Waikato Housing Market Insights with Opes Partners: Property Podcasters share market insights with Property Investors
Waikato Real Estate recently hosted the second event in their investor seminar series, featuring an engaging Q&A session with renowned property investing experts Andrew Nicol and Ed McKnight from Opes Partners, the hosts of the widely acclaimed Property Academy Podcast.
With the general election on the horizon, attendees were keen to understand the potential impact of this political event on property investments. Andrew and Ed presented historical data indicating an intriguing pattern in property market behaviour. In the months leading up to an election, property purchases tend to decrease in number by an average of 6%, commencing around eight months before the election date. This decline aligns with the uncertainty stemming from potential policy alterations under a new government.
Remarkably, the post-election period exhibits a contrasting trend, characterised by a notable surge in property purchases. On average, property acquisitions increase by approximately 6% in the months following an election, meaning there are 12% more properties bought by Kiwis in the months following an election, compared to the months prior to the election.
Waikato Real Estate’s Michelle Pearson noted that “Ed’s analysis on market activity around elections is particularly interesting when you overlay it with the fact we are at the top of this interest rate cycle, and the house price downturn is more or less over.”
“I’d expect investor confidence and activity to resurface quickly post-election, regardless of outcome, as the political landscape becomes clearer.”
The session also featured an exploration of the recent adjustments to Loan-to-Value Ratio (LVR) rules by the Reserve Bank of New Zealand (RBNZ). These modifications represent significant changes for property investors and set the stage for an insightful discussion.
The conversation then shifted towards Debt-to-Income (DTI) rules, providing attendees with a comprehensive understanding of this crucial financial metric. DTI, short for Debt-to-Income, determines borrowing limits based on an individual's income. For example, with a DTI ratio of 7 and an annual income of $100,000, one can borrow up to $700,000. However, the impending introduction of DTI rules, tentatively scheduled for March 2024, has the potential to reshape borrowing dynamics.
Andrew and Ed clarified that the RBNZ intends to implement DTI rules primarily to manage lending practices during future housing cycles, rather than to impact current borrowers. They emphasised that, currently, only 7% of lending in New Zealand is at a 7 times DTI ratio, resulting in minimal immediate implications.
Transitioning to the specifics of the Waikato region, Andrew and Ed highlighted the intriguing trajectory of the local property market.
Starting from a position of being approximately 15% undervalued in June 2015, expectations have shifted over time. The increased interest from investors beyond Auckland's borders led to an adjustment, and today, Waikato house prices are perceived to be 9.5% overpriced. Notably, Hamilton remains an attractive investment destination, with properties 1.3% undervalued, according to Ed’s modelling.
Addressing the pressing question of house price trends in the Waikato, Ed presented a significant revelation:
"The house price downturn at a national level is done. It's over."
Ed cited recent forecasting from the RBNZ, who project NZ house prices to increase 14.3% over the next three years, averaging around 4% annually, with an expected rise of 2.6% by year-end.
Recent data from the Real Estate Institute of New Zealand (REINZ) further supports this sentiment, reporting a 0.8% increase in Waikato house prices in July. Ed's assessment of this data for Waikato residents is optimistic:
"For you guys, the house price downturn might be over... give it a month or two, and we'll be even more certain."
Click here to listen to the full interview on Spotify
Click here to watch the full interview on Youtube