Podcast: Real Insight: Here's How the Market Is Operating In the First Days of Level 2 | Ep. 248

Posted by Ed McKnight on 19/05/20
How the Market Is Operating In the First Days of Level 2 001
Listen to the Show

Listen to the Show

Show Notes

What's Covered in the Show?

In this episode, we discuss how the property market is operating now that the country has come out of lockdown. This stems from a recent article Andrew provided comment for in The Press and for Stuff.co.nz (read the article here).

We are seeing pent up demand coming onto the market, which likely stems from: a) the property market not being able to function during lockdown. 8 weeks worth of demand is now hitting the market in one week. b) potential property buyers have had time to research the market during the lockdown, which is providing renewed interest. TradeMe property, for instance, has reported a 38% increase in property searches from 18-29 year olds.

We also mention our upcoming property investment webinar, where Andrew will cover what he's learnt from owning 38 investment properties and how he manages to make sure that they are all performing for him. That is happening this coming Tuesday at 7pm. Click the link in this paragraph to register.


Transcript of the Podcast

Ed McKnight: Hello and welcome along to the Property Academy podcast. I'm your host, Ed McKnight, and I'm Andrew Nicol, and today on the show we're talking about, or actually we're doing a follow up from yesterday's episode where we talked about how did the property market operate under lockdown.

Of course, we just had that Real Estate Institute of New Zealand data release, just on Friday, about what actually happened within the property market during the lockdown.

Now we're going to talk about, well, how's the property market operating now that we're coming out of lockdown, and this is actually based off an article that was just released in yesterday's paper, at Stuff I think, and was it also in The Press Andrew?

Andrew Nicol: It's also in The Press, it's sitting on my desk here for my mother so that she can frame it.

Ed McKnight: And the reason that Andrew's mother might want to frame it is because I believe he, well, he has featured, I'm not sure whether the actual paper had a big photo of you, Andrew, but it's certainly on the Stuff website.

And Stuff is talking about, or The Press is talking about that there is a lot more activity happening specifically within the Christchurch market.

Of course, it's a Christchurch paper, so that's where they are focused on. But there is a lot more activity happening within the Christchurch property market, most likely because of the kind of pent up demand that's happened.

Of course, if you shut down the property market for a month, there's a lot of people who have spent a lot of time looking at properties over that time. If they're going to enter the market anyway, you know, they've got the time to be able to scroll through, Trade Me or Realestate.co.nz In order to be able to find properties, and we're starting to see that demand come onto the market all at one time.

It's like having seven weeks of demand hitting the market within one week. Now, Andrew, you were interviewed and quoted in this article. Why don't you give us a summary of what you were saying to the journalist saying what you're seeing out in the market at the moment.

Andrew Nicol: Sure. So actually I got called up on Monday originally about, from the guy from Stuff. And, he just wanted to know about how sales were going during lockdown. And this was through our normal real estate arm, so the normal real estate team selling to mum and dad home owners as opposed to investors.

So I spoke a little bit about that, about the precautions that you have to take in level three. And then I spoke a little bit about investment and they went away and thought about it and came back and said, actually, he's been hearing quite a lot from the likes of us and Harcourt, etc talking about how much investment inquiry is going on at the moment. And so anyway, we had a chat.

So in a normal month, we like to work with a roundabout 30 clients. That's, that's kind of our target, we're with 30 new clients a month, and, I had this conversation with him yesterday, which was the 15th, the Friday, and as of halfway through the month, we're already up to 32 clients for this month alone.

And we only just entered level two on Thursday. So it's been insanely busy. And, whilst we work with clients from all around the country, the clients that we work with, tend not to be limited to the area that they live in. So if you're living in Queenstown now, you're probably not investing in Queenstown right now.

So some of my Queenstown investors, and actually one of them reached out to me this week, contacted me and said, hey, look, my Christchurch property that I bought last year has done so well, I want them to buy another one.

So what we're seeing is that there is a massive amount of inquiry, for Canterbury particularly, but also investors overall, because right now you've got, we've had a bit of an uncertain time, but we have got so many factors of positive news when it comes to investing in the New Zealand property market.

You've got LVR restrictions being eased, which means that banks can lend more money to you, both for an owner occupier and for an investor, we've got insanely record low interest rates. So I use 3% on some of my budgets.

I got criticised yesterday for using too high interest rates at 3% , it is unheard of. I had an interview with a client only a couple of hours ago today, and it was going to be a greater cash flow, even factoring in for all potential costs, a greater case flow, than if he had that money sitting in the bank and he gets his capital growth as well.

I wandered around, it's Saturday here as we record this, I wandered around town before, and it's amazing to see everyone's out. There's a lot of positive activity.

My friends in real estate are all run off their feet. The mortgage brokers I deal with can't believe how busy they are. And even people like valuers are taking up to 10 days to do a valuation because there's so much inquiry for the rental market and particularly in Christchurch right now.

Ed McKnight: And I just want to talk about why we are saying that level of activity within the market. And that is because we have had some pent up demand from seven or eight weeks where the property market hasn't been active.

And then it's all hitting the market at the same time. I just read a stat that Trade Me properties are reporting a 38% rise, in terms of people browsing for properties on their site, specifically in the 18 to 29 year old bracket.

So 38% more young people, first home buyers are browsing sites, looking for properties because they've had the time to be able to do this, and now they've had the time to figure out their financial situation and are coming into the market. So I'd expect in some ways, it's a little bit of an aberration, you know, Covid 19 hasn't made us all suddenly want to get into the property market.

It's that there's pent up demand we've had, we saw massive decreases in volumes for all of April, and probably for the, for the start of May, when the data comes out on the 15th of June, we'll likely see that as well. But now it's coming back onto the market. And that's quite positive to know that that demand is still there.

So we are seeing people looking for properties. And the other thing that's really interesting is that, there's also been 130% rise in people looking for properties on Trade Me for the Queenstown lakes area. So a lot of people looking at that market, and that's probably a bit of a misleading metric because it doesn't necessarily mean that there are 130% more people looking to buy in the Queenstown lakes district area.

There might be people looking for real bargains. There might be people who live in Queenstown looking to see how the market's operating. It could be nosy people like me who just want to understand how the market is actually moving and what's on and available in the Queenstown Lakes district area.

And Tony Alexander, one of my favourite economists said that, well actually I think it's all property porn, that people actually just want to go and look at some really nice houses while they're thinking that there might be some bargains.

So we are seeing that. But again, I do want to say, in my view, you might have a different view, Andrew. I do think that a lot of it is this pent up demand effect that we haven't had an active property market for eight weeks. Now we're starting to get it. So it's all coming onto the market at the same time.

There may be an effect as well in terms of Kiwis who live overseas wanting to come home. And I acknowledge in that article, actually, Andrew, Rob McCormack from Harcourts has said that he's getting a huge number of inquiries from offshore, including Kiwis wanting to return home and he's actually put a little anecdote in there that he's recently sold two homes to two different overseas buyers who hadn't even seen the properties because they wanted to get into the market.

So there's kind of those two effects, the pent up demand effect, and then also some Kiwis wanting to come home. Bit early in order to be able to quantify that effect and see how long lasting it may be.

But it's definitely something that we're going to be keeping our eyes on as well. Is there anything else that you want to mention before we wrap up? Andrew.

Andrew Nicol: No, I think that's about it. I'll go back to the Warren buffet quote of be wary when people are greedy and greedy when people are wary. We're entering a time, where there's a little bit of uncertainty in the market and there's a little bit of, not to support Trump, fake news going on.

I think this is going to be a huge time of opportunity for investors that are brave enough to take action while everyone else is standing on the side line waiting for the market to drop. Because I read another article today that basically said, if you're waiting for the market to drop, you're kidding yourself. And I think that is 100% true.

Ed McKnight: And the last thing I'll just mention before we do wrap up is just when we first went into the lockdown, we did say that we thought we would see a period of three M's. We thought we'd see a period of mum so a really silent market. We've seen that. And the data now supports that.

Saying that during the lockdown period. There weren't a lot of properties sold. Volume across the country dropped by 79%. So we've had that silent period. We then said would probably see a period of momentum, I think we're still in that period and we will be in that period for maybe a couple of months before the market starts to go mental.

That was the third M. So mum, momentum and mental and we likely will start to see that coming back with a lot of activity in the property market.

The one thing that I just would say as well is we've got to also be wary of almost what I'd call like a false start. So of course the property market's getting a lot of activity at the moment because we have that pent up demand effect, obviously that effect's not necessarily going to last.

So perhaps the market will come back a bit before going back into that mental phase that we kind of mentioned, because all that demands coming onto the market now.

Now that's not going to necessarily last forever, but we will move back into that mental phase is my kind of view of things, but hey, let's wrap it up there.

Please don't forget to rate, review and subscribe to the podcast. It really does help us get the message out to more people and hey, if you want to learn more about property with Andrew and I, why not come to our webinar, which is happening this Tuesday at 7:00 PM it is our last weekly webinar.

We're going to be moving to a monthly cadence after this one, and Andrew is going to be talking about what he's learned from owning 38 investment properties and how he manages to keep a handle on them all to make sure they're actually working for him.

So I'm going to link to that in the show notes as well as this article that we've been mentioning. So tap or swipe over that cover art, it'll take you right there. Otherwise, just head along to our website, opespartners.co.nz, and you will be able to sign up there.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and we're going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand and property market.

Until next time.