The Ponsonby and surrounds residential market, encompassing Freemans Bay, St Marys Bay, Herne Bay, Westmere, Pt Chevalier and Grey Lynn, saw a sharp increase in values over the June quarter of 2017. The local market has outperformed that of the wider region as a whole where median prices have plateaued following the imposition of loan-to-value restrictions and tighter credit assessment policies. The median sales value within the Ponsonby and surrounds market lifted by 4.2% in the June quarter, reaching a new record of $1,550,000. When compared with the same quarter a year earlier, the lift in the median sales price was 6.9% or $100,000. This compares to a 2.4% increase in the wider Auckland region over the same period.
In line with regional trends the Ponsonby and surrounds market is experiencing a slowdown in sales activity. There were 187 sales completed in the local market over the June 2017 quarter, down 24.9% compared with the same quarter a year prior. On an annual basis, the year ending June 2017 period saw a fall of 14.2% compared with the same period in 2016. The fall in the Auckland region’s sales numbers was 21.8% over the same period. This slowing of activity has resulted in Auckland’s total inventory of property for sale edging up from its historical lows, as illustrated by the adjacent graph. The weeks to sell inventory of Auckland (based on current sales activity, assuming no further listings are taken on) sits at 21.2 weeks as of June 2017, close to the region’s longer term average, compared with 9.5 weeks recorded in June 2016.
While the tightening in credit conditions has resulted in a softening in the market, values in the Auckland region remain at elevated levels. Looking ahead, the underlying fundamentals which triggered the unprecedented levels of value increases in the Auckland housing market over recent years, remain unchanged. Migration remains at record levels and new home construction continues to fall short of the numbers required. As a result Auckland’s housing shortage continues to widen. Interest rates remain at historically low levels with there being little prospect of these rising significantly in the near future. The national and local economy continues to perform strongly supporting the employment market. The market fundamentals therefore remain very strong and demand is being restrained only by restrictions on lending. Under these circumstances while activity levels will remain under pressure values remain well supported.
The appreciation in values witnessed over the recent years in the Ponsonby and surrounds market has had a profound impact on the relative share of different price brackets within the overall market. According to the 12 months to June 2017 sales figures, properties selling for over $1.5M now constitute almost half of all sales. The most noticeable change was observed in the $2M+ value band, which has almost doubled its share in two years and now constitutes 24% of all sales. Consequently, value bands below $1.5M have seen a decline in their share in sales. Among these, the below $1M sector had the most notable fall and now only forms 27% of sales.
On a suburb level, Herne Bay, as usual, achieved the highest median price over the 12 months to June 2017 period with an annual median of $2,335,000. Herne Bay was followed by St Marys Bay and Westmere which recorded median prices of $1,900,000 and $1,772,000 respectively. These three suburbs also had the lowest number of transactions which is a typical attribute of higher priced markets. Grey Lynn was the most active market and made up 31% of all sales by volume followed by Point Chevalier and Freemans Bay. These three suburbs have collectively constituted more than 60% of all sales in the local market.
Suburbs within in the local market show variations in the distribution of property types being sold. Sales within Freemans Bay over the 12 months to June 2017 were dominated by apartments which formed 46% of all sales. In all the other suburbs, stand alone houses constituted the majority of sales. The number of apartment sales recorded within the area has fallen significantly over the last year reflecting the tougher lending environment within which investors are currently transacting. The number of apartments sold in the local market were down 23.1% over the 12 months to June 2017 compared with the same period a year earlier.
The number of new residential building consents issued in the Waitemata and Gulf Ward, which encompasses Ponsonby and surrounding suburbs, clearly reflects council’s policies towards higher intensification with sharp increases in apartment consents over the past few years. The ability of the development sector to further increase activity is, however, being adversely impacted by stricter credit policies which is making the sourcing of development finance harder. This compounds the problems which the sector has faced in terms of capacity constraints and, as a result, means that the regional housing shortage will remain in play for an extended period of time.
SALES HOT SPOTS – Ponsonby and Surrounds Residential Sale Prices (2017 HY1)