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Shift in property outlook

The mini-budget announced by Finance Minister Nicola Willis this week had significant changes in store for property owners seeking relief from previous policies, which have increased costs for landlords.

According to CoreLogic average house values [across all stock] in all Wairarapa districts dropped this year, with South Wairarapa showing the most dramatic decrease of $86,993, shifting from $829,134 in January to $742,142 in November.

Carterton’s average value dropped a total of $44,397, down from $661,656 in January to $617,259.

Masterton showed the least considerable change but still dropped a total of $36,258, down from $598,326 to $562,068.

According to previous CoreLogic house value datasets, the last time any of the districts showed similar figures to November’s average values was in March 2021.

Willis’ announcement on Wednesday included two highly anticipated changes surrounding the Government’s bright-line test and interest deductibility.

“Today I am announcing our immediate decision to bring the bright-line test for residential property back to two years, effective from 1 July 2024,” Willis said.

“Removing this effective capital gains tax means that properties sold after 1 July 2024 will only be subject to the rule if owned for less than two years.

“I am also confirming the Government’s commitment to fully restoring interest deductibility for rental properties.”

Increases to interest deductibility will take place from April next year.

President of the Wairarapa Property Investors Association Tim Horsbrugh said that contrary to what many people believed, these changes would be positive for renters and landlords.

“So we know that there’s less growth in rental properties, and there are landlords selling up.”

He noted that high interest rates were partially behind the average value decreases observed this year.

“When interest rates are high, the costs to borrow a house goes up significantly, and it’s significantly cheaper to rent than to buy,” Horsbrugh said.

“But as interest rates come down and people get a whiff of that, it puts a bit more confidence in the market.

“Then people will start getting back in the market, and it’s a supply and demand situation where prices will start to come up.”

He believed that with more people likely to be re-entering the market, regional prices would start to increase again next year.

When observing national trends, CoreLogic chief property economist Kelvin Davidson noted it may be a while for the market to pick back up, even with interest deductibility increased.

“Even as interest deductibility gets phased back, it’ll still be sticky for investors to sum up favourable returns when yields are low and mortgage rates high,” Davidson said.

“With strong migration and the broad plateau for mortgage rates not set to drop materially for perhaps another year or so, it wouldn’t be a surprise to see a patchy year for both sales and prices in 2024,” Davidson said.

National property sales volumes had trended upwards for seven months in a row, however Davidson considered the growth rate was still on the ‘slow side’.

“Property sales across November were up by around 19 per cent from the year prior,” Davidson said.

“However, it’s from such a low base for activity that this growth rate isn’t yet translating into a significantly higher number of sales.”

With national listings winding down for the holiday period, Davidson said total stock levels were lower than in previous years.

“New listing flows into the market are nearly 12 per cent down from this time last year, which has overall limited buyers’ choice of fresh stock.”

Bella Cleary
Bella Cleary
Bella Cleary is a reporter at the Wairarapa Times-Age, originally hailing from Wellington. She is interested in social issues and writes about the local arts and culture scene.

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