Values Remain at Elevated Levels Despite Market Slowdown
Median sales values for properties across the Coromandel sat at $560,000 as at the June quarter of 2018, holding at elevated levels despite a slowing in sales activity.
The June quarter figure is 3% ahead of the figure for the corresponding period in 2017 and 27% up on the June 2016 figure, according to sales statistics released by the Real Estate Institute of New Zealand (REINZ).
The value gains evident since 2014 were driven by a significant uplift in sales activity bolstered by a flow of equity from the Auckland market, low interest rates, and a marked increase in the rate of population growth.
Between the census of 2006 and 2013 annual average population growth across the Thames Coromandel District was 0.1%. Population estimates since then show the average rate of growth between 2013 and 2016 to have been 1.3% with there having been further acceleration between 2016 and 2017 when the population expanded by 2.2%.
Over recent months however, activity in the market has slowed, following trends seen within the Auckland market. Quarterly sales volumes peaked in the March quarter of 2016 when 308 sales were recorded by REINZ. In the June quarter of 2018, 166 transactions were completed. Whilst clearly down from recent highs the latest figure remains slightly ahead of the 12 year long term average of 177 sales per quarter.
Market Remains Tight
Despite the slowing in sales activity market conditions across the Coromandel remain tight as a result of the fact that few new listings are being brought to market. According to realestate.co.nz only 89 new properties were released to market in June 2018 this compares with an average monthly figure of 220 (based on figures from January 2007).
Market conditions are well illustrated in the adjacent graph showing the weeks required to sell the inventory of properties currently on the market, This assumes that no further listings are added and that sales activity continues at recent levels.
In June the weeks to sell figure stood at 40, this has risen since a record low of 21 weeks was recorded in August of 2016 but remains well below the long term average of 139.
Given the ongoing tight market conditions values remain well underpinned despite the slowing in activity evident over recent months.
Whitianga and Thames Dominate Activity
An analysis of sales over the 12 months ending June 2018 show the Whitianga and Thames markets to dominate activity accounting for nearly a quarter of Coromandel Sales. REINZ recorded 708 sales across the region with Whitianga leading the way with 199 sales followed by Thames with just under 150.
The eight most active markets, shown in the adjacent chart accounted for approximately 86% of sales. Of these suburbs, the tightly held, Cooks Beach boasted the highest median value, topping $700,000 albeit that this figure was based on just 23 sales. Pauanui with a median of $680,000 commanded the second highest values.
Spotlight on Thames
Many of the trends evident across the wider Coromandel area have been evident within Thames. Once again it appears that the lift in values evident over recent years has created a new base value for property in the town despite a slowing in sales activity.
Residential property sales concluded within the town during the 2018 June quarter generated a median value of $477,500. The latest figure is a new record for the town continuing the upward trend which has been evident since early 2014.
The June quarter median sits 50% above the figure recorded in the June quarter of 2014.
The rate of value growth has slowed since the end of 2016, at that time the median stood at $465,000, the increase since then has, therefore been limited, equating to just 2.7% or $12,500.
New Base Values Look to Have Been Established
Over recent months however, activity in the market has slowed, following trends seen across the wider coromandel market.
The slow down is illustrated by the increase in the average number of days required to sell properties in the town.
As the graph adjacent illustrates the average days on market figure reached a long term low of 34 days in 2016. Over the first half of this year the figure had increased to 61 days which, while up on the cyclical low, remains below the long term average of 68. When taken in isolation June quarter figures reflect a further slowing in momentum, registering a figure of 71 days albeit that this is based on a small sales sample.
To date however the slowing in sales activity has not translated into a softening of values.
Value Gains See Expansion of Higher Value Brackets
The surge in values which has been experienced within the local market over recent years has seen a marked shift in the share of sales of properties within higher value brackets.
As the two charts below show, sales in 2015 were dominated by transactions of between $250,000 and $500,000 with sales of greater than $500,000 comprising just 11% of the market.
Over the first half of 2018, while the $250,000 – $500,000 band remains the largest part of the market, comprising 53% of sales, transactions completing within the higher value brackets now account for 47% of sales.
The lift in values is also clearly illustrated by the movement in median values within the top 15% of sales, by value, as shown in the adjacent graph.
The median value generated by the highest value 15% of sales ended 2017 at approximately $705,900 up just under 6% on the figure recorded in 2016 and nearly 43% higher than the 2014 figure of $495,000.
Residential sales trends in New Zealand tend to take their lead from the Auckland market. Over the last year we have seen sales activity slow and values soften slightly as bank lending criteria has been tightened, migration has fallen from record highs, and business confidence has waned.
In the local market the impact of these changing conditions have already become evident as sales activity has slowed.
Market conditions, however, remain tight, population growth is positive, interest rates look set to remain low for an extended period of time and the local market does not have the affordability constraints which the Auckland market faces.
Having regard to the above the local market looks to have entered a period of consolidation with sales activity likely to remain subdivided but values well supported.
Retail Strip Enjoys High Occupancy
Vacancy within the Pollen Street strip remains at low levels according to the results of the 2018 Bayleys Research retail vacancy survey. Eight vacant units were recorded at the date of survey, however a majority of these are within units located at either end of the retail strip, primarily within buildings with low seismic ratings.
Only three units were available to lease in the prime shopping areas bounded by Pahau and Richmond Streets.
While vacancy rates remain at low levels, there is no lack of demand particularly for properties with high seismic ratings within the core area of the main street. Agency reports advise that the shortage of such properties is hampering efforts of some national brands to enter the Thames market. The competition for limited stock is likely to see current top end rental values challenged.
An increase in investor interest in the town’s prime retail sector has placed downward pressure on yields. Once again, lack of opportunity means that there is unsatisfied demand for property and therefore a further tightening of yields cannot be ruled out, particularly given that the Country’s low interest rate environment looks set to remain in place for an extended period of time.
Cafes, restaurants, bars and takeaway food occupiers are the most common within the retail strip accounting for nearly 20% of the 189 units surveyed. Service providers such as accountants, insurance brokers etc are the second most common occupiers followed by Hairdressers / barbers / beauty salons and then the automotive sector which includes car sale yards, automotive parts retailers and mechanics.