Kelvin Davidson, chief property economist at Corelogic, said it made sense that developers were offering incentives to shift stock. Photo: 123RF, Andy Dean Photography
Developers struggling to sell homes off the plans are trying to sweeten the deal for borrowers - including one in Auckland now offering to pay the buyer's mortgage.
Kelvin Davidson, chief property economist at Corelogic, said he estimated new build sales activity had dropped about 45 percent from the 2021 peak - a deeper downturn than the overall property market fall of about 30 percent.
"In other words, new builds have been fairly hard hit, which tends to make some sense - they're often a little more expensive than the equivalent existing property, and with listings volumes so high, people have probably just been tempted to buy an existing house rather than a new-build."
He said it made sense that developers were offering incentives to shift stock.
"It's certainly been a tough environment in the new build sector, both for getting the projects off the ground and then eventually selling the properties. You only need to look at dwelling consents to see the scale of the downturn."
Lighthouse Property has offered to pay the mortgage for buyers for the next six sales of properties in a development on St Albans Ave, in Auckland. It said it would pay the mortgage principal and interest for eight months from the date of settlement. The houses sell for prices starting at $1.095 million.
Another developer for a Mount Wellington complex last year was offering a free car to buyers.
Another, Wirihana, offered $25,000 cashback or a $25,000 whiteware voucher, a car or an interest rate of 1.95 percent for a year. Neighbours were also being offered $2000 as an incentive if they could find buyers.
In the year ended December, the number of new dwellings consented was down 9.8 percent on the year before. But ANZ economist Henry Russell said there had been a lot of supply of new builds in recent years, which was still filtering through.
Corelogic noted mid last year that townhouses accounted for 45 percent of all new dwelling consents across New Zealand in recent years, compared to just 6 percent back in 2012.
Of the 39,600 townhouses built across NZ between 2016 and mid-2024, nearly 25,000 have been in Auckland. Waitākere and Manukau had townhouse stock increase more than 50 percent since 2016.
"They also tend to be favoured more by first-home buyers given that they tend to be built on smaller sections and hence are relatively more affordable than standalone houses in that sense," Russell said.
Kelvin Davidson. Photo: SUPPLIED
"The sharp slowdown in net migration inflows and the skew of departures toward younger New Zealanders who potentially already own homes or would be considering purchasing one soon is likely having a larger impact on this part of the market than others.
"While migrant arrivals are still fairly elevated, though well down on previous peaks, these new arrivals are unlikely to be in the market to buy homes given the foreign buyer ban. As a result, the supply-demand imbalance in this segment of the market is likely wider than in other segments, meaning it will take longer for this segment of the market to pick back up."
He said there were signs of the broader housing market picking up, particularly for owner-occupier activity.
"They tend to require churn in the market as they are relocating from an existing home and likely need to sell their current home to move somewhere else. The large amount of stock currently sitting on the market has inhibited this over recent years. We expect a more meaningful upswing in house prices to be a story for later into 2025, given the current backlog of stock on the market."
Goodall said things were likely to be tough for developers for a bit longer because many buyers were still nervous about committing to a new build.
"Importantly, new builds are exempt from lending regulations, so as the debt-to-income limits start to take effect and loan-to-value restrictions continue to play a role, some borrowers may look to new builds as a more attractive option to buy property."
Mike Jones, chief economist at BNZ, agreed there were encouraging signs, such as interest rates falling and the drop in consents stabilising. Confidence within the industry had picked up.
"But I can't help but think residential construction might be one of the sectors to lag the more general turning in economic activity that seems to be underway.
"The cost to build remains another headwind, particularly when you compare it to the cost of buying an existing house. On our estimates, we're yet to see any material closing of the currently wide gap between the elevated cost to build a new home and the median existing home value of about $800,000.
"Nailing down the timing of turning points is always tough but, pulling all of the threads together, my best guess is that we're looking at the second half of this year before we start to see things pick up."
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