Residential properties in Auckland’s Eastern Suburbs continue to command some of the highest prices in the country. The quarterly median was up by 7.8% and hit a peak of $1,628,000 in the December 2016 quarter. This equates to a $310,500 or 23.6% increase from the same quarter twelve months prior when the median sat at $1,317,500. The wider Auckland region witnessed an annual price growth of 13.2% over the same period. Exemplifying the continuing demand for property in the Eastern Suburbs, is the average days on market figure. This currently sits at 37 days, down from last year’s 38 days.
Values in the Auckland region remain supported by strong market fundamentals, predominantly, a rapidly expanding population, a relatively low interest rate environment and most significantly, a regional housing shortage which continues to grow. Sales activity across the Auckland region, on the other hand, has slowed over recent months in response to the latest round of lending restrictions imposed upon investors, by the Reserve Bank of New Zealand. Another factor contributing to the softening in sales activity is the start of a slight upward trend in mortgage rates, making the cost of borrowing relatively higher.
The impact of reduced sales activity in the wider region was less profound in the Eastern Suburbs market where the fall was limited to only 9.1% in the final quarter of 2016 compared with the same quarter a year earlier. The rate of fall in the wider Auckland region was 13% over the same period. The softening of the market is also reflected in an increase in the total inventory available to the market as shown in the table below. While the total inventory and weeks to sell figures remain at below their nine year averages both have increased over recent months. In April 2016 the inventory figure was just 5,711 and the weeks to sell figure was sitting at just 9.3.
While it remains to be seen as to when the share of sales to investors increases again, values continue to be strongly underpinned, as stated above. The main drivers of the market remain in play. Net migration inflow to Auckland is at its highest levels with a 34,000 net migration gain in 2016, 3 times the 25 year historical average.
Despite the heightened building activity, the 10,000 annual building consents are still not at the levels required to reduce the demand-supply imbalance. Shortages in skilled labour and tightening lending criteria for development finance are the major capacity constraints for the industry, resulting in a growing housing shortfall. Further hampering a lift in development is the fact that all indicators show a lift in construction costs which makes fewer development projects viable.
More than one third of 2016 sales above $2M
The impact of rapid price appreciation over the last year is well illustrated by the shift in the number of Eastern Suburbs sales recorded within various value brackets between 2016 and 2015. Properties sold above $2M accounted for 35% of all sales in 2016, up from 24% recorded in 2015. Only a year ago, Eastern Suburbs properties priced $1M and below accounted for up to 31% of all sales. In 2016 this sector’s share of the market had fallen to just 17%, leaving few options for buyers looking for more affordable homes. This is partly due to the fact that, unlike the trend in the wider region where apartment and townhouse development has added smaller, more affordable, properties to the inventory, residential houses remain the dominant property type in the Eastern Suburbs market and have retained their share in overall sales over recent years.
The Orakei Ward which encompasses the Eastern Suburbs witnessed substantial increases in new building consents for multi-unit dwelling types, particularly apartments, towards the end of 2015. This was followed by a decline in 2016, despite heightened building activity in the wider region, a response to strong housing demand and planning policies aimed to promote an increase in housing supply. As the adjacent graph shows, apartment consent numbers are volatile while the figure for stand alone homes is relatively steady. The fall in consents for multi unit development recorded in 2016 reflect tougher financing conditions, as mentioned above. A single large scale apartment scheme though would see these numbers bouncing back.
Spotlight on Remuera
Remuera has, for some time been one of New Zealand’s most affluent suburbs.
Remuera houses 25% of the most expensive 100 residential properties sold in the Auckland region in 2016. Remuera had the highest proportion of $1 million + sales across the year and also saw the region’s highest value sale at $18 million.
With some of the top private and public schools in the country, a thriving local village and proximity to the CBD and Newmarket, Remuera has a high level of appeal to purchasers. Consequentially housing in the suburb is in high demand which, when paired with Auckland’s housing shortage continues to put upward pressure on prices. As a result, Remuera’s median sale price rose to $1,865,000 in the final quarter of 2016. This equates to an increase of 18.2% or $287,500 compared to the same quarter a year prior. The number of sales transactions fell by 16% to 136 completed sales in the December 2016 quarter compared to the same quarter of 2015, selling after 38 days on average, a week less than the long term average.
Spotlight on Kohimarama
Kohimarama, only 9km from the city centre, is nestled between the villages of St Heliers and Mission Bay, and it boasts equally impressive views across the harbour and out to Rangitoto Island.
As Kohimarama is a smaller suburb with a smaller number of sales the median sale price is more volatile than those recorded within larger suburbs which generate higher sales volumes. Kohimarama ended the December quarter with a median sale value of $1,725,000. This recorded 49.4% growth when compared to the same period twelve months prior. There were 21 properties sold in the Kohimarama market over the December 2016 quarter, compared with 28 sales over the same period a year earlier. The average days on market figures for Kohimarama also show a volatile trend due to the small sample size. Average days on market recorded in the September quarter was as low as 33 days, while in the December quarter the figure was 49. This though, was largely due to one high value sale which was concluded in the quarter. Kohimarama, despite its smaller size, ranked 8th, in Auckland, in terms of the proportion of its sales which were amongst the region’s 100 most expensive over the year.
SALES HOT SPOTS – Residential Sale Prices (2016 Q4)