The Wellington residential market, encompassing the Wellington City and Lower Hutt wards, continues to witness value growth in the face of high demand and a very limited supply of listings being brought to market.
While the rate of value growth within the region has slowed from the rates experienced in late 2016 new record levels have been achieved over the first half of 2017. The median lifted by 0.5% in the March 2017 quarter, which was followed by a further growth of 0.3% in the June quarter, reaching a new record of $599,500. When compared with the June quarter of 2016, this equates to a $53,500 or 9.8% increase.
In terms of sales activity, the number of sales in the June 2017 quarter was 1,174, down 14.8% compared with the same quarter a year earlier. On an annual basis, the year ending June 2017 period saw a much smaller fall of 8% compared with the same period in 2016. The decline in regional sales however, has been much more subdued than that witnessed in Auckland, in particular and the rest of the country, generally. While Wellington sales numbers are negatively influenced by tighter credit conditions like the rest of the country, unlike Auckland the Wellington market is witnessing a fall in inventory levels alongside a reduction in the number of new listings. Fewer properties available for sale means less sales and therefore the slowdown in sales numbers reflects a combination of tighter lending conditions as well as a shortage of stock. Wellington’s inventory level is as low as 6.3 weeks according to June 2017 figures released by the realestate.co.nz, making the Wellington market the tightest among all regions for the 20th consecutive month. The historical average of weeks to sell inventory in the Wellington region is around 18 weeks.
As price increases continue, properties in higher price brackets are increasingly forming a larger proportion of total sales. A comparison of the last 3 years indicate a sizable increase in the share of $1M plus properties in overall sales, particularly over the last year. According to the year ended June 2017 figures this sector of the market now constitutes 9% of all sales. The $400K-$1M band also shows a continuous increase in its relative share while the proportion of properties sold at $400K and below has fallen from 37% to 22% in only two years. Although this represents a fall of 15 percentage points, it corresponds to a considerable 40 percent change.
When the Wellington residential market is analysed on a submarket level, the Western Wellington area has commanded the highest median price over the twelve months to June 2017. Western Wellington is followed by the Eastern and Southern Wellington areas. These three areas also had the lowest number of transactions which is a typical attribute of higher priced markets. The most affordable area was Hutt Valley which was also by far the most active market and made up almost 40% of all sales in the Wellington City and Lower Hutt market despite the fact that its population is just 33% of the area’s total. The average days on market figures of various Wellington areas yield very similar results with the only exception being Hutt Valley with a slightly higher figure. All areas though have seen the days on market figure dropping over the last two years illustrating the fact that competition for a limited stock is forcing prospective purchasers to make quick decisions. In terms of property types sold over the twelve months to June 2017, Central Wellington exhibits the most diverse composition with apartments dominating the sales with a 68% share. In all other areas stand alone houses continue to form the largest segment of the market.
On the supply side, the response of the development sector to price increases has been relatively limited. The number of new residential building consents issued over the twelve months to June 2017 in Wellington City and Lower Hutt combined was 1,082 compared with 1,059 consents issued over the same period a year prior. The share of multi-unit developments in Wellington City has seen a considerable increase in the overall new residential building consents, up from 59% to 67% in the year ended June 2017 compared with the same period a year earlier. The change was largely driven by the surge in the number of new apartment consents. On the other hand, in the Lower Hutt market, unlike previous years, where new retirement units dominated development within the multi unit sector, there were no retirement consents issued over the twelve months to June 2017. As a result stand alone houses has dominated the new supply in Lower Hutt with 90% share over the last twelve months.
SALES HOT SPOTS – Wellington City and Lower Hutt Residential Sale Prices (2017 HY1)