Warmer weather typically heralds a considerable uptick in new listings and buyer activity, though, global economic conditions are wreaking havoc on market expectations this year.

Rapidly rising interest rates, uncertain consumer sentiment, soaring inflation and enduring affordability issues may suppress the usual post-winter rebound and influence the residential property market’s momentum for the remainder of the year.

However, one market segment that appears to have primarily danced to its own beat is the luxury homes sector, which continues to report value growth and a steady volume of completed transactions.

**WATERFRONT DEMAND **

Bayleys salespeople operating in high-value markets across the country say a reduction in bank lending appetites and this year’s stricter credit conditions have not had the same effect on their clients as buyers operating in the lower and middle ends of the residential market.

“Seasoned property owners are using luxury real estate as a hedge against inflation, and we are seeing transaction data show that high-net-worth buyers are looking beyond down cycles for value,” says Johnny Sinclair, Bayleys national director of residential.

“Properties across the country have experienced huge value appreciation over the last five years, which continues to pale compared to more recent downward movement. This growth ratio encourages astute market participants to invest in blue chip luxury markets, including New Zealand’s high proportion of coastal property.

Sinclair says that while New Zealand has a lot of coastal land, there remain so few trophy homes available on the market for sale, with scarcity adding another demand dynamic to the equation.

“We’re seeing more buyers than sellers for these properties – well-located with beautiful views and access to water, which continues to keep demand high, despite a cooling in other residential segments.

“Because of this, the luxury sector isn’t as affected by market movements as the broader marketplace.”

While luxury homes may be resilient in the face of current market fundamentals, Sinclair says luxury homes still take time to sell.

“High-value properties take time and care to sell because they’re just that – high value. Sellers often prefer the discretion of the tender process, which unlike a sale by auction, does not provide an immediate deadline for an unconditional sale.

“The right buyer for a high-value property could be local, national or based overseas, so we work hard to cast the net as wide as possible. At Bayleys, that means utilising our global reach with international real estate partner Knight Frank to ensure we find the right buyer for each property,” he says.

**DYNAMICS IN FLUX **

Record-low interest rates worldwide have seen property values rise sky high, particularly across New Zealand, where residential prices recorded some of the highest growth in the developed world during the pandemic.

Today, market dynamics are very different, with interest rates rising and central banks working hard to control inflation and dampen consumer demand.

“While this stands to impact 99 percent of buyers and sellers across the market through rising mortgage lending rates and a higher cost of living, those purchasing high-value homes are often less impacted by changes in borrowing costs,” Sinclair says.

“Purchasers spending more than eight million for a new home would do so by reallocating finances, rather than borrowing from the bank via a typical mortgage structure. Perhaps they are selling a business or realising the value of other assets – whatever the reason, the sale process can be less impacted by bank regulation and the movement of mortgage lending rates.”

Rising migration and the return of expatriate Kiwis can often have a more significant impact on this market segment, with the latter having collected comparatively higher foreign wages to come home more willing to invest in high-value residential assets.

“The high-end of the market is strengthening too, as more Australians return to Aotearoa following the long pandemic hiatus. Purchasers from across the ditch and Singapore can still purchase property here as a result of the Government’s obligations under Trans-Pacific Partnership Agreement (CPTTP).

“Since the borders reopened, we have seen enquiry from these countries increase for high-value properties, although there has been no discernible trend in terms of conversion to sales.”

Sinclair says the waterfront property market is just kicking into gear as the southern hemisphere prepares for a long hot summer ahead.

“Waterfront properties – be them coastal, lakefront or riverside continue to command premium prices and will realise an uptick in interest over the next few months.”

However, there is a lack of premium supply available to satiate buyer appetites, and he says some luxury property owners are holding on tight until they can find their ideal next home.

In Queenstown and Wanaka, a good tourist season has created additional interest in high-value properties, and salespeople have noted that Australian visitor arrivals have returned to more than 75 percent of pre-pandemic levels.

“Strong visitor numbers and a more vibrant tourism industry always provide a supportive effect for the luxury property market, and we expect to see the impact of this to year-end, particularly across the Upper North Island,” Sinclair says.