New Zealand banks had raised mortgage rates to around 7%, substantially increasing buyers’ interest payments and dampening demand for homes.
Similarly, property developers remain cautious because of concerns about rising interest rates, tighter lending, higher costs and labour shortages. In particular, higher interest rates are slowing sales of new homes in New Zealand’s main cities, as developers urgently need to sell completed projects first.
With 2023 being an election year, many expect a relatively quiet year for the residential market, and begin new development projects. Past experience shows that development has traditionally been slow in election years, as people often hesitate to invest in property when they feel uncertain about the political changes ahead.
Despite these challenges, opportunities remain for property developers who assess the future correctly. In 2023, some major policy changes in building and planning could have a positive effect on the current market’s recovery. Two key areas deserve attention:
- On 18 August 2022, the Medium Density Residential Standards (MDRS) formally became planning rules for New Zealand’s main cities. Auckland will hold hearings on legal submissions concerning the proposed changes during 2023, with amendments to the Auckland Unitary Plan expected by mid-2024. We can therefore expect the MDRS rules to carry greater legal weight after the October 2023 election, strengthening confidence in new residential projects.
- In November 2022, the government decided on a thorough and comprehensive reform of the Resource Management Act (RMA), including three pieces of environmental legislation that will ultimately replace the existing RMA of 1991. The new Natural and Built Environment Bill (NBA) and Spatial Planning Bill (SPA) will become law later in 2023. Over the coming years, therefore, as the new planning laws take effect nationwide through the Planning Rulebook, we can expect resource consent applications for new housing developments to become progressively simpler.
Overall, 2023 will be a fairly quiet year for the residential market, as developers, apart from completing construction on existing projects, will choose to hold back and wait as the year draws to a close.
Within these known market constraints, astute investors still have opportunities to buy developable land at reasonable discounts and, ahead of the next construction boom expected in 2024, prepare design and consent documentation。
Specialist field: luxury home sales
Professional: Sarah Liu
Senior luxury property sales consultant at Bayleys
Sarah holds a bachelor’s degree in international finance, a master’s degree in economics and a postgraduate diploma in business administration. With more than 20 years of experience in finance and business, a diligent approach and a commitment to her clients’ interests, Sarah has become a key member of the Bayleys Remuera team and the Bayleys agent with the highest total transaction value.
YIJU reader Rachel asks: With house prices falling sharply, how is New Zealand’s luxury housing market faring?
Answer: New Zealand’s property market as a whole is currently relatively subdued, with interest rates continuing to drive down house prices. This is particularly evident in the residential market.
However, although the luxury housing market is part of this wider market, it feels like a separate market.
Of course, the luxury market is affected to some extent. Overall, however, the impact is limited compared with homes typically bought by first-home buyers, because luxury homes cater to buyers with substantial financial resources.
In the luxury market, target buyers will purchase a property if they like it and the price is reasonable. Overall, buying a luxury home is a more individual choice, and the most important aspect of selling in this market is meeting clients’ needs and preferences in style.
Recently, many of my clients and prospective buyers have been looking for high-end luxury homes, including buyers with budgets in the tens of millions from around the world, such as the US, the UK and Singapore. It is fair to say that New Zealand’s luxury housing market remains very solid in 2023.
Specialist field: commercial property
Professional: Jonathan Lynch
Senior director at JLL Real Estate
Sarah holds a bachelor’s degree in international finance, a master’s degree in economics and a postgraduate diploma in business administration. With more than 20 years of experience in finance and business, a diligent approach and a commitment to her clients’ interests, Sarah has become a key member of the Bayleys Remuera team and the Bayleys agent with the highest total transaction value.
YIJU reader XILA asks: I would like to invest in commercial property in the city centre. Is 2023 a good time?
Answer: During the transition from late 2022 into 2023, there was a substantial volume of commercial property transactions in Auckland’s CBD and surrounding areas in the NZ$1,000,000–10,000,000 price range. In 2023, the CBD business district will remain vibrant and continue to develop, with some properties affected by leading indicators while others are less affected.
Many new requirements have also emerged for presenting commercial property listings. There is a wide choice of commercial properties in the CBD, and in most cases, effective advance planning and positioning of a property’s marketing can make a marked difference to its presentation. It is therefore very important to have an in-depth discussion with an expert who knows the market before presenting your asset to prospective clients.
Adapting to change is important, and understanding what is happening in today’s market matters more than ever. During 2022, the commercial and industrial property markets faced mounting headwinds: interest rates rose to combat persistent inflation, construction costs continued to climb, and mandatory lockdowns during the Covid-19 pandemic established working-from-home habits, leaving a future “return to the office” uncertain.
Investors have therefore been quite cautious, slowing the commercial property market from the strong demand seen in 2020 and 2021. Although numbers remain limited, the reopening of New Zealand’s borders has enabled overseas visitors, students and workers to return, also increasing overseas investors’ interest in New Zealand property.
I believe overseas investors’ interest in New Zealand’s commercial property market will continue to increase over the next 12 months. Compared with other major global markets at present, New Zealand is seen as a safe haven for investment, and lending has continued to develop and grow substantially since 2019.
Sarah Liu
Specialist field: luxury home sales
Professional: Sarah Liu, senior luxury property sales consultant at Bayleys
Sarah holds a bachelor’s degree in international finance, a master’s degree in economics and a postgraduate diploma in business administration. With more than 20 years of experience in finance and business, a diligent approach and a commitment to her clients’ interests, Sarah has become a key member of the Bayleys Remuera team and the Bayleys agent with the highest total transaction value.
YIJU reader Rachel asks: With house prices falling sharply, how is New Zealand’s luxury housing market faring?
New Zealand’s property market as a whole is currently relatively subdued, with interest rates continuing to drive down house prices. This is particularly evident in the residential market. However, although the luxury housing market is part of this wider market, it feels like a separate market.
Of course, the luxury market is affected to some extent. Overall, however, the impact is limited compared with homes typically bought by first-home buyers, because luxury homes cater to buyers with substantial financial resources.
In the luxury market, target buyers will purchase a property if they like it and the price is reasonable. Overall, buying a luxury home is a more individual choice, and the most important aspect of selling in this market is meeting clients’ needs and preferences in style.
Recently, many of my clients and prospective buyers have been looking for high-end luxury homes, including buyers with budgets in the tens of millions from around the world, such as the US, the UK and Singapore. It is fair to say that New Zealand’s luxury housing market remains very solid in 2023.