NZ residential rental market news, November 15

National rent and mortgage payments peak, FHBs seize opportunities, and a sharp rise in apartment insurance costs.

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

Spring Boosts Property Sales and Listings

National property sales rose 20% year-on-year in October, driven by spring’s increased market activity. 
National median house prices increased slightly, up 0.7% year-on-year to $795,000. 
Auckland saw a 4.3% drop in median prices year-on-year, while regions like Marlborough showed an 18.3% increase. 
Inventory levels grew by 26.3% nationally, providing more options for buyers. 
New listings continued to rise, marking a 21.4% increase year-on-year, with Gisborne, Canterbury, and West Coast leading. 
Auction sales represented 17.8% of all transactions, up from last year’s 16.1%. 
The median days to sell increased by 4 days, averaging 42 days.    
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Property Resale Profits Dip, Losses Rise for Investors

In Q3 2024, 90.2% of properties sold for a profit, down from 91.8% in Q2. 
Median resale profit was $269,000, a decrease from $305,000 in Q2. 
Median resale losses remained steady at $55,000. 
Properties held for over eight years generally sold at a profit. 
Auckland had the highest proportion of loss-making sales among major cities, at 16.1%. 
Owner-occupiers saw a 1% increase in loss-making sales, while investors had a 2.6% increase. 
Apartment sales were more likely to result in losses compared to standalone houses.   
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Auckland Sees Rise in Loss-Making Property Sales

In Q3 2024, 16.1% of Auckland residential property sales resulted in a loss, up from 12.9% in Q2. 
Nationally, 9.8% of property sales were loss-making, the highest since Q2 2015. 
The median loss for these sales was $55,000. 
Properties sold at a loss had a median ownership period of 2.9 years, while those sold at a profit were held for 8.5 years. 
Apartments were more likely to sell at a loss (35%) compared to standalone houses (8.9%). 
Investors experienced a higher rate of loss-making sales (11.1%) than owner-occupiers (8.8%).     
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First Home Buyers Increase Market Share Amid Softening Prices 

First home buyers (FHBs) accounted for 27% of property purchases in the first nine months of 2024, surpassing the long-term average of 21%.  
The median price paid by FHBs decreased from $715,000 in 2022 to $685,000 in 2024, despite an increase in standalone house purchases.  
FHBs are leveraging low-deposit lending, KiwiSaver funds, and showing flexibility in property type and location to enter the market.  
Wellington recorded the highest FHB market share among main centres at nearly 35%, while Tauranga had the lowest at 23%.  
The removal of the First Home Buyer Grant scheme has not significantly impacted FHB activity to date.      
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Rising Interest Rates Strain Homeowners' Finances 

Average weekly mortgage repayments have increased from $475 in 2022 to $606 in 2023. 
Homeowners refixing loans are facing interest rate hikes from around 2.5% to nearly 7%, leading to significant repayment increases. 
Some households are allocating over half of their income to mortgage payments, necessitating lifestyle adjustments. 
The Finance and Mortgage Advisers Association reports that 25% of homeowners spend more than half their income on mortgage repayments. 
Many are delaying refixing mortgages, anticipating potential OCR cuts and subsequent lower interest rates. 
Economists predict the RBNZ may reduce the OCR from 4.75% to 4.25%, potentially easing mortgage rates.      
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National Median Rent Climbs to $600 per Week 

The national median weekly rent has reached $600, marking a 4.3% increase over the past year. 
Auckland's median rent has risen to $650 per week, reflecting a 4.8% annual growth. 
Wellington's median rent stands at $620 per week, up 3.3% from the previous year. 
Christchurch has experienced a 5.5% increase, bringing the median rent to $580 per week. 
The highest regional growth was observed in the Bay of Plenty, with a 6.2% rise to $550 per week.        
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Apartment Owners Face Sharp Insurance Premium Increases 

Apartment and multi-unit building (MUB) owners are experiencing significant insurance premium increases. 
In Wellington, the average annual insurance premium per unit rose to $8,213, approximately three times that of a standalone house. 
Between 2019 and 2023, premiums for MUB owner-occupiers in Wellington increased by 58%. 
Auckland's MUB insurance premiums doubled to $1,793 per unit during the same period. 
Nationally, MUB premiums rose from $3,054 in 2019 to $4,983 in 2023. 
Insurers attribute higher premiums to the complex risks associated with larger buildings, especially seismic events. 
The age of the building significantly impacts insurance costs, with older structures often incurring higher premiums. 
Approximately 67% of survey respondents could obtain quotes from only one insurer, indicating limited market competition.            
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Consumer Confidence Rises; Home Renovations and Travel Spending Up  

Consumer spending intentions have improved, with a net 0% planning to spend more, up from a net 42% planning to spend less five months ago. 
A net 13% of respondents plan to increase spending on home renovations, indicating growing confidence in personal finances. 
The net percentage of individuals planning to reduce dining out has decreased to 11%, down from 44% in May. 
Intentions to purchase new vehicles remain subdued, with a net 10% planning to cut back, showing minimal improvement from earlier in the year. 
Plans for international travel have risen, with a net 10% intending to travel more, while domestic travel intentions have increased to a net 9% planning more trips.             
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Basecorp Adapts to Market Challenges, Expands Loan Limits  

Basecorp Finance's mortgage lending decreased slightly to $1.1 billion from $1.2 billion, outperforming many peers in a challenging year. 
The company maintained low arrears, with less than 2% of loans overdue, reflecting strong underwriting and borrower resilience. 
To support clients facing repayment difficulties, Basecorp offered solutions like switching to interest-only payments or capitalising payments, reserving enforcement actions as a last resort. 
The exit of Australian lenders Resimac and Bluestone from the market presented both increased business opportunities and concerns about industry confidence. 
Recent CCCFA rule adjustments have had minimal impact on non-bank lenders like Basecorp, which already employ flexible lending criteria. 
Basecorp raised its maximum loan size to $2.5 million, accommodating higher-value property transactions, particularly in central Auckland.            
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LifeDirect Expands Services, Targets $1 Billion in Mortgages  

LifeDirect, an online insurance platform, has merged with Loan Market Capital & Coast and Insurance Market, expanding its services to include nationwide mortgage comparisons and KiwiSaver options. 
The merger aims to increase LifeDirect's annual mortgage arrangements from $400 million to $1 billion by 2026. 
LifeDirect plans to introduce new initiatives and leverage its existing client base of 50,000 to achieve this growth target. 
The platform will offer combined home loan and insurance services, streamlining the process for clients. 
Users can determine their eligibility for home loans through an online application, followed by consultations with advisers for tailored mortgage solutions. 
LifeDirect's strategy includes enhancing brand awareness through sponsorships and integrating with third-party sites to attract more home loan inquiries.             
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