Residential property values within Auckland’s South Eastern suburbs continued to grow in the September quarter following a sharp increase during the winter quarter. The September quarterly median hit a peak of $791,500 according to the Real Estate Institute of New Zealand (REINZ). This is a $164,500 or 26% increase from the same period twelve months prior when the median was $627,000.
Quarterly sales volumes are slightly up, with nearly 4% more homes sold compared to the same period a year earlier, concluding the quarter with 339 homes sold in the region. This follows a bumper autumn/winter sales season which saw 429 homes sold in the quarter to June 2015. Demand for homes in the area pushed median prices up an unprecedented level of 18% over April, May and June, the largest median value growth over a quarter seen in the area over recent years. Generally,the number of quarterly transactions have been trending steadily upwards since the GFC low of 170 sales in December 2008 but are yet to consistently sit at pre GFC levels where the average number of quarterly sales transacted were approximately 430.
Exemplifying the continuing demand for property in the South Eastern Suburbs and Auckland, is the weeks to sell figure i.e. the time it would take to sell the total current inventory of houses for sale, assuming no further listings are taken on. This currently sits at historical low levels of 9.7 weeks. The long term average is 25 weeks. Total inventory in the region is just over half the long term average with 6,815 homes for sale, and with 3,052 sales monthly sales, remaining well above the long term average, this explains the shortage of stock and extremely low weeks to sell after months of these trends influencing the region.
Spotlight on Mt Wellington
The suburb surrounding Auckland’s youngest volcanic peak also called Mt Wellington is located 10 kilometres from Auckland CBD. The suburb is extremely well served by transport, retail and education infrastructure which adds to the attraction of the area. The eastern train line runs through to one of the largest shopping centres in New Zealand, Sylvia Park, with the suburb also serviced by a number of bus routes, schooling includes the highly regarded St Kentigern College with the Pakuranga campus located in the vicinity.
Population growth for the suburb has been accelerating at above the Auckland regional growth pace of 8% with the number of residents increasing by 10.5% between 2006 and 2013 census. Further significant growth in the area is forecast with Statistics New Zealand predicting through to 2043 indicating growth of 1.6% annually, or an increase of 8,000 people or almost 11% by 2018.
Following steady median sales values since 2007 there has been a significant lift in values since the end of 2012, with more of a lift over recent months. The median sale value in the quarter to September 2015 hit a historical high of $778,000, showing growth of near to 39% since the same quarter twelve months prior when the median was $560,000. When comparing to the June 2015 quarter where the median was $690,000 it equates to a 12.8% lift over three months. The number of sales slowed to 97 sales in the most recent quarter, following a high of 128 sales in the March quarter of 2015. Volumes of transactions have recovered strongly since the GFC lows when quarterly sales numbers in the suburb were as low as 42. Days on market are at a historical low of just under one month to sell in the area, down from 34 days in the same period twelve months prior.
Spotlight on Panmure
Panmure, positioned near the narrowest part of the Auckland isthmus, 11 kilometres south east of the city centre has experienced similar population growth between the 2006 and 2013 census. Historically the suburb was a small, prosperous but mostly pastoral setting, due to its locality to the Tamaki River Estuary and Panmure basin, significant growth was only experienced as Auckland expanded eastwards and following connection to Pakuranga with new bridges, it is now a bustling community centre.
In seven years between census, the population increased 10.5%. Located within the same board as Mt Wellington, medium projections for the region’s future growth from 2013 out to 2043 envisage growth of 1.6% annually, or an increase of 8,000 people or almost 11% by 2018. Homeowners make up 57% of the population of Panmure, compared with the Auckland region where 61.5% of the population own their own home. Personal income for all residents over 15 is 11.5% greater than the Auckland regional median, which was $33,000 in Panmure according to Statistics NZ.
Given the above it is understandable, when combined with the regional housing shortage, that over the past year Panmure has experienced a real spike in median sale prices, with $768,000 being the median in the September 2015 quarter. This equates to a 27% or $163,000 increase in twelve months. Houses are selling in one month on average, 15 days more rapidly than the same period twelve months prior, after dipping down to only take 23 days to sell at the end of March 2015. The number of sales dipped slightly in the latest quarter with 31 properties sold in the suburb.
South Eastern Suburbs Median Price Hot Spots
Still More Push than Pull
Tighter credit controls aimed at Auckland residential property investors, the introduction of a brightline test and new regulations aimed at overseas buyers will slow the Auckland housing market in 2016. However the positive drivers of the market, predominantly, low interest rates, population growth and a regional housing shortage will continue to hold sway resulting in continued value appreciation over the year.
Although increased house-building activity means new housing supply is coming on board, the residential building consent levels are still falling short of Housing Accord aspirational levels, therefore construction activity still needs to ramp up substantially to fully alleviate the housing shortage. The New Zealand population has been growing at its fastest rate for over a decade, with the annual growth rate of 1.9% for the year to June 2015 outpacing that of Australia. In Auckland, record net migration rates have seen the population being boosted by 28,395 from migration alone.
Following the lowering of the OCR to 2.75%, the cost of borrowing money is at historically low levels. However the RBNZ has indicated there may be more OCR cuts to follow to return inflation rates within the required 1-2% range.There are headwinds ahead with mortgage lending restrictions in Auckland being tightened, coupled with new tax rules for investors. From October 1, all overseas buyers of property in New Zealand must have a local bank account and Inland Revenue tax number as well as supplying a tax number from their home country. Any capital gains from selling a residential property within two years of purchase will now be taxed, unless the property is the seller’s main home, has been inherited from a deceased estate or transferred as part of a relationship property settlement. Figures from the Reserve Bank of New Zealand (RBNZ) show that in August about a third of mortgages went to property investors. Starting November 1, the limits on bank lending to low deposit borrowers comes into force, where property investors borrowing against an Auckland property will need to have a deposit of at least 30%. Banks will still be limited to not more than 10% of their lending to owner occupiers who have less than a 20% deposit on a house, while elsewhere around the country, that restriction is being eased and banks can have 15% of their lending for low deposit borrowers.