A soft April, affected by Easter, school holidays and for most an extended Anzac, has been superseded with a more encouraging May. The good news is there is still inquiry from both purchasers and tenants and transactions are happening. On a more “global” basis Adrian Orr has continued to hike the OCR putting further pressure on the cost of living and property values. It appears there is still about one-third of fixed mortgage holders to come off low rates further amplifying the issue. That said, this month’s 25 basis point rise was somewhat tempered from some predictions it would be 50 points. More encouraging still is a signal from the Reserve Bank that their tightening might be over. That should provide confidence for people looking to make purchasing decisions coupled with the prediction rates could start to ease in the second half of 2024. Seize the day perhaps?
The residential market is a good bell weather for household confidence. This sector appears to have stabilized both in terms of volume and median price. The cost of replacement does put a natural floor on values. Rental stocks remain extremely tight and Hamilton continues to punch above its weight in attracting people migrating here for work and/or a better quality of life. One-third of all our letting inquiry originates from Auckland. The forecasted volume of immigration will have to put pressure on supply perhaps kicking the recovery cycle into gear. There are green shoots appearing and it does genuinely look like a good time to buy. On the Commercial front the quarter has been characterized by an increase in industrial availability, both in terms of properties for lease and sale.
This would be the first time in a number of years that tenants and purchasers now have choice. That has taken some urgency out of that decision-making process. While there is vacancy across the size range, the real volume is starting to be seen in that under 200m2 space as new unit developments come to a completion. This comes at a time when the traditional occupants of these properties are feeling the pinch and looking to reduce costs. Further vacancies are likely. While evidence is sparce, there is a clear indicator that capitalization rates have moved up by around 1 – 2 % depending on size/value of the property and sector (industrial v office v retail). Land values are also coming under pressure. Despite all of that we are still expecting that rental rates will remain firm (albeit that growth has stalled). The cost to build remains high, resulting in a natural floor for rental rates.
On a different note, are you aware of the amendments to the Unit Titles Act? There are now much more comprehensive disclosure requirements, particularly pre-contract. If you have questions or would like to engage our body corporate services, please contact either Rob or Alice directly.