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QV's David Nagel thinks house prices will rise in 2021 because supply hasn't yet caught up, but the increases will fade from the hot 2020 rate to a warmer rate more like in 2019

QV's David Nagel thinks house prices will rise in 2021 because supply hasn't yet caught up, but the increases will fade from the hot 2020 rate to a warmer rate more like in 2019

Content supplied by QV.


Nostradamus himself could not have predicted the strange series of events that befell our world in 2020 – nor the wild trajectory of New Zealand’s property market, which has gone from “doom and gloom” to “boom and Zoom” in record time.

Even so, Quotable Value (QV) general manager David Nagel has shuffled his tarot cards, read his tea leaves, and peered into his proverbial crystal ball. Though the economic outlook remains murky due to Covid-19, he’s predicting property prices will continue to rise in 2021, though at a considerably slower rate than we are currently seeing.

“A shortage of listings, record-low interest rates, and the looming re-introduction of loan-to-value (LVR) ratios means that the property market is in for a hectic summer yet. But when the LVRs do eventually kick back in just as the weather begins to cool in March, I expect the property market will start to cool as well.

“I’m predicting we’ll see something more akin to 2019 levels of growth again, when prices increased by an average of 4-5% nationally, as opposed to the rampant double-figure growth that we’ve witnessed during the back half of this year.”

That will come as scant consolation to first-home buyers in NZ’s expensive urban centres, Auckland and Wellington, where property prices have skyrocketed even higher in recent times, but it may provide some relief for buyers in the regions.

But Mr Nagel was quick to point out that NZ’s economic recovery still faces a bumpy road ahead, and though news of a potential Covid-19 vaccine being available as soon as the first half of next year was very promising, the country might still face further lockdowns, causing even more economic strife.

“As 2020 has taught us, anything can happen. But what we’ve also learnt this year is that NZ’s residential property market is more resilient than many of us expected. While interest rates remain so low, it’s difficult – but certainly not impossible – to fathom a scenario in which prices would fall dramatically.

“Until we address this country’s chronic shortage of housing, and I have been pleased to see that Auckland is on the right track now with record numbers of consents and work on new builds, we’re likely to have more buyers than we do houses, which is only going to keep prices up.”

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39 Comments

Predictions can be wrong but I totally agree with it. There is still a pool of keen buyers and almost nothing is available to buy. Certainly stock on hand has greatly shrunk so unless that changes the whoosh sound will ring out as properties fly out the door. "Resilient" is the word of 2020 and also 2021

Agreed. I'm skimming Trade Me from time to time, laughing at some of the prices being asked for in our area. But then the properties sell in no time.

I saw a local listing just come on, lick of paint, new deck and a bit of staging beo 685k, it last sold in Nov for 465k. It's a total dump, cross lease unit on a busy main road in a flood zone no privacy or turn around area. Will be interesting to see what it'll sell for. I mean... who would buy that? Surely rational people will hold back on not buying if the asset is a dump?

Might not make much money once agent fees and tax (bright line test) are paid

I'd say a cool 100-150k profit for a month's work if they get that price not a bad earner but the person buying the house... why, just why? Are people that desperate they'll buy an absolute dog? Must be.

Yes, what a lot of purchasers don't realize is it's one thing buying a house of quality or upside, and another to buy a house that is on the verge of obsolescence by way of quality, design, or even location. Many property owners could be caught with what is a 'stranded asset' and will find they are 'the greater fool.'

There are design, methodology, and technology improvements that are happening in house building that will start to highlight that most of NZ housing (even most new housing) is not fit for purpose and that the price paid for it will never be recouped as any new purchaser will want to discount the purchase price back to make allowance for the renovation upgrades that will be needed.

This has already happened with many older commercial buildings that got hit with the new seismic requirements.

These improvements would already be far more common, if the savings offered by these, was not being captured by the restrictions in land supply and council consenting delays.

As long as Govt. cause restrictive policies, then all most purchasers can purchase is of high priced and of poor quality.

But if they are truly serious about their 'Climate Change Crisis' then they must make changes soon to building code and start addressing supplying affordable supply, not just supply per se.

When (if) they do this, many purchasers will find themselves on the wrong side of history. Until then, next purchaser please ........

I couldn^t agree more. In ChCh there are a lot of pre-EQ homes being snapped up
A large number of these were not inspected below floor or ceiling level , fixed quickly by Fletchers and on-sold. These are now being dunped again.

Nothing available to buy due to mental low interest rates. There are empty or low occupancy houses all over our suburb.
The stupidly will continue into 2021 I am sure... or until the young and fhb's are mentally crushed or marching on parliament!

the pool of FHBs with adequate deposit and servicability is running out as the prices go through the roof, and with the big four banks reinttroducing LVRs for investors, and the RBNZ reintroducing them in Mar/Apr thats going to exhaust the investors with financing too. Prices will flatline shortly, and maybe drop in the longer term (but not much)

How many investors are in it mainly for Capital Gains, where yield is just enough to cover the carrying costs? *shrug*. There's only so much you can squeeze out of a rental market that's already tapped out, combined with some potential downside with additional supply coming online after a record number of CCC's and building consents issued and migration through the floor.

Could find an increase in "greater fools" next year listing their "investment" properties citing buyers remorse?

People don't realise how difficult being a landlord actually is. I understand it is only going to get tougher with new rental standards coming in, which many of these crap boxes won't meet. So it is a good time for some landlords to get out and sell up. There are so many poor quality houses out there, and some accidental landlords and buying them, not realizing that they could be buying a big headache..
But some people with a million + in savings at the bank, who expected to get some interest off this money in their retirement as income, now see the need to put it into something that will earn more than nothing at the bank. It is causing asset prices to increase, and IMO is why housing and shares are gone up so much. The yields on shares have decreases as a result, as the share prices have gone up.

I am amazed that banks will lend to FHBs who have not actually saved up that deposit properly, by putting aside money each week from their earnings. It appears they are allowing FHBs to borrow that money from their parents or use their parents house as equity, to get together that deposit. I thought one of the whole reasons that banks wanted their customers to save for a deposit, was to show that they had the ability and saving ethics to do this, to show that they can also put aside money to service their mortgage. If banks aren't requiring FHBs to actually save for the deposit, then I can see that being quite a risk for them when interest rates eventually rise. Maybe a few years off, but rates can stay this low forever.

Sorry what? "saving ethics"? Banks don't care about "saving ethics" they just want to make sure they have minimised their risk. Deposits are about protecting them from negative equity, nothing to do with proving an ethic. They are much more interested in your previous behaviour with debt (ie missed payments on credit cards/loans etc) as this tells that something about the kind of borrower you are but they don't care what kind of saver you are.

There's still upside in Palmerston North - a large unsatisfied demand for houses in all price ranges. Bare land/sections are almost non-existent and hotly pursued by developers.

TTP

there's plenty available in the market, the only problem is the price range it is available for.

Andre Barbault forecast a pandemic in Europe for 2019-22.
He did so in published print, in an article in 2011.
No one who is not interested in astrological prediction ever bothers to check that SOMEONE DID forecast all this, and 8 years before it occurred.
In 1954 he also published a prediction that USSR would implode in 1989-90.
You don't need Nostradamus, as Barbault says it out clear and not in quatrains.
Go read him. He has written 2 books that have been translated into English.
His economic forecasts for 2021-23 are dire and are the basis for my view that 2021, as the eye of the storm, will be the worst year since 2009 for world economy. This has yet to start in earnest but will dawn on February 18th and go through to end of year, with markets declining across the globe and finally crashing in October-November 2021. markets will fall 50% or more, as they did in 2007-09. For same reason: Uranus and Saturn synodic cycle.

I have been picking 2022 as a bad financial year, when a credit crunch will hit.

Yes so am I. People thought things like house prices and job losses would occur within weeks or months. But some of these things can take some time to take effect.

mikekirk29,

You really believe that the movements of the planets have a direct influence on events on Earth? If so,The first word that comes to mind is gullible. I must assume that you have already acted on this 'hard' information to dispose of all your assets before the sh*t hits the fan later this year. yes?

Firstly, did you bother investigating the source I referred to?
Secondly: judgement in the absence of investigation is prejudice
Thirdly, Newton, the arch rationalist, studied and believed in astrology.
Fourthly, many leading corporations in USA and elsewhere use it to do profiling for prospective employees.
Fifth, I plan well ahead thanks

Newtown also had nervous breakdowns, suspectedly caused from chemical poisoning (lead or mercury). He believed he could turn metals into gold with a Philosophers stone, and metals possessed life. He also believed he could create an elixir of life. I don't know why you think Newton believing it is proof.

The doctor present at your birth has more gravitational effect on your body than Jupiter.

Same old 'build more houses and everything will be 'right' nonsense. The supply side issues will not be solved by thousands more Auckland apartments ('record consents') - the demand is for affordable rental properties (and to a lesser extent affordable purchase properties).

The house price boom is driven by the confidence of *investors* to make gains in the medium-term - and they have every reason to be confident as (a) rental values are high (and often Govt subsidised); (b) interest rates are low and likely to remain so (ineffective monetary policy); (c) demand remains high in many places; (d) the tax regime is generous in the extreme; and, (e) Govt shows no sign of doing anything that will change anything from (a) to (d). The LTV ratios will impact first time buyers more than investors making it a pretty ineffective tool.

The solution here is largescale building and recquisition of houses for affordable rent. Take any large city in the north of the UK and you will find around 10 times more affordable rent / social housing per head than in New Zealand.

I suspect Apartment prices will stall somewhat within the next few years, because many NZers don't want to buy them. Many NZers want a freehold house on it's own piece of land, no matter how small.

IMO when there is a supply problem, like there is in NZ for actual houses, then making it easier for first home buyers will end up pushing up prices even higher. Theoretically decreasing interest rates should make houses cheaper and easier to buy. But when there is a lack of supply, it just means that people are prepared to pay more, up to the limit they can afford. Any first home grants, or ability to use kiwisaver just adds fuel to the house price fire. I suspect rent to buy schemes maybe the same. Kiwibuild coul dhave been a solution, except it had to be run like state housing, not let developers have the control, because they end up being shoeboxes, on postage stamp sites, which don't appear to have been very popular. I have looked at some myself as a FHB and didn't want one.

But the government and their voters don't want things change, because the current housing situation creates wealth from nowhere, and makes the banks stronger on paper. A significant amount if earnings now each year with any household that owns a house, comes from the capital gains that their house makes. It may even be making more per year than someone working full time. Whereas people who don't own a home, have a huge hole in wealth that they have missed out on.

It is going to get hotter in the kitchen in 2021. Wait for the vaccine and end of Covid. It will set more fire to the market for housing and shares.

I doubt the vaccine and end of covid will make much difference.

Complete opposite I think.

A broken clock is right twice a day

Increasing house prices in 2021 is not a prediction it's a certainty. All parties involved are on the same page and its clear to see. If interest rates remain low or even go lower then prices will go up.

It's not a certainty. But it's a near certainty.
There is of course the chance of a credit crisis which could bring prices down.
Still, it's probably only a 5-10% chance. And I wouldn't be making decisions based on that!

Just as, in March 2020, it was a near certainty that prices would fall in 2020. It was just a question of how much they would fall, right?

Correct then the government stepped in or there would have been a crash. Basically there now needs to be some sort of unforeseen event that even the government cannot save house price falls.

If other countries such as the US were to see inflation, and forced to increase interest rates, then we might be in a spot of bother. But that's highly unlikely.

You are giving them far too much credit for being able to control things. If their stepping in was only meant to avoid a crash, then why didn't they only step in enough to avoid prices falling, not increasing at a record rate?

To infer that they have control, would also infer they deliberately wanted prices to increase as much as they have.

Increasing house prices in 2021 is not a prediction it's a certainty. All parties involved are on the same page and its clear to see. If interest rates remain low or even go lower then prices will go up.

Let's talk in a few months when your crystal ball displays the effects of higher unemployment rates.

C67 could be right, we know there's a lot of support for continued property inflation.

I disagree people are losing confidence in the NZD, it's price is going up and the effects of debt payment which is happening right now in a major scale are deflationary.

If the controls are no longer responding, the captain & first officer often in unison try hard on manipulating the difficult natural momentum. All passengers can only leave their hope in good faith to them, but mostly already shifting their confidence to the good Ol' Lord Almighty.. then brace for impact. Best of luck 5mil team.

Here are things Kiwis should consider;
- With country size, population, economic etc.: Why NZ QE/LSAP are the largest? relative to other big OECDs
- Stress tested Banks, all safe: but all lobbied against CAR? TD guarantee? no neg OCR? & put back the LVR?
- Talking about 'supply' when the overseas demand is stop, odd eh? read report how many expat with big$?..
- Is savings, living within means are all but dead in NZ future psyche? and the debt to be reticulated as growth
Couple things missing in NZ economic variables, yet something else increased and been praised for it.
QE by traditions demand future austerity.. but hey it's NZ won't happened here, more govt job vacancies.
Chemotherapy for cancer must be delivered precisely to prolong the obvious, low dosage (could be like OZ economy/QE, natural timing kick in), high dosage (like NZ QE?)..shall accelerate the poison reaction to both (cancer cells & patient).