Posted by President John Matthews
We have all noticed the proliferation of newly built or building town houses all over Lower Hutt, and wondered who was buying them.  John gave us the answer: no-one! Too many of them are being built too close together and are too small.  No owner wants them built next door, cutting out their sun, and almost no one wants to buy them as they are too small, lack garages and gardens and often have too little sun themselves.  Furthermore they often lack parking and being two or three storeys, are unsuitable for the retirement market.  Many developers, having built or in the process of still building them are letting them, or turning them into BnBs and one Christchurch based developer which built many and once employed twenty agents in the Wellington area now employs only one. 
Furthermore the Hutt City Council seemingly  determined to shoot itself in the foot is set to impose a $50000 fee for each new house a developer builds, and may insist they are built on a raised platform to be well above the water table.  On top of this high interest rates are making even these units expensive to finance and rising insurance costs compound the problem.  These two bedroom town houses which used to cost $850-900K off the plans are now selling for $625-650K in the Hutt, or $495K in Wainui.  A three bedroom house in Petone which used to cost $8K to insure is now costing $16K.  A quality house which cost $1.2 million four years ago would now sell for around $850K. Rising building costs make the situation worse: a standard new build costs $4500 per square metre, or $6500 for a quality build.
As a result the housing market is currently going off the boil.  There are over 100 houses currently on the market in the Hutt Valley in the $800k - $1.2 million range, thirty in Petone alone, and 42 in Eastbourne.  Investors are pulling out of the market because of high interest rates and the thought that a change of government could return the punitive inability of landlords to claim tax relief on the interest payments on mortgages. Now there is the prospect of redundancy making buyers wary of taking on a commitment and many younger people are moving to Australia.  Current market values are now significantly lower than the rateable values and there is little hope of capital gain.  FOMO (Fear of Missing Out) has disappeared.  Retirement villages are also suffering.  Prices of units were often set two or three years ago and are relatively high and so retirees who had planned to sell their home and move into a retirement village with the proceeds of the sale and have a little bit left over are finding their plans are unrealistic.  Many of the retirement villages are reluctant to lower their prices and so are now in effect offering loans which will eventually be repaid from the estate of the (deceased) purchaser.  This particularly affects retirement villages in expensive areas such as Wellington where a three bedroom retirement unit could now cost $1.6 million but $500k in Levin.
Not all is doom and gloom.  Agents' three friends of death, divorce and disability are, like taxes, always with us and good, well-presented houses in a good area with some but not too much land will sell, but prices are unlikely to ever return to the astronomical heights they reached three years ago.