Residential properties in Auckland’s Eastern Suburbs continue to command some of the highest prices in the country. The quarterly median hit a peak of $1,400,000 last quarter. While this has receded slightly in the quarter to September 2015 this latest figure of $1,371,000 equates to a $201,000 or 17% increase from the same quarter twelve months prior when the median was $1,170,000.
Ending the winter sales season on a high, when it is typically quieter than other seasons, quarterly sales volumes are on the up, with 12% more homes sold compared to the same period a year earlier, concluding the quarter with 435 homes sold. The volume of sales have had a sustained recovery since the global financial crisis (GFC) but are yet to return to the 2005-2007 pre GFC levels.
Exemplifying the continuing demand for property in the Eastern Suburbs and Auckland, is the weeks to sell figure i.e. the time it would take to sell the total current inventory of houses for sale, assuming no further listings are taken on. This currently sits at historical low levels of 9.7 weeks. The long term average is 25 weeks. Total inventory in the region is just over half the long term average with 6,815 homes for sale, and with 3,052 sales monthly sales, remaining well above the long term average, this explains the shortage of stock and extremely low weeks to sell after months of these trends influencing the region.
Spotlight on Parnell
Often billed as Auckland’s oldest suburb, Parnell, located only 2km from the city centre, dates back to the earliest days of European settlement in 1841. With the quaint Victorian style village attracting boutique fashion and food offerings, its proximity to the waterfront, Hobson Bay and the picturesque Auckland Domain, it is understandable the demand to live within the suburb has not waned. Between the 2006 and 2013 censuses the population in Parnell swelled 8.8% to have 7,092 residents; the Auckland region grew 8.5% in the same period. The increased population reflects the popularity of the suburb due to its proximity to the CBD and universities and has been accommodated through the intensification of housing stock.
The consequence of continued demand has had continued upward pressure on prices which has pushed the median sale price in Parnell up to $1,240,000 for the quarter to September 2015, this is an almost 11.7% or $130,000 increase on the quarter prior. The median price hit never seen before heights in the September quarter in 2014, peaking at $1,330,000. The number of transactions are increasing at around 260 rolling annual sales to September 2015 this has been increasing since 2011 when rolling annual transactions were approximately 155. Properties are taking on average 35 days to sell, about two weeks less than the long term average of 49 days.
Spotlight on KohimaramaSometimes overlooked because of its highly regarded neighbours, Kohimarama, only 9km from the city centre, is nestled between the villages of St Heliers and Mission Bay, albeit it boasts equally impressive views across the harbour and out to Rangitoto Island.
Between the 2006 and 2013 Statistics New Zealand census the suburb experienced moderate growth, increasing the number of inhabitants by 4%, due to some intensification rather than spread as it is closely bounded by the waterfront and neighbouring suburbs. Kohimarama boasts an extremely high level of home ownership with almost 76% of residents living in the area own their own home, reflecting the fact that the area is among the most affluent in the city with approximately 50% of residents over 15 falling into the highest earning bracket reported in the census, earning $50,000 or above per annum. This compares with a national average of only 26.7%.
After marked increases in value in the first half of 2015 the median has eased slightly to conclude the September quarter with a median sale value of $1,055,000. This recorded 8.2% growth when compared to the same period twelve months prior. The number of sales dipped slightly in the last quarter with 28 properties sold in the suburb. As Kohimarama is a smaller suburb with a smaller number of sales the median sale price will fluctuate more than when using a bigger sample of sales. Days on the market in Kohimarama have fallen from 53 days in the last quarter to now taking only 36 days for a property to sell in the area, which is hardly surprising given the demand for homes in the area and there being less of them on the market for sale, driving competition for properties and prices up.
Eastern Suburbs Median Price Hot Spots
Still more Push than PullTighter credit controls aimed at Auckland residential property investors, the introduction of a brightline test and new regulations aimed at overseas buyers will slow the Auckland housing market in 2016. However the positive drivers of the market, predominantly, low interest rates, population growth and a regional housing shortage will continue to hold sway resulting in continued value appreciation over the year.
Although increased house-building activity means new housing supply is coming on board, the residential building consent levels are still falling short of Housing Accord aspirational levels, therefore construction activity still needs to ramp up substantially to fully alleviate the housing shortage. The New Zealand population has been growing at its fastest rate for over a decade, with the annual growth rate of 1.9% for the year to June 2015 outpacing that of Australia. In Auckland, record net migration rates have seen the population being boosted by 28,395 from migration alone.
Following the lowering of the OCR to 2.75%, the cost of borrowing money is at historically low levels. However the RBNZ has indicated there may be more OCR cuts to follow to return inflation rates within the required 1-2% range.
There are headwinds ahead with mortgage lending restrictions in Auckland being tightened, coupled with new tax rules for investors. From October 1, all overseas buyers of property in New Zealand must have a local bank account and Inland Revenue tax number as well as supplying a tax number from their home country. Any capital gains from selling a residential property within two years of purchase will now be taxed, unless the property is the seller’s main home, has been inherited from a deceased estate or transferred as part of a relationship property settlement. Figures from the Reserve Bank of New Zealand (RBNZ) show that in August about a third of mortgages went to property investors. Starting November 1, the limits on bank lending to low deposit borrowers comes into force, where property investors borrowing against an Auckland property will need to have a deposit of at least 30%. Banks will still be limited to not more than 10% of their lending to owner occupiers who have less than a 20% deposit on a house, while elsewhere around the country, that restriction is being eased and banks can have 15% of their lending for low deposit borrowers.