Affordability measures unlikely to deliver for Coromandel first home buyers

30 Mar 2021

The jury is still out as to whether first home buyers on the Coromandel will see any relief from the government’s affordability measures announced last week with the volume of houses hitting the market now at a record low.

Local estate agents say supply is likely to lift as a result of some landlords exiting the rental market. However, the impact of that on house prices could be minimal, given the huge gulf between demand and supply.

“It is early days, so we obviously haven’t seen much reaction yet from the market,” says Dave Frew of Harcourts Whitianga. “I think we will see some landlords decide to sell-up because removing their ability to offset mortgage interest as an expense will mean it simply won’t be worth it for some people. That may create a little more choice for buyers who at moment have very limited options. But I don’t think it will be enough to seriously impact prices.

Previously those who rented their property to residential tenants could include the interest as a business expense, reducing the amount of tax they needed to pay on their rental income. That provision has now been removed for newly purchased investment properties and will be phased out for existing rentals over the next four years.

According to the February property report from realestate.co.nz, the Coromandel reached an “all-time stock low” with just 201 homes available for purchase, down 54.2 percent on February 2020. David says the shortage is particularly acute in the $750,000 to $950,000 range, where a large number of would-be buyers are aiming.

Like everyone else in the sector, the Harcourts team was stunned by the rising flood of buyers seeking property since the middle of last year. “When we came back after [the nationwide] lockdown and we looked at the figures for April, it was quite confronting,” says Dave. “We were looking at huge losses, the predictions for the economy, the housing market in particular, were pretty dire, so we were wondering how we were going to get through the coming months. But then things just started to take off. By August we were getting back to normal and it has just continued to grow from there.”

In February, the Real Estate Institute of New Zealand had the average price for a home on the Coromandel at $865,000, a record median high for the month and a staggering 37 percent above the February 2020 median of $630,000. “Prices have increased substantially,” says Dave. “We have seen houses sell for $3 million. That has always been a bit of a ceiling here that hadn’t been previously reached, but we but we are now regularly seeing sales around that figure.”

The government’s action was spurred by the view that investors, which include people buying holiday properties, were driving up the costs of housing and shutting out first home buyers. “We have seen the proportion of those buyers rise slightly, but not to a huge extent,” says Dave.

In terms of who the Mercury Bay buyers are, in addition to those purchasing baches, the area is attracting a growing number of people who may be approaching retirement, but see the opportunity to work remotely while beginning to make some lifestyle changes.

David’s colleague, Dayle Candy, says an optimistic view on the government’s measures could be around the incentivisation of new building. “If you think about who our homeowners are in Mercury Bay, we have a lot of builders, tradies, people with skills in those areas,” she says. “If we do see more build-ready land becoming available, some of those homeowners may see an opportunity to trade up which would increase housing stock and help supply. I think we’d certainly like to see our council get involved in any opportunities that may come from the government on that front.”

The extension from five to 10 years of the bright line test, the point at which capital gains on property sales are taxed, will not apply to new builds, further encouraging new activity. With so many factors at play, Dayle says both potential buyers and sellers would be thinking about their options and what may have changed for them. “There’s a lot of speculation about what may or may not happen, it is likely to take a bit of time before we see if any real trends emerge,” she says.

The commitment from the government to invest $3.8 billion in infrastructure such as piping and roads to service new development has been welcomed by Thames-Coromandel District Council mayor, Sandra Goudie. “Two of the biggest things that have stymied housing development are planning through the Resource Management Act and funding for infrastructure," she says. “The government is meeting us halfway there with this [new] Acceleration Fund and we’re already preparing the case as to why we should get a slice of this money.

“We have infrastructure projects to enable housing that are on our ‘nice to have list’ in our Long Term Plan which is currently out for public consultation that potentially could get across the line with this government funding.”

Any support from the government is likely to be targeted at the Thames Ward which TCDC prioritised for housing development via the Thames and Surrounds Spatial Plan Rescope which was signed off last week. According to Mrs Goudie, the goal is to identify land for significant housing developments within the next 12 months. “Thames is one of our main centres where there hasn’t been any housing stock growth for more than three decades and we’ve got developers looking there with loads of interest, but wanting more certainly about planning and future infrastructure,” she says.

Pictured: Whitianga from the air. The jury is still out as to whether first home buyers on the Coromandel will see any relief from the government’s affordability measures announced last week.