The second quarter of 2016 witnessed the highest quarterly price increase in the Auckland residential market since 2014. A short lived slowdown towards the end of 2015, a reaction to regulatory changes, was followed by a strong pick up in the first quarter of 2016. As market pressures have continued to increase over subsequent months, the second quarter experienced an even sharper surge. The regional median lifted by 7.5% in the June quarter reaching a new record of $837,000. Much of the price increase occurred in the last month of the quarter, resulting in additional measures being taken by the Reserve Bank, in an attempt to cool the investor market. The “Bank” announced that the existing lending restrictions, which require Auckland residential property investors to have at least a 30 per cent deposit have been further tightened with a 40 percent deposit now being required. In addition the restrictions will no longer be limited to Auckland properties only. The new regulations will take effect on 1 October 2016 although it is likely that the high street banks will begin implementing the new rules almost immediately.
The overall Auckland market remains tight, with figures from realestate.co.nz indicating that the total inventory for sale in June was only 5,934 properties, a 1% fall, over the last 12 months, from 5,992 and 42% lower than the 8 year historic average of 10,160. The number of weeks to sell the inventory (based on current sales activity, assuming no further listings are taken on) are still on their lowest levels, with the June 2016 figure being 9.5 weeks, significantly lower than the historic 8 year average of 23 weeks. This tightening is also illustrated by the latest REINZ data, which shows an acceleration in the speed of sales in May and June, resulting in the average days on market figure falling to 32 days in June from its 36 days level in April.
Value changes, when analysed at suburb level, are more volatile than regional movements given the smaller number of sales. Over the Eastern suburbs a strong lift in values was noted in the opening quarter of the year, when a record three month lift of 14.2% was recorded by REINZ, followed by a dip in values over the June Quarter. Over the opening half of the year however, the local area median has lifted by 12.3%, compared with 10.1% for the Auckland region as a whole, reaching $1,475,000.
Sales volumes eased slightly in the June quarter, reflecting the reduction in listings being made available to the market, with 439 transactions completed compared with a 516 a year earlier. However, market conditions in the Eastern suburbs market remain tight as illustrated by the fact that the average days on market figure, at 38 days has remained unchanged from the figure recorded in the second quarter of last year.
As has been well reported, the most significant driver of value appreciation across the Auckland regional residential market has been the imbalance between supply and demand. In response to this issue Auckland Council is promoting greater intensification of residential development within established urban areas. The Council’s view being that this maximises the benefit of existing infrastructure, including public transport, retail amenity and proximity to employment areas. The development sector has begun to respond to this approach with there having been a sharp increase in building consent applications for apartment and townhouse development across the region. The local area mirrors the wider regional trends as illustrated in the graph adjacent. The proportion of consents which apartment development accounted for in the year to June 2016 is sharply up on that recorded for the preceding 12 months.
This pattern in residential construction activity is very likely to be more evident in the near future. In late July, The Independent Hearings Panel handed its recommendations on the Proposed Auckland Unitary Plan to Auckland Council and suggested an even higher intensification than the Auckland Council originally had planned.
Spotlight on Orakei
Orakei’s proximity to the coast and the CBD, the latter being just five kilometres to the west, has seen the suburb’s real estate experiencing high levels of demand. As a result, values have lifted sharply over recent years making Orakei one of the region’s highest value suburbs. Orakei is home to some of the population’s most affluent people. Consequently there has been particular pressure placed on the upper part of the suburb’s value illustrated in the graph below which shows figures for the top 15% of the market. In the twelve months to June 2016 period, Orakei had a top 15% median sales price of $4,430,000, making it the most expensive of the Eastern suburbs and the second most expensive in the entire country after Herne Bay. Among all sales in the year to June 2016, Fenton Circus was the street which had the highest median price with $5,025,000, followed by Paritai Drive with a median price of $4,202,500 which also constituted more than 10% of sales in the Orakei market. Houses selling at values in excess of $2 million now constitutes a little more than one third of all sales in Orakei, reinforcing the top end status of the market.
Spotlight on Epsom
As one of the most exclusive and affluent suburbs of Auckland, Epsom is located five km south of the city centre between Mount Eden and One Tree Hill. The area benefits from easy access to a number of attractive parks and reserves while also being ringed with Mount Eden Domain on the west and Cornwall Park and One Tree Hill Domain on the east. Epsom has long been viewed as an aspirational location in which to live in, given its amenities, proximity to CBD and excellent schools.
Followed by double digit gains in the opening three months of 2016, the median price in the Epsom market lifted by 3.6% or $64,750 in the June quarter reaching a new record of $1,847,250. As is the case across the wider area Epsom witnessed an easing in sales activity over the June quarter. The average days on market figure increased slightly from 37 days in June 2015 to 44 days in the same period this year. The lift in values however shows that demand for property in the suburb remains strong and it is therefore sellers that are controlling the local market.
Eastern Suburbs Median Price Hot Spots