Investors coming off the fence

Squirrel chief executive David Cunningham says while house sales activity was absolutely anaemic over summer — the market has definitely entered a pretty healthy comeback phase in the last month or two.

In part, that’s down to the fact house prices are starting to stabilise, he says.

“Prices have now fallen about 20% in nominal terms, or 30% once you factor inflation into the equation, essentially taking us back to where they were pre-Covid.

“Commentary from the Reserve Bank is that those falls have done what was needed to get us back to a more sustainable space with house prices,” says Cunningham.

“And given interest rates are likely to start falling in the coming months, I think we’re going to see investor housing turnover gradually pick up more and more from here.”

He says while people might sit on the fence when there’s cause for uncertainty, their fundamental need for housing never goes away.

“Now those causes for uncertainty are starting to disappear, investors will be back on the hunt to buy. And now the tap has been turned on again with respect to immigration, you can bet that’s going to add even more fuel to the housing market fire.”

Cunningham says it won’t necessarily mean prices shoot back up, but choice is going to start to disappear for buyers — something that has been warned about for months.

“In fact, he says demand is heating up in a massive way in the rental space.  In Auckland rentals are being snapped up so quickly there’s barely anything going at the moment — meaning the market could be on track to follow in the wake of Sydney, Melbourne and Brisbane, which are deep in the midst of a rental crisis.

“And the sad irony of it is that, as demand picks up again, we’re systematically destroying our construction sector at the same time.”

Cunningham says the sector should be supported to maintain the levels of consents and building highs hit last year — to help stay ahead of immigration levels, and maintain sustainable house prices.

“Unfortunately it’s the same mistake New Zealand makes every time we go through this sort of housing market cycle. Hopefully one day we’ll learn.”