Having softened in the final quarter of 2015, in response to regulatory changes, Auckland residential values returned to growth over the opening period 2016. The regional median lifted by 2.9% in the March quarter albeit that sales activity remained relatively subdued. It seems that a number of buyers decided to adopt a “wait and see” approach following the introduction of the new rules and regulations in order to assess their impact on the market, The latest figures released by the Real Estate Institute of New Zealand (REINZ), however, suggest that the primary drivers, predominantly, low interest rates, the migration boom and regional housing shortage are having a greater influence on the market than changes to taxation provisions and lending restrictions.
The overall Auckland market remains tight, with figures from realestate.co.nz indicating that inventory for sale in April was only at 5,711, a 10.8% fall from 6,404 last year’s same month and 45% lower than the 8 year historic average of 10,378. The number of weeks to sell inventory (based on current sales activity, assuming no further listings are taken on) are still on their lowest levels, with the April 2016 figure being 10.3 weeks, significantly lower than the historic 8 year average of 24 weeks. This tightening is also illustrated by the latest REINZ data, which shows an acceleration in the speed of sales in February and March, resulting in the average days on market figure falling to 30 days in March from its 39 days level in January.
The North Shore market trends followed those of the wider region in general, with a relatively higher volatility in price movements. Following a short-lived fall, median prices in the area posted the highest quarterly growth rate recorded since the last quarter of 2014. The median value climbed by 8.9% or $80,000 in the first quarter of 2016 compared to the previous quarter, reaching a new record of $980.000. The median price was up 12.6% from the same quarter of the previous year. Sales volumes were down in the March quarter with 1,075 transactions completed compared with a 1,387 a year earlier. Overall however, market conditions in the North Shore market remain tight as illustrated by the fact that the average days on market figure, at 42 days was only slightly up from the 37 days recorded in the opening three months of last year.
Consent Numbers Signal ChangeChanges in the annual building consents in the North Shore Ward show that the move to higher intensity development is now underway. As shown in the graph below the number of consents issued for stand alone houses has declined over the last year while there has been a significant increase in plans for multi unit development. The number of building consents for all types of residential properties increased 41% in 2015, compared to 2014. However in absolute terms, the scale of increase in new building consents in the North Shore Ward was limited to 139, which is unlikely to alter the market dynamics, given the high demand, net migration inflow and low interest rate environment.
A closer look at North Shore sales
An analysis of recent sales in the North Shore market show that sales at $1million and more constituted half of the sales in the last quarter, with the majority of them falling into the $1-1.5 million price bracket. In terms of property types, residential houses dominated the sales with almost 85% of all transactions. Given the heightened building activity in apartment and units in the region, it is likely to result in a reduction in the relative share of stand alone houses in future years in favour of smaller property types.
Spotlight on Coatesville and Dairy Flat LifestyleLifestyle block values in Coatesville and Dairy Flat markets have started to surge since mid-2012 after an extended period post GFC, when the market was relatively subdued. The median price in the first quarter of 2016 reached $1,920,000, compared to its 2012 second quarter value of $840,000, corresponding to a growth of almost 130% in less than 4 years. The March quarter, median was up 24% from the same quarter of previous year and was lifted by 1.3% compared to the previous quarter. Lifestyle blocks in the Coatesville and Dairy Flat markets have also witnessed a spike in transaction activity since the beginning of year 2013, as the average number of quarterly transactions climbed to 49 sales from a low, post GFC, average of 20 per quarter recorded between 2008 and 2012. Market conditions in the Coatesville and Dairy Flat markets have tightened illustrated by a fall in the average days on market figure to 53 days, down from 68 days in only 12 months. The longer term average, 10 years, is 75 days.
Increased activity in the lifestyle market reflects trends within the wider residential sector. However, there are also some unique factors which are playing their part. As higher intensity development becomes more common within established residential suburbs, purchasers who prefer having more open space around them see lifestyle areas as a preferable option.
Value increases also reflect to some degree zoning changes proposed within the Auckland Unitary Plan (PAUP). The PAUP contains provisions which allow for the transfer of titles from other rural landholdings to the Countryside Living Rural zones thereby facilitating a greater degree of sub-division. Agency reports suggest that the “transferrable titles” are currently selling at values of between $150,000 and $200,000.
In addition, the unitary plan identifies a number of Future Urban areas in the Dairy Flat / Silverdale / Wainui East area which allows for higher levels of development to accommodate Auckland’s future population growth. To date, land sales within these areas remain limited and the impact on value is therefore still unclear, however, if implemented as proposed it is likely that the impact will be significant.
Spotlight on DevonportDevonport has long been viewed as an aspirational location in which to live, given its seaside charm and ease of transport to the CBD, alongside its large number of shops, cafés and restaurants. While down by 1.8% from the previous quarter, median sales price in the March quarter of 2016 reflect an increase of 8.3% or $100,000 over that recorded in the same quarter of 2015, sitting at $1.300.000. Sales activity has remained fairly stable compared to the larger falls in sales numbers seen within the wider region. The area recorded a quarterly transaction count of 77 in the first quarter of 2016. This was down just 4.9% from the 81 sales of both the previous quarter and the same quarter of 2015. The average days on market figure recorded in the first three months of 2016 was 47 days, all but unchanged from the corresponding period last year, suggesting the continuity of tight market conditions.
North Shore Median Price Hot Spots