The New Zealand economy has recovered at a solid pace since the recession in late 2010. The recovery has been better than most of our peers. Strong net migration, the Canterbury rebuild and an improving labour market remain the key driving forces behind domestic demand. The strength is also particularly apparent in Auckland, with strong population growth turbo-charging its housing market, driving North Shore property values up significantly.
The residential median price for North Shore once again reached unprecedented levels in the three months to May 2015, now reaching $922,000 according to the Real Estate Institute of New Zealand (REINZ). This equates to an $115,000 increase or 14% up from the December 2014 quarter. Compared with the same period twelve months prior it is a 24% increase when the median was $743,500.
Quarterly sales volumes are also on the increase, having reached a post Global Financial Crisis (GFC) low of 700 sales in the September 2008 quarter – activity levels have recovered strongly albeit not quite to pre GFC 2002-2003 levels. The December quarter hit 1,600 sales in the North Shore, with a slight dip to nearly 1,400 to March. Volumes for the three months to May 2015 show transactions are trending upwards again with 1530 sales recorded. The reserve bank recently revised the OCR level down to 3.25% triggering banks to lower mortgage rates again. With the most affordable money we have seen in recent years this low interest rate environment, combined with the record immigration numbers have all fed the demand side of the housing market, bringing about some of the tightest market conditions ever experience. This is illustrated by the Auckland region weeks to sell hitting rock bottom at 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. Owners excited at the prospect of selling their property for a markedly higher rate than it was worth even a few months ago, are still cautious about the rapidly growing values and what they in turn can afford to move on to. Agency reports are seeing more deals incorporating longer settlements to give their client more time to find somewhere to move onto in this tight market.
Building consents in Auckland are on the increase according to Statistics NZ, although the rate of increase is not 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 region in the past year, equalling to over 26,000 new residents. All of this puts sustained upward pressure on sales prices.
When comparing percentage of sales in price brackets for the North Shore in the pie charts below between 2010 and 2015, the change is highly visible. In 2010 61% of sales made were under $600,000, compared with only 9% now. The $600,000 – $800,000 category has stayed stable with 23% and 28% of sales respectively, but the gaps opening up are obviously in the higher value sales brackets, most notably $800,000 – $1,200,000. Sales in this bracket now make up over 50% of total sales in the North Shore following continued competition for property due to a general shortage of housing across the region. The North Shore has over recent years, become a desirable location for home buyers with the lifestyle in living close to the Eastern Coast Bays and proximity to good schools, drawing people to invest or live in the area. As a result, high levels of competition among purchasers for property brought to the market is the norm.
Spotlight on Birkenhead
Birkenhead is located on the north shore of the Waitemata Harbour to the west of State Highway 1, and only four kilometres from Auckland city centre. According to Statistics NZ, the greater Birkenhead area had a population increase of 4.2% between the censuses of 2006-2013, with projections of a 9.4% increase in residents over the next ten years to 2023. Being located in such close proximity to Auckland CBD, Birkenhead is ideal for commuters with regular bus services and ferries being advantageous, and the historic village boasting numerous hospitality options with cafes, restaurants and significant shopping options.
Properties within Birkenhead Point through to the central Birkenhead area span a range of values, offering families and investors alike differing degrees of housing affordability. In the three months to May 2015 the Birkenhead median sale price was $921,000 according to REINZ. In comparison, in the same period twelve months earlier the median was $730,000 equating to growth of 26%. Sales transactions for the same period were relatively static from a year prior with 77 sales in the three months to May. Save the typical fluctuations in the December quarter, sales volumes in Birkenhead look to be trending up after a lull in the middle of 2014 when the entire Auckland Region reported a shortage of listings as well as sales.
The Birkenhead area’s other ferry terminal location, Northcote Point, commanded a median of $1,386,000 in the three months to May 2015 equating to a 52% increase from the same period a year earlier.
Spotlight on Milford
The coastal suburb of Milford, one of the east coast bays on the North Shore located 11km from central Auckland has experienced unparalleled median price growth in the three months to May 2015. Milford’s median is now $1,236,000 up 54% over the year equating to an increase of $435,000. Sales volumes in the three months to May 2015 stayed stable on the same period 12 months earlier, although average days on the market dropped slightly from 39 down to 32 days to sell a home on average.
Statistics NZ reports that between 2006 and 2013 the population in Milford had no change however plans are in place to accommodate predicted growth in Milford and its surrounding suburbs with its area becoming a significant suburban hub. This upmarket suburb is well serviced by its town centre and suburban mall, offering substantial shopping options, as well as attracting residents with its proximity to the coast and Lake Pupuke. The marina is also a fabulous draw card when considering purchasing in Milford. Local council have a number of projects underway and in planning stages to improve on the many excellent qualities of the Milford town centre, including repairing the pedestrian bridge near the marina which connects Milford Reserve with Beach Road; with a remote controlled tilt to ensure boats travelling up Wairau creek can pass. The Milford Town Centre Plan has a focus on public space improvements with links to the key features of Milford, being the beach, Wairau Estuary, Lake Pupuke and the town centre, with a community life focussed on a central plaza.