New Zealand’s economy is currently growing at an annual rate of around 2.5 percent, supported by low interest rates, construction activity, and high net immigration. However the growth outlook is now softer, as the rebuild in Canterbury appears to have peaked, and the world price for New Zealands dairy exports has fallen off sharply. House prices in the Auckland region continue to increase rapidly, but outside Auckland, house price inflation generally remains low. Increased building activity is underway in the Auckland region but it will take some time for the imbalances in the housing market to be corrected, as consents continue to fall below the targeted housing accord aspirations. The RBNZ reasoning for the July reduction in the OCR to 3% was due to the softening economic outlook and low inflation, with further reductions likely in future.
The Eastern Suburbs have some of the highest value real estate in the country, and the median sale price for the region hit unprecedented levels in the latest quarter to June 2015, now reaching $1,404,000 according to the Real Estate Institute of New Zealand (REINZ). This equates to a $289,000 increase, or up 25% from the same quarter twelve months prior when the median was $1,115,000.
Quarterly sales volumes are also on the increase, having reached a Global Financial Crisis (GFC) low of 264 sales in the September 2007 quarter – activity levels have recovered strongly albeit not quite to pre GFC 2006-2007 levels. The December quarter hit 541 sales in the Eastern Suburbs, following the trend of the spring sales increase, with a slight dip to nearly 430 to March.
Attractive borrowing rates, combined with record immigration numbers have all fed the demand side of the housing market, bringing about some of the tightest market conditions ever experienced.
This is illustrated by the Auckland region weeks to sell hitting a record low of 9.6 weeks. Sales volumes are up, with historically lower new listings coming on board, and an already dwindling total inventory, this all equates to the lowest weeks to sell out of all stock ever recorded for the region. Raising vendor expectations are mitigated to a degree by concerns about what they in turn can afford to move on to. Agency reports are seeing more deals incorporating longer settlements to give their clients more time to find somewhere to move onto in this tight market.
With local and central government aiming to alleviate the supply shortage of homes in the Auckland region by releasing land and streamlining the consent process for Special Housing Areas reporting mixed results, another approach which the council favours is greater intensification of developments.
Overall building consents in Auckland are on the increase according to Statistics NZ, although the rate of increase is not great enough to keep up with the backlogged lack of housing supply, a supply imbalance exacerbated by the sudden influx of international migrants who have moved to the Auckland region in the past year, equalling nearly 27,000 new residents. All of this puts sustained upward pressure on sales prices.
It is hardly surprising therefore that we are seeing a huge increase in resource consents for new builds of apartments, townhouses and units. Particularly in the Orakei board which encompasses the Eastern Suburbs according to Statistics NZ. Post GFC when activity flat lined there has been a steady increase in the number and value of developments in the area, in particular spiking in November 2013 and to even higher levels since March 2015.
The Eastern suburbs typically house well educated, degree qualified, well paid professionals, managers and professionals with demanding careers. Classed as self made lifestylers, these residents are characteristically higher earning older professionals, wary of changes in business conditions which could have an impact on their family’s savings, lifestyle and education. It is understandable consequently that more apartments and townhouses are being assembled, although this new wave of construction is to a higher standard of quality than those built pre GFC. The final product these developments are aiming to achieve is more for owner occupiers than investors, while still offering a more affordable accommodation option than houses in these locations are.
Spotlight on GlendowieLocated on the north-eastern extent of the Auckland Isthmus, and bounded by the Waitemata Harbour and Tamaki Estuary, Glendowie has experienced a marked increase in values in recent years. The seaside neighbourhood with proximity to the heart of Auckland city, encompasses large parks and estuary reserves such as Churchill Park and Tahuna Torea Nature Reserve. The area feels like an escape from the city with rural, coastal or river scapes commonplace, yet residents can be at Queen Street in 15 minutes. The rising population and demand for housing has put pressure on residental stock, and in turn upward pressure on prices in Glendowie, with 13% median price growth over twelve months to the June 2015 quarter. The median price hit unprecedented levels in the first quarter of 2015 peaking at $1,350,000, but has eased slightly in the last quarter.
After values dipped in 2008 as a result of the GFC, the median price plateaued for a few years until a sharp increase at the end of 2012 and again in the second quarter of 2013, concluding the three months to June 2015 at a median value of $1,282,500. This equates to a $152,500 increase since the same period twelve months prior. Days on the market have fallen, taking 29 days to sell, and volume of sales transactions have stayed stable at 130-160 rolling annual sales for the suburb in the year to June 2015.
Eastern Suburbs Median Price Hot Spots – Winter 2015
Spotlight on OrakeiHome to some of Auckland’s most expensive real estate, with Paritai Drive generally regarded as the most expensive street in New Zealand, Orakei is home to some of the populations most affluent people. The median income per person in Orakei is 48% greater than the wider Auckland median according to the last census completed by Statistics New Zealand.
With its location on a peninsula only five kilometres to the east of the city centre, close to the shores of the Waitemata Harbour waterfront, Hobson Bay and Orakei Basin to the west and south, it is understandable the desire to live within the suburb has not waned. Consequently this demand teamed with Auckland’s housing shortage continues to put upward pressure on prices and has pushed the median sale price for Orakei up to $1,669,500 in the quarter to June 2015. This is a 40% or $482,500 increase on the same period a year prior. The median price hit never seen before in heights in the first quarter of 2015, peaking at $1,800,000. The number of transactions are stable at approximately 100 rolling annual sales to June 2015, selling after 42 days on average, about a week less than the long term average of 54 days.