Mood of the Boardroom: 'Less spectacular' forecast for housing market

By Anne Gibson

The post-lockdown Auckland real estate boom won't be as strong this year as it was last year, according to a real estate boss.

Peter Thompson, Barfoot & Thompson managing director, said sales were able to continue due to technological developments implemented last year so the downturn wouldn't be as sharp as when Auckland went to level 4 last year.

"I don't think we're going to have the same boom when we come out of level 4 as we had 18 months ago because this time, people who had viewed property before lockdown were still able to negotiate through virtual means to buy," he says.

The agency had been able to develop new IT systems such as online auctions and virtual appraisals and virtual viewings to continue operating during this lockdown.

But the lockdown has continued to cause concern among vendors, purchasers, landlords and tenants — "particularly those in the process of settling their existing purchase or moving into their dream homes".

Interest rates looked likely to increase early next year rather than this year, he said, so that would delay the impact of those on the market.

The bright-line test, or capital gains tax on investment property, being extended from five to 10 years, does not, Thompson says have a huge effect on landlords. "Tax legislation won't affect investors. They buy when they have free cash, whether they put it into housing, keep it on term investments at the bank or invest it in the share market. Tax isn't the major concern to investors. It would be more interest rate rises."

The family-owned agency has 76 branches and around 1800 salespeople but a total team of more than 2600 people. Revenue was static due to higher costs running the business, he said.

Although sales growth had risen, so had compliance costs like anti-money laundry regimes.

"Sales numbers are well up on 12 months ago and we've had two really big years but revenue is not growing at the same rate".

On commercial landlords being asked to provide rent relief, he sees a different picture during this lockdown compared to last.

The Government was giving additional subsidies to assist tenants, though hairdressers and hospitality industry as examples who were unable to trade would need some assistance in the form of rent relief.

But industries like accountants, lawyers and real estate agents, as examples, were able to continue working and still earning an income would not need the rent relief in the same way as perhaps retailers, he said. It would have to be assessed on a case-by-case basis.

Investors who owned those commercial or retail properties often had mortgages and needed to continue paying, "so it's all very well saying landlords needed to help, but some are not in the same position".

Barfoot & Thomspon have made many new technology system developments since last lockdown "but ideally, we need more notice of going into lockdown" so we can implement these new systems more efficiently.

Technology would not replace face-to-face meetings but other means of linking up had to be developed to be more successful. Google Meetings were particularly successful for the agency, he said.
Such IT developments meant the firm did not suffer as much under this highest alert level compared to last year, Thompson said.

"Sales and prices stood up extremely well during the first two weeks of the lockdown, and a major reason for this is the systems and procedures the industry and other professions such as banking and legal have put in place to enable trading to carry on during lockdowns," Thompson said.

"This enabled vendors and buyers to progress negotiations and contractual proceedings around properties that had been viewed prior to the lockdown commencing."

Thompson said 1020 sales in August were "excellent for a winter month. If you exclude last year, when the market was still recovering from last year's two-month lockdown, sales were more than 20 per cent higher than we normally achieve in August".

He is worried about the lack of skilled workers in sectors other than real estate, particularly IT, nurses, teachers, construction, tradespeople and fruit pickers.

He is also worried about the lack of managed isolation and quarantine facilities and wants more flexibility allowed for home isolation for business leaders and open that up so it's not just sports teams or those involved in the arts who are given special priority.

Peter Thompson's top three issues

• Lack of skilled workers in sectors other than real estate, particularly IT, nurses, teachers, construction and tradespeople and fruit pickers who need to come into New Zealand.

• Lack of managed isolation and quarantine facilities (MIQ) — more flexibility allowed for home isolation for business leaders and opening up MIQ so it's not just sports teams or those involved in the arts who are given special priority.

• Government legislation biting into the profits of small and medium size businesses. It could help if the corporate tax rate was reduced based on the size of company profits.

What is inkl?

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