Fuelled by strong population growth and a rapidly expanding tourism sector, the Wanaka residential market has seen continued value growth over the last 12 months. As at the September 2017 quarter, the median sales value of the Wanaka market sat at $920,000. This latest quarterly value equates to an annual increase of 13.4% from the September 2016 quarter. When compared with the same quarter two years earlier, the rate of growth has been a remarkable 39.1%.
When quarterly fluctuations are smoothed using 12-monthly moving averages to September 2017, the sharp growth in prices since 2014 becomes more evident.
Sales activity has eased 27% over the past 12 months to September 2017 to 225 transactions, down from 310 a year earlier.
While inventory data is not available on a sub-regional market basis, the Central Otago figures provided by realestate.co.nz which encompass the Wanaka market, indicate that both the inventory for sale and the weeks to sell inventory (based on current sales activity) remain considerably below their historical averages. This suggests that the shortage of properties available for sale is playing an important role in constraining sales activity. The tight market conditions are probably best illustrated by the average days on market figures within the Wanaka residential market which was as low as 47 days over the September 2017 quarter compared to 50 days over the same period a year earlier.
The prevailing conditions in the Wanaka market are driven by strong fundamentals. Wanaka has seen a very rapid population increase over the last decade. According to the Statistics New Zealand estimates, Wanaka has a population of 8,450 as at 30 June 2017 which equates to population growth of 7.6% in one year. When compared with 10 years earlier, the population has increased by 48%. This compares with 13% growth recorded New Zealand-wide and 19% in Auckland over the same period.
While the attractive lifestyle offered by Wanaka is playing a major role in the rapidly growing permanent local population, another important factor is the increased job opportunities and economic prosperity being driven by an expanding tourism sector. Wanaka has been experiencing a record surge in the number of guest nights particularly since mid-2014. The number of guest nights for the year to September 2017 was 35% higher than the same period 3 years earlier. This is more than twice the growth experienced across the country as a whole over the same period. A longer term game changer for Wanaka tourism could be the dual operation of Queenstown and Wanaka airports. Queenstown Airport is currently working on the development options for a new and bigger terminal however, it is projected that tourism growth will exceed the airport’s capacity after which new solutions will need to be found. One proposal is sharing flights with the Wanaka airport. In line with its increased popularity as a tourism destination, Wanaka has also been drawing holiday home owners which has been an important element of increased demand for properties in the local market.
The same dynamics which are driving the local residential sales market are in play with regard to the rental sector within Wanaka. Rents have continued to reach new highs over recent months. The average weekly rent, in the September 2017 quarter, for a 3 bedroom house reached $530 according to the rental bond data released by the Ministry of Business, Innovation and Employment. This is 31% higher than the same period in 2013, an average annual increase of 7%. While the surge in rental rates supports the new house price levels achieved over recent years, the shortage of appropriately priced accommodation for the increased labour needs of the tourism and construction industry presents a challenge for Wanaka.
The impact of the value appreciation, witnessed over recent years, is well illustrated by the shift in the number of sales recorded within various value brackets. The comparison of year ending September figures shows a noticeable decrease in the share of lower priced properties in overall sales. The relative share of properties priced $500K and below, which accounted for 25% over the twelve months to September 2015 period, has fallen to 5% in only 2 years. Similarly, the share of properties in the $500K-$750K sector has more than halved over the same period. On the other hand, the share of all price brackets above $750K saw a sizeable increase. The combined share of $1M-$1.5M and $1.5M plus bands now form 45% of all sales over the 12 months to September 2017, which was up from 18% recorded two years ago.
Tight conditions in the Wanaka residential market are also reflected in residential section prices. The local market recorded a median section price of $600,000 over the September 2017 quarter. The volume of reported sales were limited to 19, making the median prices very dependent on the size and location of the sections sold over the quarter. As mentioned in our previous Wanaka report, the data does not include all “off-the-plan sales” and agency feedback suggests the actual section sales are much higher. The quarterly medians still provide a clear indication of current price trends which show a rapid surge supported by strong demand despite what has been a sizeable pipeline of sections.
SALES HOT SPOTS – Wanaka Residential Sale Prices (2017 HY1)