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Speaker 1: Yoda. I'm Chelsea Daniels and this is the Front Page,

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Speaker 1: a daily podcast presented by The New Zealand Herald. For

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Speaker 1: better or worse, house prices have been a cornerstone of

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Speaker 1: our economy for decades, but a rise in prices now

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Speaker 1: put home ownership out of reach for many kiwis. This

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Speaker 1: could be changing though. Wellington City is a new rateable

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Speaker 1: valuations show that on average, house values have plummeted twenty

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Speaker 1: four point four percent since twenty twenty one. It comes

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Speaker 1: as the city, which once made headlines for its hotly

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Speaker 1: contested rental market, is now seeing landlords fighting to fill

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Speaker 1: their homes. So is this a nationwide phenomenon? And it

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Speaker 1: is the dream of owning your own home becoming more

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Speaker 1: of a reality Today on the Front Page, co host

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Speaker 1: of Opus Partners, the Property Academy podcast and Mcknightter's with

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Speaker 1: us to run through the latest in property add a

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Speaker 1: twenty four point four percent decrease is a big drop

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Speaker 1: in any market. Why have the property valuations fallen so

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Speaker 1: much in Wellington?

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Speaker 2: Well the main reason is they were last set when

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Speaker 2: property prices were really, really high. So Wellington City last

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Speaker 2: updated their CVS around about mid twenty twenty one, and

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Speaker 2: since their property values have really really fallen. In fact,

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Speaker 2: from their peak to their trough, Wellington City house prices

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Speaker 2: dropped closer to twenty seven percent.

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Speaker 1: How big of a difference is there between property and

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Speaker 1: market valuations? Are different things considered?

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Speaker 2: Yeah, So the way these cvs are set is a

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Speaker 2: lot of councils, and there are sixty seven different councils

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Speaker 2: around the country who set these cvs. They usually hit

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Speaker 2: up a company like qv which is a government owned company,

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Speaker 2: and they run a couple of algorithms very similar to

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Speaker 2: a Hobes dot co dot ed Z or a one

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Speaker 2: roof and they just spit out a whole heap of

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Speaker 2: property values. Now, the way they figure that out, well,

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Speaker 2: the way that algorithm runs is they look at what

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Speaker 2: properties are selling for right now, and that gives a

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Speaker 2: sense of okay, well what might your house actually be worth.

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Speaker 1: Have we seen this drop happen nationally? I remember when

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Speaker 1: we last spoke, you mentioned a big eighteen percent drop

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Speaker 1: right after COVID. But where does that set long term?

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Speaker 2: Yeah, so if we think about the country, it's eighteen

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Speaker 2: percent down from the absolute peak to the absolute trough. Now,

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Speaker 2: if we think about Wellington. Wellington got hit so hard,

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Speaker 2: and I'll tell you the reason why. It's because right

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Speaker 2: up into that peak in twenty twenty one, Wellington went

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Speaker 2: through two booms. So it actually started back in twenty sixteen.

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Speaker 2: Now that was the good old days if you were

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Speaker 2: buying a property in Wellington City because house prices had

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Speaker 2: been flat for like nine years. But what happened in

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Speaker 2: twenty and sixteen as Wellington property prices started taking off,

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Speaker 2: and they took off in most of regional New zeal

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Speaker 2: Then in twenty twenty, what happened where had the COVID

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Speaker 2: lockdown's interest rates came down? Wellington basically got a second boom,

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Speaker 2: and property prices just went up and up and up

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Speaker 2: and up.

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Speaker 3: And that is the.

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Speaker 2: Reason why from peak to trough, Wellington City prices they

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Speaker 2: dropped twenty seven percent, which is more than that eighteen

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Speaker 2: percent average around the country. Lower Hut they had it

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Speaker 2: even harder. They dropped thirty percent, and Upper Hut dropped

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Speaker 2: about twenty nine percent.

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Speaker 3: So Wellington region as a whole they.

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Speaker 2: Have really borne the brunt of this property value decrease.

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Speaker 2: And it's mainly because of what happened in the years

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Speaker 2: leading up to it. From twenty sixteen to twenty twenty one,

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Speaker 2: we had that double boom.

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Speaker 1: What's Auckland done differently to Wellington to keep valuations pretty consistent?

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Speaker 3: Well, two things happening there.

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Speaker 2: First of all, Auckland house prices didn't go up by

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Speaker 2: quite as much of the preceding years, so little property

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Speaker 2: history lesson. From twenty twelve to twenty sixteen, Auckland house

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Speaker 2: prices boomed. They were really recovered after the GFC, and

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Speaker 2: then the Reserve Bank came out and introduced the LVR

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Speaker 2: restrictions and that slowed down the housing market in Auckland

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Speaker 2: because the Reserve Bank actually had tougher rules for Auckland

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Speaker 2: compared to the rest of the country. Then we saw

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Speaker 2: house prices slowed down and flatlined for four years. So

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Speaker 2: during the COVID boom, Auckland didn't have that same double

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Speaker 2: boom that we saw. But the other thing you've got

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Speaker 2: to remember is Auckland house prices still have been hit

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Speaker 2: really really hard. From pitt to Trough, property values fell

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Speaker 2: just under twenty four percent, but you might not see

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Speaker 2: the cvs are just quite as much where those new

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Speaker 2: values come out, just simply because it's all about, well,

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Speaker 2: when did the council last rerun those cvs. So if

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Speaker 2: you are in Wellington City, an area where the council

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Speaker 2: last set those cvs, where property prices were really high,

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Speaker 2: well you really notice it now because property prices are

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Speaker 2: full of lot. If you're at a different area, Totoga

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Speaker 2: comes to my BELI believe that they last set their

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Speaker 2: CVS with property prices words is close.

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Speaker 3: To the peak and so you don't observe that same drop.

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Speaker 1: And the latest Auckland property valuations were done in October

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Speaker 1: twenty twenty four, but have now been delayed into at

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Speaker 1: least May this year. Why do you think this might be?

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Speaker 1: Is something to be worried about.

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Speaker 2: I wouldn't necessarily be worried about it, and I often

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Speaker 2: encourage people to not worry too much about the CV

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Speaker 2: because you've got to really understand what is this all about.

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Speaker 2: Your CV doesn't really tell you what your house is

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Speaker 2: going to sell for today. Because even if we think

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Speaker 2: about these Wellington CVS that have only just come out,

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Speaker 2: they were done in September twenty twenty four, they're five

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Speaker 2: months old, and the property market moves month to months.

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Speaker 2: So just because some algorithm five months ago said your

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Speaker 2: house was worth X, it doesn't mean it's actually going

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Speaker 2: to sell for that today. And even if you think

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Speaker 2: about some of these algorithms, they're not that accurate. So

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Speaker 2: if we think about stuff like homestock code on endz,

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Speaker 2: where you go online you see the homes estimate, even

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Speaker 2: though that is updated every single month. In fact, I

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Speaker 2: believe sometimes maybe even fortnightly, only about just over fifty

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Speaker 2: percent of properties will sell within ten percent of whatever

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Speaker 2: price that's show.

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Speaker 3: Now let's put that into context.

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Speaker 2: Let's say that your logo that says your property is

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Speaker 2: worth a million bucks, Well, you've only got just over

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Speaker 2: a fifty percent chance, just over a coin flip chance

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Speaker 2: of your properties selling for somewhere between nine hundred k

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Speaker 2: and one point one million dollars. And then you go, ah,

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Speaker 2: that's not that high a chance. It's actually not that accurate.

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Speaker 2: So the CV doesn't really impact what your house is

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Speaker 2: going to sell for, even though some people will try

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Speaker 2: to use it as a bit of a negotiation tactic.

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Speaker 2: Real estate agents offered here this idea, Well, I don't

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Speaker 2: want to pay above CV, but where it does affect

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Speaker 2: you is just the proportion of the rates bill that

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Speaker 2: you actually pay. So what some people think, especially when

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Speaker 2: cvs are going up as oh well, the council just

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Speaker 2: wants to put up a CV so that they can

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Speaker 2: collect even more rates and sped more money.

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Speaker 3: That's it's not actually how it works.

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Speaker 2: Because everybody at Wellington City you're seeing your CV go

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Speaker 2: down by twenty four to twenty five percent. Your rates

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Speaker 2: bills not going down by twenty five percent. It's probably

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Speaker 2: going up by ten to fifteen percent something like that.

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Speaker 2: All the cvs are used for is to divide up

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Speaker 2: the share or to determine how much of the total

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Speaker 2: rates are you paying.

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Speaker 3: And the council basically.

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Speaker 2: Says, if your house is worth a million bucks, well

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Speaker 2: you're probably a bit richer, so you're going to pay

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Speaker 2: more rates. If your house is worth half a million bucks,

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Speaker 2: well you don't have as much money as this other guy,

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Speaker 2: and so you're not going to pay quite as much rates.

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Speaker 2: That's what cvs are really used for. And I do

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Speaker 2: think that here a hell it do we read a

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Speaker 2: little bit too much into them.

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Speaker 4: For years we've said that there's not enough housing and

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Speaker 4: so there's been a lot of pressure on that in

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Speaker 4: the last government.

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Speaker 3: Rather than kind of fix the supply issue. They focused

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Speaker 3: on the demand. So they did.

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Speaker 4: They introduced policies that were kind of anti lenl right there,

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Speaker 4: interested up to bill their roles. They made it tougher

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Speaker 4: to be a landlord, healthy homes, and trying to sort

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Speaker 4: of soften that demand from the investor side so that

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Speaker 4: it kind of took some of the heat out of

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Speaker 4: the market. Now this government's going on a different approach.

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Speaker 4: They're saying, well, actually, the way we fix it is supply.

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Speaker 1: One of the big issues in this country for decades

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Speaker 1: has been housing supply, or lack thereof. Take your pick

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Speaker 1: of any random Auckland street and you'll come across about

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Speaker 1: ten townhouses where there used to be just two. How

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Speaker 1: much has that supply increased and how is that impacting

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Speaker 1: house prices?

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Speaker 3: Well, it's increased quite a lot.

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Speaker 2: We had a massive building boom during the COVID years,

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Speaker 2: and I like to think of it in terms of

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Speaker 2: new buildings per person of this country because our population's

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Speaker 2: going up. So the long term average is about every

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Speaker 2: year we built six houses for every one thousand people.

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Speaker 3: That's the average.

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Speaker 2: And during that big COVID boom, we got up to

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Speaker 2: ten houses per thousand people here in New Zealand, and

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Speaker 2: so you're like, okay, that's actually quite a large increase.

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Speaker 2: We were building two thirds more houses than normal during

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Speaker 2: that period. And the other reason there's a lot of

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Speaker 2: supply at the moment is if we look at those

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Speaker 2: dwelling consents and we match it up with sales, how

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Speaker 2: many properties are real estate agents actually selling. The number

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Speaker 2: of properties sold in New Zealand peaked in June twenty

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Speaker 2: twenty one.

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Speaker 3: Now, at that point.

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Speaker 2: As real estate agents stopped selling quite as many properties,

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Speaker 2: what did developers do. Did they think, oh, wow, there's

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Speaker 2: not as many properties being sold, I better not build

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Speaker 2: as many properties. No, they kept on buying land and

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Speaker 2: consenting properties and applying to build even more townhouses.

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Speaker 3: And it happened for about a year.

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Speaker 2: We still saw developers going like the clappers, having all

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Speaker 2: of this confidence, even as the market started to drop away.

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Speaker 2: Now two three years later, that's the reason why you

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Speaker 2: might see a lot of townhouses going up, and they

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Speaker 2: might might not all be full, they might not all

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Speaker 2: be sold right now. It's because developers two years ago

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Speaker 2: was still building even though the market was weakening.

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Speaker 1: So given that these new builds are not slowing down

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Speaker 1: at all, at least not in Auckland. Could we get

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Speaker 1: to a point where we actually have more supply than

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Speaker 1: prospective buyers.

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Speaker 2: So what I think we'll see is this period where

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Speaker 2: there's quite a lot of supply is going to be temporary.

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Speaker 2: Because it takes time to build a house somewhere between

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Speaker 2: twelve months and twenty four months, depending on the development

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Speaker 2: for apartments, it's going to be much longer than that.

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Speaker 2: And what we are still dealing with is the hangover

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Speaker 2: of all of that consenting that was happening in twenty

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Speaker 2: twenty two through to maybe early twenty twenty three. Right

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Speaker 2: now we are actually just back at that long term

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Speaker 2: average and have been for the last couple of months

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Speaker 2: of six new dwellings consented per thousand kiwis. And so

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Speaker 2: I'm pretty confident that if we move two years into

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Speaker 2: the future, you won't have that same supply of new

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Speaker 2: builds that are on the market and developers are really

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Speaker 2: struggling to sell. One of the other issues you have

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Speaker 2: at the moment, and why there is a little bit

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Speaker 2: of supply is some developers are not able to meet

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Speaker 2: the market. And what I mean by that is they

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Speaker 2: bought land when it was really expensive, they took out

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Speaker 2: loans and now they've built those houses, but they can't

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Speaker 2: sell them for what would be a fair market price.

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Speaker 2: And that's because they would take too much of a hit.

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Speaker 2: And so you've got some developers who are holding on

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Speaker 2: to completed stock and they are not willing and not

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Speaker 2: able to lower the price to a point where it

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Speaker 2: would actually clear the market.

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Speaker 1: On the other side of the coin, obviously, is renters.

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Speaker 1: Going back to Wellington, I remember when UNI students and

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Speaker 1: public servants were fighting each other to get into some moldy,

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Speaker 1: leaky garden shed just to have a roof over their heads.

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Speaker 1: Ports in the last month of seeing landlords offering grocery

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Speaker 1: and patrol vouchers to try and get people to move in,

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Speaker 1: what's changed there.

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Speaker 2: Oh, there's been a huge change to the rental market,

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Speaker 2: just massive. So if I take it back to twenty

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Speaker 2: twenty three, if you looked at the surveys of landlords,

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Speaker 2: way more landlords would say actually, it's really easy to

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Speaker 2: get a tenant, compared to those who say, actually, I'm

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Speaker 2: finding it a bit tough at the moment. At the moment,

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Speaker 2: a net twenty percent of landlords are saying actually it

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Speaker 2: is really tough to find a tenant, so way more

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Speaker 2: landlords are saying it's hard compared to those who are

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Speaker 2: saying it's easy, and we are seeing that turn into

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Speaker 2: either flat rents in most of the countries, so christ Church,

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Speaker 2: Auckland pretty flat at the moment. We're actually seen in

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Speaker 2: some parts like Wellington, rents just slightly decreasing.

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Speaker 3: At the moment.

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Speaker 2: There'll be some landlords who are increasing rents still some

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Speaker 2: who are decreasing it, but the average is falling.

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Speaker 3: Awey bit. This is really coming down to a couple

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Speaker 3: of things.

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Speaker 2: First of all, that supply question, where we saw way

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Speaker 2: more properties being built and so that supply is coming

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Speaker 2: onto the market. I think the other thing as well

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Speaker 2: is all of these keywis moving over to Australia. Seeing

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Speaker 2: so many keywis move over, that means they're leaving properties

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Speaker 2: that perhaps they've rented, and we are still seeing more

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Speaker 2: people arrive in New Zealand compared to those who leave.

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Speaker 2: Our net migration is positive in other words, but those

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Speaker 2: people coming in maybe they don't rent straight away, maybe

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Speaker 2: they stay with friends, so we're not seeing that have

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Speaker 2: that same impact on the rental market. It's not that

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Speaker 2: rents are massively declining, but it's that they are flatlining

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Speaker 2: compared to the average increases usually kind of four to

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Speaker 2: five percent, and so that is a sign that the

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Speaker 2: rental market is very soft.

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Speaker 1: Right, So are we seeing favorable renter conditions like this

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Speaker 1: around the country.

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Speaker 2: Across most of the country. Yes, But this is a

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Speaker 2: good point just because things are going poorly if you're

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Speaker 2: thinking about from a landlord's perspective at Wellington or Aukland,

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Speaker 2: or just because conditions are very very favorable for renters

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Speaker 2: in Auckland or Wellington. That's only part of the country.

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Speaker 2: So if I take you down to Southland, we are

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Speaker 2: seeing really strong rental signals down there. At the moment,

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Speaker 2: rents are going up by above that long term average.

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Speaker 2: In parts of Otago you were seeing that as well,

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Speaker 2: and so at the bottom of the South Island you're

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Speaker 2: seeing quite a strong rental market for most of the

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Speaker 2: rest of the country. If I look at trade means data,

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Speaker 2: what we see is that the number of searchers, the

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Speaker 2: number of people logging on and try to fight a

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Speaker 2: rental property, it's kind of plus or minus two percent

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Speaker 2: year on. Yes, some regions are a little bit up,

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Speaker 2: some are a little bit down. It's basically flat. The

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Speaker 2: supply of rental listings though the number of properties on

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Speaker 2: trade me on one roof on realestate dot co dot NZ,

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Speaker 2: those are up sometimes twenty five even thirty five percent,

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Speaker 2: depending on the month.

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Speaker 3: You're looking at different story.

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Speaker 2: Down in Southland we're actually seeing yep, rental listings might

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Speaker 2: be up by five percent, but rental demand those searchers

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Speaker 2: are up like ten percent. So it's that demand supply

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Speaker 2: story that means that Southland strong, but the main centers

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Speaker 2: are pretty weak at the moment.

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Speaker 5: The thing that jumps out when you have a good

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Speaker 5: look at cropper market in New Zealand is that there

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Speaker 5: is no such thing. Yes, the property market in New Zealand,

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Speaker 5: it's been quite expert. We don't explicitly forecast different regions,

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Speaker 5: but when I look at some of the drivers, I

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Speaker 5: think you can see at the moment signs that the

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Speaker 5: housing market, in particular in the South Island is tighter

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Speaker 5: than it is in other parts.

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Speaker 1: Of the country.

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Speaker 5: So if you look at canabury Otago houses selling will

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Speaker 5: rapidly that are tighter in terms of demand versus supply

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Speaker 5: and sales to listing ratios and things like that. So

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Speaker 5: my senses that we will see those markets perhaps perform

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Speaker 5: a little bit more strongly than the average.

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Speaker 1: Core Logic reckons property sales volumes will rise from about

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Speaker 1: eighty K to ninety K this year, citing lower mortgage rates.

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Speaker 1: Of course are the anticipation of a growing economy as well,

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Speaker 1: but they do mention further job losses on the horizon

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Speaker 1: might dampen the market a bit. Despite that, though they

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Speaker 1: say no doubt it will be a busier buying year.

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Speaker 1: Do you agree, Yeah.

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Speaker 3: We're seeing that in the data.

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Speaker 2: It depends what Every time you quote property data, there

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Speaker 2: are kind of three or four companies that put out numbers,

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Speaker 2: so I'll say numbers that are slightly different. When I

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Speaker 2: look at sales reported by real estate agents. There's definitely

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Speaker 2: been a rebound. We bottomed out at about fifty eight

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Speaker 2: thousand sales a year. That happened kind of early twenty

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Speaker 2: twenty three. That is way down from the peak. Like

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Speaker 2: the peak was like one hundred thousand properties sold in

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Speaker 2: a year, a lot of houses sold. Our long term

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Speaker 2: average is about eighty thousand. At the moment, we're sitting

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Speaker 2: just above seventy thousand, so we are below average. We've

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Speaker 2: curtedly recovered from the bottom, which was in twenty twenty three.

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Speaker 2: We are seeing more property transactions that probably will start

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Speaker 2: to go up towards that long term average of eighty thousand.

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Speaker 2: You know, maybe we'll get up to ninety thousand. I

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Speaker 2: probably don't think will happen there that this year. But

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Speaker 2: what's really fascinating as we are seeing those property volumes,

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Speaker 2: those property sales recover and recover quite strongly. It's up

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Speaker 2: thirteen percent year on year, but we are not seeing

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Speaker 2: that translate into higher prices for most of the country.

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Speaker 2: Now that's really good if you're a buyer because there's

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Speaker 2: a lot of stock out there on the market, so

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Speaker 2: there's a lot of listings online, makes it much more

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Speaker 2: likely that you're able to find that property that you

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Speaker 2: like and you're able to stag it at a price

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Speaker 2: that is pretty close to the bottom of the market.

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Speaker 2: So it's a great time to buy a property. In fact,

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Speaker 2: I wrote a piece late last year for One roof

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Speaker 2: talking about the reasons I was buying a property to

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Speaker 2: live in at that specific time because there are a

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Speaker 2: lot of good buying signals at the moment but what's

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Speaker 2: fascinating is as we are seeing those sales recover, we're

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Speaker 2: not seeing prices move just yet. And I think first

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Speaker 2: home buyers especially have a real opportunity.

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Speaker 1: Right, So, overall, ed, what would your predictions be on

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Speaker 1: house prices, rents, housing supply, all that jazz for twenty

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Speaker 1: twenty five.

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Speaker 3: So at the rest of gee the ball wrong.

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Speaker 2: I'm going to give you numbers anyway, because that's what

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Speaker 2: most people want to know. I think that we will

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Speaker 2: see moderate house price growth. Now, what does that mean?

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Speaker 2: Kind of five percent? Six percent is what most economists,

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Speaker 2: most banks are kind of thinking.

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Speaker 3: That's where most of our heads are at.

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Speaker 2: In terms of housing supply, In terms of new dwellings consented,

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Speaker 2: I expect it will be a bit flat. If not,

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Speaker 2: i'd expect it to actually drop down just slightly, because

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Speaker 2: I know that developers are still struggling from a couple

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Speaker 2: of years ago. There are also a couple of new

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Speaker 2: rules out in Auckland, which of course is over a

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Speaker 2: third of our population. There are new rules that are

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Speaker 2: making it much more difficult to develop water care who

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Speaker 2: manages all of the water pipes. They've got new rules

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Speaker 2: where they're saying, well, if you build in this area

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Speaker 2: or that area, Yeah, you might have resource consent, but

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Speaker 2: we're actually not going to let you connect to the

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Speaker 2: toilets to our pipes until you do a few things.

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Speaker 2: So it's becoming more expensive for developers. That's going to

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Speaker 2: scare some of them off in our largest city. So

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Speaker 2: I would expect new dwellings to either kind of stay

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Speaker 2: flat go down a bit in terms of total listings

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Speaker 2: on the market. There is a backlog of properties that

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Speaker 2: need to be I think they will start to drop down,

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Speaker 2: but I don't think there's going to be huge pressure

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Speaker 2: for buyers in terms of lots and lots and lots

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Speaker 2: and lots of competition because we've got a backlog to

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Speaker 2: work through. Just to put that into context, if a

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Speaker 2: single property was not listed on any of those online platforms,

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Speaker 2: trade me one roof for the next half a year,

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Speaker 2: it would still take that half a year to clear

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Speaker 2: and sell all of those properties that are currently listed online,

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Speaker 2: because that's how many there are. There's about twenty four

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Speaker 2: weeks worth of inventory or inventory depending.

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Speaker 3: On how you say it, available online.

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Speaker 2: That compares to a ten year average of about eighteen weeks.

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Speaker 3: Thanks for joining us, ED No trouble, happy to be

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Speaker 3: back any time.

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Speaker 6: That's it for this episode of the Front Page. You

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Speaker 6: can read more about today's stories and extensive news coverage

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Speaker 6: at enzadherld dot co dot MZ. The Front Page is

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Speaker 6: produced by Ethan Sells and Richard Martin, who is also

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Speaker 6: our sound engineer.

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Speaker 1: I'm Chelsea Daniels. Subscribe to the Front Page on iHeartRadio

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