Real estate points to Auckland’s dominance strengthening

Real estate data points to Auckland’s dominance only strengthening

By Geoff Barnett

Respected and independent property information company, CoreLogic, recently compiled and analysed some extensive data which backs up some real estate commentary but at the same time dispels a few commonly held assumptions.

Yes migration may have peaked but it will continue to be strong for some time. Departures have dropped off, particularly to Australia but arrivals from China, India and the UK continue to fuel the net migration gains.

Nationwide building consents have been trending down over the past decade. Apart from rocketing consent growth in Canterbury since 2011, the rest of New Zealand including Auckland has been weak with annual consents still fewer than two percent of the total housing stock.

Many were quick to promote the sales figures for the month of March as being record breaking and yes compared to any month since 2007 they were. However current overall monthly sales figures, no matter how good they sound, are still well behind the monthly sale volumes we saw in the mid-2000s. As a percentage of the housing stock, current turnover is still lower than any time pre the Global Financial Crisis.

The most interesting image CoreLogic NZ Ltd promotes are two maps of the Auckland region showing in red the number of properties worth less than $400,000 in 2005 compared to 2014. In 2005 Auckland is a sea of red while in 2014 just a smattering and mostly in the south-western part of the region.

So while it’s now near impossible to find a property less than $400,000, when it comes to the percentage of all sales it is the lower-end of market that is strong while the top end of the market is becoming less active and tracking down.

With Auckland’s annual price growth at 13.9%, it is no surprise that Auckland is increasingly dominant in lifting the country’s overall growth rate up to 7.7%. It’s certainly not being dragged up by Wellington’s annual price growth recorded at just 0.5% or Dunedin’s at 0.6%.

And when it comes to property values, the main centres outside Auckland have mostly only experienced very modest growth in their valuations since the GFC with even Christchurch levelling out.

The assumption by many is that the market is full of first-time home buyers vying to buy a house while interest rates are relatively low. However CoreLogic’s figures clearly show the biggest category of buyers remains investors at around 40%, followed by movers. First-time home buyers make up less than 20 percent. Another trend is that fewer Kiwis are up-sizing at the moment and a growing slice of the pie are people completely new to an area.

In Auckland, some of the suburbs that saw significant increases in their values in the past year include Manurewa, Papatoetoe, Mount Wellington, and Henderson. First home buyers are now nearly completely absent from Auckland’s central isthmus suburbs, where investors are increasingly dominant.

But just when you think Auckland is expensive CoreLogic reminds us that Sydney has far more million dollar suburbs and in fact multi-million dollar ones. Sydney’s ‘top 20’ most expensive suburbs now range from Point Piper with a median house value of $5.7m to Kangaroo Point at $2.2m. Even glamorous Double Bay comes in at a sluggish 9th at $2.8m.

The good news is unlike Sydney there remain plenty of opportunities in Auckland to buy a house for less than $1m within 10km of the central city and definitely within 20kms. However if, or when, we return to the giddy sales volumes and open home queues of 12 years ago those sub $1m opportunities will rapidly dwindle.

I hate to say it, but the overall trends and professional analysis all point to the fact hat in the foreseeable future Auckland’s not going to get any cheaper than it is today.

Geoff Barnett is the National Manager of Century 21 New Zealand.

www.century21.co.nz

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