Property types most likely to hold their value this year

Some regions will continue to see strong growth, while others are expected to fall. What homes will hold their value?

16 February 2022

If you’re preparing your home to sell this year and you’re wondering how realistic you should be on price, it may depend on what kind of property you have, says real estate experts.

For those of you selling family homes that tick all the boxes, buyers will still be prepared to spend big, says seasoned agent, UP Real Estate’s Jennifer Temm-Munns.

Jennifer is marketing a home in Pt Chevalier across from Walker Park. With four bedrooms, two bathrooms, and a pool, it’s exactly the kind of property people are looking to upsize to, she says.

48 Walker Road, Point Chevalier, Auckland City.

Having said that, the Pt Chevalier market will typically have 30 homes on the market in the price range and currently has 53 homes, so buyers certainly have more choice.

Very nice character homes on subdivided sections are extremely popular with well-heeled first home buyers, adds the UP agent. Most of these will start at around $1.5 million if you’re lucky, she says.

What’s not of much interest at the moment is a tired, three-bedroom, one-bathroom home on a full section. This kind of home was selling quite well last year but people are approaching these types of homes with more caution, she says. Developers aren’t as actively snapping up these homes even if they’re subdivisible because they have quite a bit on already.

If yours is a dated townhouse, there won’t be as much interest, either, she says. “It’s not what the young ones want,” she explains.

If you’ve got a brick and tile unit to sell, on the other hand, these remain popular, adds the Auckland agent. People like the fact there’s no body corp to pay, these properties usually come with parking, and they work well as a first home which people can later turn into an investment property, as they’re easy to find tenants for.

Properties appealing to broad range of buyers will do best

Nick Goodall, head of research at CoreLogic, says homes that will appeal to the broadest range of buyers will do best in the 2022 changing market.

When the market is going well, anything will sell, he says. When credit is less available people can’t afford the prices of last year.

It’s hard to see the appeal of family homes reducing any time soon, says Nick. Homes with some future development potential will appeal to a wide range of buyers whether they’re planning on developing themselves or selling with the development potential for the future.

“There’s only upside, you either do it yourself or someone sees the potential,” says Nick.

For other homes which don’t tick as many boxes, the head of research says people are becoming more discerning. Do I want to pay $2.5 million for a place that needs the kitchen updating, people are asking.

Your ability to sell at a good price will always depend on the number of properties up for sale in your market, he cautions. Lower Hutt and Palmerston North property markets, for instance, have twice as many properties as a year ago, he says.

81 Ranfurly Road, Epsom, Auckland City.

Luxury homes will do okay

Meanwhile, for those selling luxury homes, the news could be good.

“I think property prices at the top of the market are going to hold their value very well,” says Ed McKnight, resident economist at Opes Partners which helps property investors with their strategies. This seems to be an extraordinarily tight market with not a lot of supply, he comments.

There’s strong buyer demand from some people whose businesses have done very well out of Covid and not a lot of homes are being built in their high-end price bracket, explains Ed.

“In well-to-do areas like Remuera and Herne Bay, we’re seeing house prices increase at the top end. Regulations on debt-to-income ratios and other constraints won’t bite as much if you’re trading up from an $8 million home to a $12 million home,” he explains.

In the middle market, meanwhile, stand-alone homes will be at the top in holding their values, then townhouses will follow quite closely behind, Ed says. Apartments will be a distant third, he predicts.

Townhouses should have two or more bedrooms, and an outdoor area is very important. It’s also better if the home can have a carpark outside the door. Some new developments are putting parking in one part and houses in another area.

397 Cowan Bay Road, Warkworth, Rodney.

Regions where prices will rise and fall

There are parts of the country that will see some price growth adjustment after a few years of substantial price increases. These will be areas like Manawatū-Wanganui, Wellington, and South Waikato predicts the Opes Partners economist. Some markets like Wellington have seen values more than double, he says. Wellington house values have increased by 2.3 times in the last six years, he notes.

Other areas, like Christchurch, Taranaki, wider Canterbury, and Nelson and Marlborough, are likely to continue to see prices grow, he says.

What valuers say

Waikato-based valuer, Telfer Young’s Glenda Whitehead, likes to talk about segmentation and rationalisation when looking at values in the country’s markets at the moment.

“The whole market was at runaway speed there and there will be a shakedown,” she says.

Glenda, who’s seen a lot of new homes built in the Waikato market, believes new-build homes that are completed and ready to move in, will be commanding a premium this year. “You don’t have the risk of a land and build property,” she says. There's no worry that the property won’t be finished. For those willing to take the risk there seems to be plenty of land and build in the Waikato.

“I think the market could segment. You could see part of it turing over and other parts not,” she says.

Stand alone house and land packages will continue to be highly sought after.

In Auckland, there’s likely to be an oversupply of smaller, more affordable housing products before long, predicts Gordon Edginton, director of Auckland property valuers, Prendos.

These will be terraced houses, units and apartments geared toward first home buyers who will find it much harder to get finance than other buyers in the market.

“As the first home buyers dry up, the vendors/developers will need to get more competitive to achieve a sale,” he says.

Prices are unlikely to drop much, if at all, for (completed) new-builds because the cost of building keeps rising, adds Gordon.

“There are material shortages, labour shortages, no tradespeople, and so on, so the rising build costs will help to underpin prices,” he says.

Anything with a bit of land should do better, says the valuer. Though upcoming changes to planning rules will unlock a huge swathe of property offering development potential, he believes.

“Over time, these planning rule changes could eventually mean there’s development land everywhere so it will have an impact one day on reducing land values. But I see that as a long game,” says the Prendos director.

Apartments have fallen out of favour a bit as a development option due to higher build costs and a reduced market appetite for the end product, says Gordon. Buyers prefer terraced units or stand-alone homes.

At the other end of the spectrum, lifestyle properties have been doing well, adds the valuer. “I can see that continuing as there’s more working from home, less commuting and owners want some space and a good environment around them. They’re a popular choice and likely will continue to be,” he says.
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