Published on: 2017-08-16

Hamilton real estate market showing signs of “prudence and rationality”

Hamilton real estate market showing signs of “prudence and rationality”

Lodge Real Estate’s managing director Jeremy O’Rourke says there’s a prudence and sense of rationality in the Hamilton real estate market not seen for some time.

“This time last year we had what we would call an ‘irrational’ market,” O’Rourke says. “This year, there’s much more rationality in buying decisions, even in a market with low supply and strong demand in a growing city. People are not buying at any cost like they were last year.”

O’Rourke says several factors are combining to create a more prudent and slightly slower market in July, including Loan-to-Value restrictions keeping investors out of the market, “substitute” markets, and many people wanting to buy first before they sell. He suspects September’s general election could also be keeping people away.

There were fewer house sales in Hamilton in July 2017 with 244 houses sold, down from 260 in June and well down on the fevered days of July 2016. It’s taking slightly longer to sell at 39 days, but median prices are showing no signs of slowing down. The median house price in Hamilton in July 2017 is now at $529,000, up from $520,000 in June and up from $507,000 a year ago.

O’Rourke says while that median price continues to rise, there’s much more prudence in the Hamilton market at the moment. “People are prepared to pay for the right property but there’s now a reluctance to take on ridiculous debt – they won’t buy houses at any price like last year.

“We tend to get myopic about Hamilton but we forget that we are surrounded by substitute markets – lifestyle blocks and great towns within 20 minutes’ drive of Hamilton that offer great value. That’s a release valve for the Hamilton market and it can temper the prices we see here,” he says. “If you live around Ngaruawahia, it’s only eight minutes to The Base, and a lot of people work at the top end of town.”

He says many people are currently also wanting to secure properties first before selling and that’s impacting supply. The influx of people to Hamilton City continues, O’Rourke says; coming from migration and people moving from other cities. “I think Hamilton has been undervalued in the past but that’s changing dramatically as confidence continues to build in the city, with the likes of the turning of dirt at the Ruakura Inland Port. There’s lots of good things happening in Hamilton and that’s driving a lot of industry to us.”

He says there’s a band of people, often in their mid-30s to mid-40s who are returning to Hamilton after growing up here.

A few first-home buyers are getting into the market, but the LVRs continue to impact on investors, and that’s flowing into the rental market; Hamilton has had a dire shortage of rental properties for several months. O’Rourke is calling for a loosening of LVRs just for first-home buyers, to allow them to buy and live in their first home which would free up some rental housing.

O’Rourke says there’s many things adding up to the slightly quieter market in July. “These things we’re seeing, including that prudence and rationality, the substitute markets, people waiting on apartments to be built, they all have a cumulative effect. You tend to see lots of these little things adding up, then something always happens and they release themselves.”