North Shore residential activity looks set to improve in 2018. Following a sharp drop in the number of sales over the second half 2017, activity levels look to have found a base and we expect volumes to continue to improve from here. With a current median value of $1,073,750, North Shore residential prices remain well underpinned.
Over the latter part of 2017, both the wider Auckland region and the North Shore experienced a softening in market activity with volumes falling 16% and 18% respectively, when compared to the same quarter last year. Encouragingly the North Shore experienced an upturn over the December 2017 quarter with sales activity increasing by 8%, outperforming the broader Auckland market which experienced a 3% increase over the same period. We expect to see sales activity lift further as buyers adjust to the new regulatory backdrop.
The uncertainty caused by the election and subsequent change of government, as well as the lending restrictions imposed by the Reserve Bank and commercial lenders were key drivers of the slowdown in activity over the second half of 2017. Values however have held firm with the local median finishing the year at $1,073,750, up 2.4% over the last 12 months. This reflects the ongoing appeal in the North Shore area and a number of important factors underpinning the market including persistent low interest rates, high migration levels, a challenging supply backdrop and the slight loosening in Loan to Vale (LVR) lending restrictions.
The recent softening in overall activity levels has had little impact on the continued price appreciation experienced in the North Shore market. Proportionate shares of differing price brackets over the past 3 years, show the persistent demand and consequent lift in values. The 2017 year has seen the largest numbers of property transactions occur within the over $1 million price bracket. This has seen a steady year-by-year increase since 2015. On the other hand the number of transactions to take place under $1 million has continued to fall.
The East Coast Bays dominated sales activity in 2017 with 1,213 transactions. This compares to just 263 transactions in the tightly held suburb of Devonport which also holds the title as the most expensive area on the North Shore with a median value of $1,455,000. Milford/Takapuna and Albany follow with the next highest sales values of $1,300,000 and $1,200,000 respectively.
A recent tightening of lending criteria by the commercial banks has led to increased difficulties amongst developers in obtaining finance for projects which has resulted in a general slowdown in residential consents. This slight slow down in activity is evident across the North Shore ward, encompassing a number of residential suburbs including Devonport, Takapuna, Milford and Glenfield, down 6% over the year to December 2017.
The Auckland Council’s Unitary Plan is working to encourage a greater intensification of the housing stock. Within the North Shore Ward, this has resulted in an increase in mult-unit dwelling consents. Apartment consent numbers have increased with 1,356 consents issued over 2017, up 77% from 2016. Retirement consent numbers saw a rebound at the end of the year with 119 new consents issued in December 2017.
Despite detached housing still dominating across all suburbs, inroads are being made across other housing types including townhouses and apartments. Going forward we would expect to see the proportion of detached housing continue to decline. To date, the Milford/Takapuna area has seen the largest mix of housing type transactions with 45% being multi-unit dwellings in the year to December 2017.
The slowing in sales activity over the last year has resulted in a lift in residential inventory levels across the Auckland region, up 34% from the prior year. Weeks to sell all inventory, has reached 22, and now sits just below the long term average.
Migration levels remain elevated with net migration adding 36,152 to Auckland’s population as of December 2017. Net inflows have eased since their historical high of 36,796 in August 2017 and the government has indicated their plans to reduce inflows further. Migration levels are expected to stay above long term averages, sustaining the need for a significant rate of home building. All this at a time when the construction sector is reaching capacity limits and is experiencing difficulties in sourcing skilled labour, material and credit to fund projects. As a result we expect current tight market conditions will ensure values remain firmly underpinned.
SALES HOT SPOTS – North Shore Residential Sale Prices 2017 HY2