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Market Comment – March 2019

By Daniel Horrobin

All eyes on negotiations as buyer market bounces back

With the kids back to school and 2019 well and truly underway, the current market has certainly swung in favour of buyers – and savvy buyers they are indeed.

With an increase of property choice available, buyers are more active than ever. And with the ‘fear of missing out’ attitude no longer prevalent in the current landscape, they’re not afraid to negotiate hard.

This is clear in the auction room where, despite continued high energy, we’re having to work hard to get buyer and seller expectations to meet. An increase in negotiations on the auction room floor has seen a slight drop off in our under-the-hammer success rates, but despite this, we’re still seeing a very high percentage of properties sell through post-auction negotiations.

For those who are selling, the more motivated you are, the better. Vendors who are investing in a marketing campaign are capturing the attention of a greater buyer audience, which leads to more competition and a more successful sale.

As February comes to a close, the Auckland market is generally tracking along nicely. Although properties are taking longer to sell, the year has started off in a positive way with noticeable growth compared to 2018.

Want expert advice on buying, selling or investing in Auckland’s apartment market? Give us a call and we’ll help you make your strongest move at the best time.

National average asking price for a Kiwi home at an all-time high –

The national average asking price for a Kiwi home is at an all-time high, since records began 12 years ago. There is more choice for property hunters in the Auckland region, as new listings are up while asking prices stay static, but Kiwis’ passion for property remains strong.

Eight regions’ all-time asking price highs are the major driving force behind a new record high for New Zealand’s average asking house price.  “Auckland is not one of those regions, but has its own story to tell,” says spokesperson Vanessa Taylor.

Real-time statistics from the country’s largest property listing site show the national property asking price in January 2019 climbed 3.3% on the previous month to $695,116 – the highest on record.

Spokesperson Vanessa Taylor says when started collecting data 12 years ago (January 2007) the average national asking price for a property was $410,666. “Since then, the continuous increases in the national asking prices have largely been led by the Auckland region, but this month it was a diverse mix of eight other regions which took the limelight,” she says.

“The Auckland region also has its own unique story to tell and is tending to favour those who are buying,” says Vanessa. While total housing stock across the nation was down 2.5% when compared to January 2018, in the Auckland region stock was up 4.6% with a total of 9,081 homes on the market.

Of these 9,081 homes, 2,420 were new listings, which is a 12.1% increase on January 2018. The average asking price in the Auckland region was flat (a slight increase of 0.7% to $960,482) when compared to December 2018.

“The Auckland market is favouring buyers, with a fresh injection of new listings, a flattening in the average asking price and a slowdown in the time it takes for properties to sell.

Hold or fold: Will capital gains tax force property investors to sell quickly? –

Ask specialist property and tax accountant Matthew Gilligan what he thinks property investors will do if the capital gains tax (CGT) proposed by the Tax Working Group goes ahead and he is in no doubt.

Investors will hold. But that’s not a good thing.

“The one distortion that comes out of the way that CGT works is that it will encourage ‘lock in effect’, meaning people won’t sell,” he says. “CGT is easy to circumvent, and we’ll be telling our clients that.”

Gilligan, whose specialist practice Gilligan and Rowe has some 9000 property investor clients, making it the largest property practice in the country, says that the tax is a huge incentive not to sell. He’ll recommend that to his clients, showing that they’ll be better off gearing against the improved value of the asset and using that money, tax free.

“Say you’ve got a property that you bought for $500,000, and 10 years later it is now worth $1 million. If you sell, you’d pay CGT at 33 percent, and have $333,000 in hand,” he explains. “Or, you could go borrow against the gain and pay no tax on it. You don’t have to put it into property. There is a tax incentive not to sell.”

He reckons there are other, less complex ways of the government getting the revenue, such as stamp duties or extending the Bright Line Test to ten, even 15 years – both less burdensome for both IRD and investors’ compliance costs.

Gilligan, who bought his first home aged 25 and the first of his 30 investment properties three years later, tells his clients in seminars and books “don’t sell it, gear it”. Even for first time investors, the mums and dads, the teachers and policemen, he advises to develop property to hold it – to make it tax efficient to create housing supply.

He anticipates that along with lock-in, there’ll be what’s known as “mansion effect”, where instead of selling, as they would before CGT, owners just keep pouring money into their houses.

“Most investors I talked to today and yesterday can live with CGT, even if they’re not particularly enamoured with it,” he says. “There are a lot of people who still want to rent, and landlords who want to run a service business providing accommodation.”

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