Ponsonby and the surrounding suburbs comprise one of the most affluent areas of Auckland. The Ponsonby and surrounds (Freemans Bay, St Marys Bay, Herne Bay, Westmere, Pt Chevalier and Grey Lynn) market trends have generally followed those of the wider region over recent months. The local median reached a new record of $1,477,500 in the December quarter, an increase of $28,373 or 2% compared to the previous quarter. When compared to the same period a year earlier, the rate of appreciation was 11.7% or $155,000. The slowdown in sales activity in the local market also mirrored the wider region, with the number of transactions down 28.1% compared to the last quarter of 2015. Overall however, market conditions in the Ponsonby and surrounds market remain tight as illustrated by the fact that the average days on market figure in the Ponsonby market was down to 37 days from 43 days of the same quarter of 2015.
The breakdown of sales by price brackets reinforces the upscale status of the area. The over $2 million value band alone accounted for nearly 22% of all sales in the year 2016, while almost 70% of all sales were completed at above $1 million. Herne Bay was the suburb which recorded the highest quarterly median price not only for the Ponsonby and surrounds market but for the entire country, with a $2.4 million quarterly median over the last three months.
The current surge in median price levels in the local market were attained despite the increasing share of smaller properties in overall transactions. The share of residential house sales fell from 67% to 64% over the course of the year. The share of residential houses in sales over the year 2011 were 70%, suggesting that the heightened tendency towards smaller properties in the area has been long existent, but has become more prominent over the last year.
This trend is set to continue at an increasing rate as the changes in the annual building consents in the Waitemata and Gulf Ward, which encompasses Ponsonby and surrounding suburbs, illustrates, with there being a significant lift in consents for higher intensity developments while the supply of stand alone houses has remained almost constant over the last five years. Over the twelve months to November 2016, the number of building consents for all types of residential properties increased 5% compared to the same period a year earlier. Apartments accounted for 90% of new consents by number. This change is being driven by Council policies aimed at alleviating the housing supply shortage in the Auckland region and to meet the increased level of demand for smaller spaces within close proximity to the CBD as a result of housing affordability problems, smaller family sizes and change in life-styles.
Further tightening of lending restrictions for investors imposed in late 2016 by the Reserve Bank of New Zealand (The Bank) has resulted in a softening of sales activity across the Auckland region along with a moderation in value gains.
December sales statistics reported by the Real Estate Institute of New Zealand (REINZ) show the volume of sales in December 2016 to have been 1,873 across the region down from 2,225 a year earlier. Compared with the closing three months of 2015 sales activity fell by 25.1% in the final quarter of 2016.
The impact of the latest lending restrictions are well illustrated by lending statistics issued by The Bank. These show the share of all new mortgage lending to the investor category falling from approximately 38% in mid 2016 to just over 27% in November.
A similar slowdown in investor activity was seen in late 2015 following the implementation of the initial round of lending restrictions. On that occasion investors returned to the market within a few months. It remains to be seen whether a similar trend will eventuate on this occasion.
The market is however continuing to be supported by low interest rates and the regional housing shortage. Although it appears that the bottom of the interest rate cycle has been reached, mortgage rates edged up in late 2016, further increases over the course of 2017 are likely to be limited with home owners therefore, continuing to benefit from historically low interest rates for some time.
The regional housing shortage will remain a key driver of the market over the year ahead. Migration levels, currently at record highs, look set to hold at elevated levels. The development sector meanwhile continues to struggle to meet the increased demand with building consents continuing to run below the levels required to balance supply and demand.
The impact of the slowdown in sales activity on values has been less profound. While the region’s median value in the month of December dipped from the November level, on a quarterly basis, Auckland values finished the year 13.8% ahead of the December quarter 2015 figure at $865,000.
Recent months have seen a lift in the number of new listings being brought to market but despite this and the fall in sales activity the market remains tight compared with longer term averages. New listings in November and December were up on those compared to the same months of 2015. The overall position is illustrated by figures released by realestate.co.nz which show that the total inventory for sale in December was only 7,230 properties, almost 30% lower than the 9 year historic average of 10,247. The number of weeks to sell the inventory (based on current sales activity, assuming no further listings are taken on) is still at low levels, with the December 2016 figure being 15.2 weeks, significantly lower than the historic 9 year average of 23.6 weeks.
SALES HOT SPOTS – Ponsonby, Grey Lynn, Pt Chevalier, Herne Bay, St Marys Bay, Freemans Bay, Westmere – Median Prices (2016 HY2)