Wellington residential property values have surged over recent months after an extended period, post GFC, when the market was relatively subdued. The regional median lifted by 4.4% in the March quarter and it was up 10.6% from the same quarter of the previous year, reaching $470.000. The latest quarterly figures followed a strong December quarter which saw values rise by 6.8%. The same period also witnessed a spike in transaction activity with 2,363 sales, recorded, almost 40% higher than the last 8 years’ quarterly average.
Residential Conditions Tightening
Following the rapid increase at the end of 2015, prices continued to rise and the number of sales held at high levels in the March quarter. The latest Wellington data from realestate.co.nz shows just how rapidly residential market conditions have tightened. Sales volumes for the month of March 2016 were almost 25% up compared to the same month last year as buyer activity increased. However, the total number of residential properties available for sale in April 2016 is 53% down compared to last year’s same month, suggesting there are now more buyers lining up to compete for fewer properties. Total inventory sat at only 1,078, a dramatic fall from 2,282 last year and the historic average of 2,562. This has left the number of weeks to sell the total inventory (based on current sales activity, assuming no further listings are taken on) at extremely low levels. The April figure is as low as 5.6 weeks, which fell from 14.6 weeks in only 12 months. The longer term average (8 years) is 20 weeks.
New projects to boost region’s economic development
A raft of new and proposed investment projects across the region encompassing transportation, hospitality, events and tourism provide good prospects for economic growth, job creation and support for a growing population.
The Wellington Northern Corridor – The State Highway project will play a key role in the economic transformation of Wellington by improving transport routes into the city, and from the city to the airport. With a total length of approximately 110 km, the new road will promote Wellington’s connection with other regions and unlock the economic potential of the city.
A longer airport runway – Introduction of long-distance direct air connections aims to improve the region’s ability to attract more tourists, as well as international students and businesses.
Film and screen productions – The project seeks to explore new opportunities to create a continuous flow of film projects which can be an important source of economic activity especially when the impacts on secondary sectors are considered.
Visitor attractions – The scheme encompasses the expansion of existing museums, as well as the development of a number of new museums which have the potential to attract more domestic and international visitors.
Wellington Convention Centre – The development of the purpose built convention centre has the potential to attract more events to Wellington and increase the city’s share in the conference market, as well as the international profile of the city.
New supply falling shortAccording to the latest Statistics NZ data, Wellington residential building consents for the 2015 year was up 10.9% from the previous year and sat at 1,721. The number of consents in Wellington City was 640 in the year 2015 and made up nearly 40% of the entire Wellington region in terms of residential building consents, However, Wellington City fell short of its new housing targets. The Wellington Housing Accord signed in June 2014 targeted 1,000 consent in its first year and 1,500 a year for the next four years. The accord was designed to make it possible for the Council and Government to identify Special Housing Areas where fast-track development of housing can take place with the objective to boost housing supply. The council approved 21 Special Housing Areas during the first year of the accord, however to date, developers have not responded to planning incentives and new construction starts remained below the targets.
Wellington submarket breakdown
A closer analysis of submarket trends showed that Central Wellington experienced the greatest percentage growth in the number of sales transactions between 2014 and 2015. The 31% growth rate within the city core was followed by Southern Wellington (24%), Hutt Valley (22%) and Upper Hutt (21%).
It is, however, the North Wellington area which has seen the fastest value growth so far this year with the March quarter median up by 20% compared with the same period in 2015. This was followed by Central Wellington (17%) and Southern Wellington (17%), Hutt Valley (14%) and Western Wellington (14%).
Spotlight – Central Wellington Apartments
The Central Wellington apartment market experienced strong growth both in terms of sales activity and price appreciation. Transaction numbers in the sub-market were up 52% in the second half of 2015 compared to the same period in 2014. The median sales price for the last half of 2015 reached $391,250, compared to $356,500 12 months earlier, corresponding to a growth rate of 9.8%.
Investment activity within the apartment sector is strong driven by the availability of attractive rental returns. The median rental for a two bedroom CBD apartment is $500 a week according to MBIE statistics which, when set against median sales values, generates a yield of just over 6.5%.
The City’s expanding education sector is also adding support to the apartment market. Growth in student numbers at establishments such as Victoria University is underpinning tenant demand for local apartments and expanding the purchaser base. There has also been a positive reaction from the development sector particularly in regard to conversion schemes in areas such as Te Aro.
Spotlight – Hutt Valley
The Hutt Valley market experienced a sharp increase in the median sales value over the last 12 months. Values climbed by 13.7% or $50,000 in the first quarter of 2016 compared to the same quarter last year, reaching $415.000. Annual sales activity also increased 21.8% as 1,880 sales were recorded in 2015, which was up from a 2014 sales figure of 1,543.
Spotlight – Kapiti Coast
Value and sales activity growth has also been apparent in the Kapiti Coast area. The March quarter median reached $390,000, an increase of 6.8% or $25,000 compared to the same quarter of 2015. The total number of sales in 2015 was 10.4% up from the 2014 sales number of 1,143, reaching 1,262.
The lift in activity levels and pricing on the coast have been driven in no small part by the influence of the region’s major roading projects. Once complete journey times from the Kapiti Coast suburbs to Wellington’s CBD will be significantly reduced with this prospect already leading to a lift in purchaser interest in the area.
Wellington Residential Median Price Hot Spots