NZ residential rental market news, January 10

Are mortgage processing times too slow? New tenancy laws and House prices outpace apartments.

Too long; didn't read? Here're this week's TLDRs...

Home values fell in 2024, stabilisation expected in 2025

Property values fell by 0.2% nationally in December, marking nine drops in ten months during 2024. 
The national median home value now stands at $803,624, 3.9% lower than a year ago and 17.6% below the post-COVID peak. 
Main centres show mixed results: Hamilton, Tauranga, and Dunedin saw slight increases, while Auckland and Wellington continued to decline. 
December’s decline reflects high mortgage rates and labour market weakness but suggests a slowdown in the rate of decline. 
Lower mortgage rates and emerging market resilience may stabilise property values in 2025. 
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Housing market sees declining prices and low new listings

Average asking prices for homes fell by 1.7% in December, marking the fourth consecutive monthly decline. 
The national average asking price is now 17.6% below its peak in February 2024. 
The number of new listings in December was the lowest in nearly four years. 
Total housing stock remains high, indicating properties are taking longer to sell. 
The market is currently favouring buyers due to increased inventory and declining prices.    
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Auckland and Wellington property values continue to decline

Property values in Auckland and Wellington continue to decline, with Auckland down 0.4% and Wellington down 0.8% in December. 
This marks the ninth drop in the past ten months, reflecting high mortgage rates and a weakening labour market. 
The national median home value stands at $803,624, 3.9% lower than a year ago and 17.6% below the post-COVID peak. 
Some regions, such as Hamilton, Tauranga, and Dunedin, have shown slight increases, indicating potential market stabilisation. 
Lower mortgage rates may provide short-term relief, but the market is expected to remain subdued into 2025.      
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Barfoot & Thompson's December sales strong; prices slightly down

Barfoot & Thompson's December sales increased significantly, up 60% from December 2022. 
The median selling price in December was $1,045,000, slightly up from November but lower than December 2022. 
New listings in December were at their lowest since 2018, with 666 properties listed. 
Total listings on hand were 4,383, higher than long-term averages. 
The market currently favours buyers with increased inventory and price declines. 
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House prices outpace apartments due to land value appreciation

Between May 2019 and November 2024, average asking prices increased by 29.6% for houses and 27.1% for apartments. 
Over a 17-year period, house prices rose by 102.6%, while apartment prices increased by 82.8%. 
Houses typically appreciate more due to land value, which is not as significant for apartments. 
In November 2024, Auckland apartments had an average asking price 25.3% lower than houses in the region.       
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Construction sector poised for growth in 2025

The construction sector is expected to improve in 2025. 
Easing of supply chain constraints will enhance material availability. 
Labour shortages are anticipated to lessen, increasing workforce capacity. 
RBNZ's recent OCR cuts may boost construction activity. 
Kainga Ora's building projects will continue to support the sector. 
Potential regulatory changes could further stimulate construction growth.         
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Mortgage rates predicted to fall below 5% in 2025 

Mortgage rates are expected to drop below 5% in 2025. 
This decline is attributed to the RBNZ's recent OCR cuts. 
Lower rates may stimulate the housing market and increase buyer activity. 
Borrowers are advised to consider fixing rates to take advantage of potential savings.             
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Commercial property market faces significant downturn in 2024 

The commercial property market experienced its toughest year in two decades in 2024, with sales and leasing volumes plummeting. 
High interest rates, remote working, and online shopping contributed to increased vacancy rates and subdued rental growth. 
Commercial property sales values fell below $6 billion, the lowest in more than a decade. 
Retail properties showed signs of recovery, and industrial properties remained strong, indicating potential optimism for 2025.              
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New tenancy law balances landlord and tenant interests 

The Residential Tenancies Amendment Bill has been enacted to balance landlord and tenant interests. 
It reintroduces 90-day 'no cause' terminations for periodic tenancies, allowing landlords to end agreements with clear notice. 
Notice periods for both landlords and tenants have been adjusted to provide greater flexibility. 
Landlords can now require a pet bond, with new rules on pet consent and liability, making pet-friendly rentals more viable. 
The Real Estate Institute of New Zealand (REINZ) supports these changes, stating they encourage more rental homes and provide greater clarity for landlords.             
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Kāinga Ora increases warnings and relocations for disruptive tenants

Since July 2024, Kāinga Ora has issued 553 Section 55A notices for disruptive tenant behaviour, a significant increase from 41 during the same period the previous year. 
These notices include first-time warnings (40%), second warnings (16%), and final notices (2%), which can lead to tenancy termination. 
Housing Minister Chris Bishop states that the government's March 2024 directive for a stricter approach to managing disruptive tenants is yielding positive results. 
The average resolution time for complaints about disruptive behaviour has decreased to 15 business days by December 2024. 
Between July and November, Kāinga Ora conducted 101 tenant relocations to address conflicts, with two-thirds resulting in no further complaints.              
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Non-bank lenders see increased demand from struggling homeowners   

Home-buyers and owners facing financial challenges are increasingly turning to non-bank lenders, known as second-tier lenders, for assistance. 
These lenders offer alternative lending criteria compared to traditional banks, often at higher interest rates. 
Mortgage advisers report a rise in clients seeking second-tier lending to avoid mortgagee sales and retain their homes. 
Such loans are typically short-term solutions, with borrowers refinancing back to main banks after a minimum of six months. 
Interest rates from non-bank lenders are generally higher; for example, Liberty offers a two-year rate of 7.75%, compared to ASB's 5.49% for the same term. 
Non-bank lenders can approve loans more quickly and consider unconventional income sources, providing flexibility for borrowers. 
Despite this trend, Reserve Bank data indicates a decrease in housing lending by non-bank institutions, from $6.05 billion in November 2022 to $5.4 billion in November 2024.               
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Call for increased bank staffing to improve mortgage processing times   

Squirrel Mortgages CEO David Cunningham suggests that the Commerce Commission (ComCom) should have recommended increased bank staffing in its recent banking competition study. 
He notes that current delays in mortgage application processing times are unintentionally anti-competitive, with banks offering faster approvals to direct customers compared to those applying through mortgage advisers. 
Cunningham observes that banks reduced frontline staff when the mortgage market contracted and have not adequately increased staffing to handle the recent rise in applications submitted by independent advisers. 
He points out that adviser-originated loan applications have grown from 40% to about 60% over the past five years, but banks have not proportionally increased their adviser support teams. 
Cunningham criticises the manual nature of New Zealand's loan approval processes, describing them as significantly less advanced than those in Australia. 
He anticipates that banks will work to expand their adviser teams to address the current processing delays. 
ASB Bank temporarily halted pre-approvals for new clients in November to manage turnaround times and plans to resume them by 10 January, aiming for a processing time of 5-7 business days.               
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Challenger acquires Bluestone's NZ mortgage book for $597M   

Australian-listed Challenger has acquired Bluestone Home Loans' New Zealand mortgage portfolio for $597 million. 
The Overseas Investment Office approved the transaction on 26 November 2024. 
Bluestone exited the New Zealand market in August 2024, citing insufficient scale and tight margins. 
Existing customers' loans will be transferred to Challenger's management, with no changes to repayment terms. 
Challenger is a prominent Australian investment firm with a market capitalisation of $4.1 billion and manages assets worth A$127 billion as of June 2024.               
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