Normally spring is a little messy and squally. So far, we’ve had some decent sun and a touch of rain, but thankfully the winds have held off.
(I know this as one of the gents in the office has been getting out for more mountain-biking excursions than usual! Shout out to the right honourable Sloan McPhee—good rooster, and all round legend.)
Anyway, we’re not here to talk about the weather. Let’s chat politics, finance and a touch of religion—all the taboo topics that tend to ruffle feathers at family get-togethers.
First off though, let’s do the numbers for the Wellington region for August, courtesy of REINZ:
- It’s taking an average of 60 days to sell at the moment—which has been creeping up for a while! The 10 year average for the month of August is 41 days, so buckle in and hold firm if you’re in this camp.
- Sales numbers are down from last month (457 vs 529), and also against last year (457 vs 534).
- Median price is also down, but only slightly ($725,000 to $717,000 month on month) so we’re seeing a bit of a floor here I’m thinking. It was sitting at $740,000 twelve months ago.
It’s fair to say that this year has been more challenging than expected, but as always we’ll persevere. It’s not our first rodeo.
And since we’re being fair, this isn’t entirely our doing. We’re a minnow on the world economic stage, so a sneeze offshore has a bit of a butterfly effect.
For Wellington in particular, the journey has been challenging—and Auckland hasn’t escaped unscathed either.
Kiwi always tend to get a bit more nervous in an election year, holding our collective breath and hitting pause on plans. From experience though that just builds demand which all comes out in a rush after the fact.
What’s been happening in the housing market?
Most buyer activity falls into three categories: investors, first home buyers, and movers. We could get deeper into it, but yawn—no time for a dissertation.
First home buyers have made up a higher proportion of activity this time round. Some people argue that’s because movers are worried about job security, and the higher cost of living. Whilst true, no one’s immune, so I’m not buying it as the root of the current position.
Over the last 3–5 years, first home buyers were active as usual, with a number purchasing when prices were higher.
The correction we’ve had in recent years has eroded equity levels, and in some cases, left clients in negative equity (where the house is worth less than the size of their loan)—which puts the brakes on for potential ‘movers’ in the current market.
Coupled with diminished returns for landlords (lower yield from higher costs, and falling rents in some situations) causing them to liquidate portfolios, supply is high, and demand diminished, exacerbating the current property value slide we’ve seen.
A bit of a perfect storm, and particularly for Wellington, with the government sector being one of the hardest hit. It does play favourably for first home buyers wanting to get on the property ladder though.
And surprise, an independent review of the Reserve Bank's actions around Covid has just come out today, confirming that interest rates were kept low for too long. To be fair, unprecedented times and all that, but we are now paying the price.
What’s been happening in the economy?
I don’t think we need to labour over the numbers. We’re all taking the hit to our wallets— at the pump, the checkout, with council rates (and water now for Welly, whoop whoop) and insurance. All things it’s pretty hard to avoid.
A lot of this is thanks to the Cheeto-in-Chief over in the Greatest Country in the World. Anything he touches just seems to turn to custard.
I’m not seeing a short-term solution to the current position in the Middle East, but didn’t envisage one to begin with. It’s a hot mess.
I made mention of the role of the smaller groups (Houthi, Iraqi militia, Hamas and Hezbollah) in an interest rate video about six weeks ago, and we’re seeing that play out now with the Bab el-Mandeb Strait being impacted, where Saudi oil transits through.
The Fanta Menace is used to dealing in petrol dollars and hamburger bucks, but the belief-based countries of the Middle East place a higher emphasis on pride, people and religion. Very rarely do the two meet in the middle, as is now being found out.
Iran has worked out how to make their adversary squeal, but their counterpart doesn’t know how to achieve the same, other than via a course of destruction.
New Zealand has coped fairly well so far though, and I imagine we’ll continue to do so. The resilience of our agri sector has seen us through thus far, as it always does when times are tough—but even they will start feeling it more if diesel continues to track north, and logistics costs increase.
How are things looking in the lead-up to the election?
We’ve got our own election coming up too, but with the two main parties being fairly central, I don’t expect much in the way of massive change.
Both Labour and National will leave interest deductibility alone for investment properties, and the old capital gains tax drum is being beaten, but this won’t be grandfathered in, so expectations around a big tax-take from it will be limited. Due to value decreases, even backdating it won’t have a big impact.
I’m sure we’ll get more promises along the way, but short tenures in power result in limited meaningful action, in my humble opinion.
For now, let’s keep at the coal face. The champagne will taste so much better when it does start flowing!!!
And just because I’ve been signing these updates off with quotes of late, here’s one from Roman stoic philosopher Seneca:
"True happiness is to enjoy the present, without anxious dependence upon the future."
About the author: Nick Virtue, Squirrel Mortgage Adviser - Wellington
Nick cut his teeth inside the big banks—racking up 15 years' experience across SME, franchise, health and large corporate clients—before taking the leap to become a mortgage adviser in 2020. As one of our resident Wellington home loan experts, Nick knows the Capital (and its housing market) like the back of his hand. Whether working with clients or chatting to media, he has a way of breaking down the complex world of mortgages into simple, easy-to-understand language.