Major headlines this past month have turned to the Ministry of Business, Innovation, and Employment seeking feedback on options to make it easier to build small, self-contained, and detached houses, commonly known as ‘granny flats,’ on properties with an existing home: https://www.mbie.govt.nz/have-your-say/grannyflats#howtohaveyoursay.
Feedback is sought on options to enable granny flats up to 60 square metres in size to be built without needing a building or resource consent, provided they meet certain criteria. The consultation covers both building and resource management system questions; you can choose to respond to any sections, and I encourage you to do so.
From a property investor’s perspective, a key question I have is whether the property’s owner will be legally permitted to rent both units separately. This is a significant issue following the passing of the Residential Tenancies Amendment Bill No. 2 in August 2019, which notably changed the Tenancy Tribunal’s approach to multi-unit sites, especially those properties without a separate title for each unit.
Submissions close on Monday, 12 August 2024, at 5 pm. Any changes to the Building Act and resource management systems are aimed to take effect in the middle of next year.
More generally, in observation of the current housing market, I read this week that slow momentum since the election and the Reserve Bank’s ‘tough love’ with interest rates are being cited in a new house price growth forecast by the Westpac Bank. In the bank’s latest Economic Bulletin, Westpac’s Chief Economist Kelly Eckhold said the bank’s economists now expect house price growth of just 2.1% for 2024, down from their previous forecast of 5.8% growth. ASB also dropped its forecast recently, to 1%. ANZ expects 3%, and BNZ cut its forecast to 2% from a previous expectation of 5%.
A key factor “leaning against” house price growth and activity has been the Reserve Bank’s focus on keeping interest rates high, Westpac said.
While it had expected the prospect of an official cash rate (OCR) cut early next year to provide support for the market as 2024 goes on, the Reserve Bank is still talking tough and pushing out the prospect of a cut.
“We think this more pessimistic view has been reflected in the downturn of many economic growth and confidence indicators in recent months – the housing market included,” Westpac’s economists said. “While this pessimism persists, it seems hard to see a significant pick-up in house prices in 2024.”
Infometrics chief forecaster Gareth Kiernan is quoted saying, “As we had anticipated, debt-servicing costs remain a major constraint on buyers, and with the timing of interest rate cuts having been pushed out into 2025, there’s little relief from those high debt-servicing costs in the near term. Additionally, it appears that the mix of migrants, being more tilted towards lower-skilled and lower-income people than we’ve seen in the past, means that a significant chunk of the new arrivals are not in a position to consider purchasing a house either.”
New Zealand citizens continue to leave the country at record levels, according to new Stats NZ data. More than 81,000 Kiwis departed long-term in the year to April for a net loss of 56,500, exceeding the previous record of 52,000 in the year to March.
“Departures of New Zealanders have been on an upward trend since early 2022, which likely reflects a catch-up on delayed plans. More recently, there has also been a lift in departures of non-New Zealand citizens, which may be a sign that deteriorating job prospects are prompting some migrants to return home.” For migrant departures in the April 2024 year, New Zealand citizens were the largest group, with 81,200 departures. The next largest groups were citizens of China (7,600) and the UK (5,100).
Despite these challenges, there are still opportunities and positive developments within the property market. Innovative building solutions, such as the proposed changes to facilitate the construction of granny flats, represent a step forward in addressing housing shortages and providing more flexible living arrangements for families. Additionally, the potential for lower building costs and increased rental income from these units can offer attractive incentives for property investors. As we navigate these evolving market conditions, staying informed and adapting our strategies will be key to seizing the opportunities that arise.
