The Waiheke residential property market has performed strongly again over the last year. Median values have increased with capital appreciation spreading to suburbs located further from the ferry terminal. Increased competition for property has seen transactions concluding at a faster rate than has been the case in recent years. The elevated levels of activity have resulted in increased confidence within the development sector leading to a sharp increase in construction activity. There has also been a positive flow on to the lifestyle market sector with sales activity reaching multi year highs.
Residential property values within Waiheke Island suburbs have continued to trend upwards over the last year with the Island’s median sitting at $680,000 as at the September quarter an increase of $54,000 or almost 9% since the same period twelve months prior. The increase in values has been attained despite a slight dip being recorded in the September quarter as has tended to be the case over recent years.
Sales activity has held at elevated levels over recent months following a sharp lift registered in late 2012. The increase in activity driven, primarily by interest from Auckland buyers attracted to Waiheke due to its many lifestyle advantages and its affordability when compared to many of the city’s inner suburbs.
This demand has, in turn, sparked a sharp increase in median sales prices following a lengthy period, post the Global Financial Crisis (GFC), when the median remained relatively stable. Between late 2012 and mid 2015 however, sales statistics released by the Real Estate Institute of New Zealand (REINZ), show the median to have risen by 40% peaking at $730,000 in June 2015. In the September 2015 quarter 75 sales were concluded which was nearly 9% less than the same period a year earlier. Sales transactions on the island hit historical lows mid GFC when during the September quarter of 2008 only 20 sales were completed. Since then though activity levels have been increasingly trending upwards with annualised volumes of sales now consistently being recorded higher than pre GFC levels with approximately 320-350 sales per annum.Property is on average selling two weeks faster than in the June 2015 quarter when the average days on market figure stood at 62 days.
The high level of demand for property on the Island combined with a lack of listings will continue putting upward pressure on values.
The increase in values is clearly illustrated by the graph below showing a breakdown of sales by price bracket. Of all sales concluded in 2015 a third have commanded values in excess of $800,000.
The rise in values experienced has seen some significant changes in the price brackets within which sales transact. The largest sector of the market in Waiheke currently is the $600,000 to $800,000 price range which accounts for almost 40% of all sales, in 2014 sales within this bracket made up only 27% of the market when median prices were marginally less. Notably all segments in excess of $1,000,000 continue to get larger, following the upward trend of median price growth and the island’s changing demographics.
With locations which provide easy access to the ferry having already experienced a significant increase in prices, purchasers have increasingly spread their search for affordable properties leading to there having been increased competition for property within a wider range of suburbs. The demand for residential property has flowed through to the lifestyle market on the island, which has seen a real lift in sales volumes in the year to date, with 23 sales having been concluded, the highest for many years. Sales in 2015 have generated a median price of $1,820,000.
Development Activity on the IncreaseThe continued high demand for property on Waiheke has resulted in a response from the development sector as illustrated by the sharp increase in consent numbers, as shown in the graph.
Annualised consent numbers are up nearly 70%compared with the same period in 2014. This increase in development activity will help to alleviate the housing shortage and the impact of high demand for properties on the island.
Although increased house-building activity means new housing supply is coming on board, the overall regional residential building consent levels are still falling short of Housing Accord aspirational levels, therefore construction activity in the Auckland region 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. The flow on to Waiheke will see a 6.1% increase in the population by 2018 and 37% by 2043 with mid range projections of the population to be 11,800 in 2043 according to Statistics New Zealand.
Following the lowering of the OCR to 2.5%, the cost of borrowing money is at historically low levels to ensure future average inflation settles near the middle of the 1-2% target range.
Still More Push Than Pull
Despite an increase in regulations surrounding the Auckland housing market the strength of current drivers will result in further value gains, albeit at a slower pace than has been witnessed over the last two years.
Measures put in place to lower demand include, mortgage lending restrictions in Auckland being tightened, new tax rules for investors and new requirements for overseas buyers. From October 1, all overseas buyers of property in New Zealand have had to 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. Since November 1, new limits on bank lending to low deposit borrowers has been in force. Property investors borrowing against an Auckland property 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.
As stated above however, it is likely that the positive drivers of the market predominantly low interest rates, population growth and a regional housing shortage will continue to hold sway over the next year resulting in continued value appreciation.