A housing revolution

Estimated in the realm of 65,000, New Zealand’s housing shortfall continues to underpin house price growth, while highlighting the need for new supply across our big cities and regional markets.

“We’re in the midst of a cultural housing shift,” says Suzie Wigglesworth, Bayleys national director – Projects.

“For more than a decade high net migration has contrasted against low levels of building activity as the catalyst for a widening gap between housing supply and demand.”

“Today there is an acknowledgement that we need to provide new homes at size and scale to stabilise market demand, and policy-makers are increasingly implementing initiatives to ensure ongoing investment into off-the-plan projects,” she adds.

“Buyers too, are embracing off-the-plan housing with new master-planned communities and fully integrated apartments increasingly attractive for their environmental and lifestyle considerations,” she adds.

SPIKE IN DEMAND OVER LOCKDOWN

Currently marketing more than 72 new residential off-the-plan developments across the country, the Bayleys Projects team has noted a distinct uptick in enquiry over this latest lockdown.

“Projects launched during more restrictive alert level four conditions have been selling incredibly well, while we continue to bring new projects to the market,” Wigglesworth says.

In the week to October 1, Bayleys Real Estate in Auckland noted 38 percent of all transactions concluded were for off-the-plan projects, pointing to increasing interest in the sector.

“Off-the-plan properties are bought and sold using digital imagery, mapping and 3D walkthroughs so in that respect the sector can trade as normal during the more restrictive alert levels,” Wigglesworth says.

Digital tools were instrumental in the successful sale of townhouses at ‘Taumata’ in Glen Innes, Auckland which launched during the latest lockdown, at the same time a complete sell-down of stage one at the Coronet Peak Alpine Villas in Queenstown was also achieved.

“During level four lockdown restrictions, all 18 of the two- and three-bedroom townhouses in stage one of Coronet Peak sold out within two weeks,” Wigglesworth says.

The boutique development was launched exclusively to the Bayleys national network, and with prices starting at $699,000, around 80 percent of the purchases were made by investors.

NEW CONDITIONS

Wigglesworth says since the Government clarified wording around its March tax changes, the development sector has seen marked new enquiry from investors.

March 2021 saw the Government announce a suite of changes for the housing sector with the bright-line test extended from five to 10 years, additional infrastructure funding and, most controversially, limitations on property investors’ ability to deduct interest expenses from residential property income.

“Back in March we knew that new builds were going to be exempt from the latest tax reforms, but we didn’t know what constituted a ‘new-build’ property,” she says.

“With recent clarification from the Government about new-build exemptions, investors have clear guidelines to work with, and we have seen a marked uptick of interest for off-the-plan projects from the in“With recent clarification from the Government about new-build exemptions, investors have clear guidelines to work with, and we have seen a marked uptick of interest for off-the-plan projects,” – Suzie Wigglesworth, Bayleys national director – Projects. For Kiwis that have already returned home, the switch to more agile working environments following prolonged lockdown restrictions raises more questions about the need to live close to the city.

“The need to meet Healthy Homes obligations and the fact that new properties are built to the latest building standards are other considerations increasing the appeal of new-build properties for investors,” she adds.

Under new guidelines, a property will be considered ‘new’ for a period of 20 years from the time its Code Compliance Certificate is issued, meaning that property investors who have purchased a new property on or after 27 March 2021 will be able to deduct interest expenses from their rental income.

“Interest amongst first-home purchasers has always been high for new-build properties given their relatively affordable nature when compared to existing homes, but we now expect their exemption from recent policy changes will continue to widen the buyer pool for off-the-plan projects,” Wigglesworth says.

DEMAND IS SHAPING SUPPLY

The emergence of new developments in unexpected areas, and how they are being embraced by the market speaks to demand from those increasingly priced out of traditional standalone homes in the regions.

The emergence of new developments in unexpected areas, and how they are being embraced by the market speaks to demand from those increasingly priced out of traditional standalone homes in the regions.

Such projects include Bayleys marketing a 62ha community hub and residential subdivision at ‘Te Awa Lakes’ at Horotiu north of Hamilton and the recent sell-out of a 15-apartment boutique development in central Christchurch dubbed the ‘Oxford Apartments.’

“This spread of demand, and the creation of new community hubs or satellite cities speaks to the bigger picture of much-needed supply to satisfy current levels of demand.”

“Buyers across the country are motivated by different things, apartments at the ‘Oxford’ were sold predominantly to owner-occupiers seeking a second home, while buyers at ‘Te Awa Lakes’ are looking for a fully integrated community,” Wigglesworth says.

“Developers are seeing this demand and working to create efficient projects in places outside traditional urban hubs,” she adds.

While a record number of new homes were consented in August, up some 42 percent year-on-year, Wigglesworth says developers still face challenges converting consents to the finished product.

“Supply pressures like global disruption to supply chains and material shortages, regulatory challenges and a shortage of skilled labour are certainly obstacles to overcome,” she notes.

“Established developers however, like those we partner with, generally find these challenges easier to navigate given they have experience and scale to overcome obstacles,” she adds.

Whilst there are challenges facing the sector, Wigglesworth says demand for new-build properties across all market segments continues to be high, illustrating that despite lockdown-related upheaval Kiwis remain hungry for new homes.

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