Positive surge in house price expectations
Positive surge in house price expectations, with Auckland
the big winner
December 18, 2019
A wave of positivity has swept the nation’s housing market, with the latest Colliers International survey finding a significant lift in price growth expectations over the next year.
A net positive 41 per cent of respondents to the quarterly Residential Property Market Outlook Survey expect the median residential property price to increase in the next 12 months.
This is up from a net positive 18 per cent in the previous quarter, and the highest national score since the March 2017 quarter.
The net positive score represents the percentage of survey respondents who expect the median price to increase versus decrease over the next 12 months.
The survey, released today, also found positivity has returned throughout New Zealand. For the first time since the September 2017 quarter, all 13 regions achieved a net positive score.
Queenstown remains in first place with a net positive score of 63 per cent, while Tauranga/Mount Maunganui remains in second place at a net positive 55 per cent.
Chris Dibble, Research and Communications Director at Colliers International, says Auckland has been the biggest winner in the latest survey.
“After a relatively sombre year, respondents are now feeling much more upbeat for Auckland’s future, pushing it to third place.
“The median price outlook for the Auckland region is a net positive 49 per cent, up significantly from the last quarter, which recorded a net positive 6 per cent.
“In addition to the surge in Auckland, median price expectations in Rotorua, New Plymouth, Palmerston North, Christchurch and Dunedin have almost doubled since the last survey.” Survey respondents were also asked what could have the biggest positive and negative impacts on the property market in 2020.
The most common positive response was low interest rates, followed by a change of government. The most oft- cited negative response was election uncertainty, followed by global uncertainties.
The survey’s release coincides with Colliers International’s latest half-yearly Auckland Residential Development Report.
The research report found 29 new apartment projects were completed in the first three quarters of 2019, with seven more expected to complete by the end of the year.
This contributed to the largest number of new units to be completed in Auckland in 14 years.
Dibble says the last quarter of 2019 is shaping up to be pivotal for Auckland’s residential sector.
“The Auckland region appears to be showing signs of life again after flatlining for around three years.
“While annual price rises in Auckland are likely to remain modest to start with in 2020, it does set the scene for higher rates of growth in 2021.”
Dibble says price rises will go hand in hand with a rise in stock to purchase.
“There’s a large pipeline of stock under construction, with around 5,000 units expected to hit the market in 2020 and 2021, with more in the marketing and consent phase.”
Dibble says low interest rates, high levels of population growth and solid job prospects have been major drivers of the recent upswing in development.
“But crucially, the Auckland Unitary Plan has been a major lever enabling this growth.
“Intensification in brownfield locations has been instrumental, especially when focused around other key attributes like infrastructure and amenity.”
Dibble says while apartment development has traditionally been concentrated in the CBD, that has been changing in recent years as more projects take shape in city fringe and suburban areas.
“Suburban apartments will dominate the supply pipeline in 2020, making up 53 per cent of all new units, compared with 33 per cent in the CBD and 14 per cent in the city fringe.
“That’s quite a shift from the status quo. More than half of Auckland’s existing apartments are in the CBD, compared with 24 per cent in the city fringe and just 21 per cent in the suburbs.” The report found investors and first home buyers provide the lion’s share of purchasing activity for new apartments in Auckland, at 40 per cent and 27 per cent respectively. Movers make up 22 per cent.
“First home buyers have returned to the market recently as more developers have matched their product with customer requirements around the likes of price and size,” says Dibble.
“While movers may reduce their share in activity, they remain a key component to the health of the sector.” In 2020, developers are expected to continue to focus on delivering more affordable apartments, catering to ongoing demand from first home buyers and the prolific number of investors.
Historically low interest rates and rising rents provide the impetus.
Dibble says we will also hear more announcements of new ‘build to rent’ projects in 2020 in Auckland.
“This is due to the solutions the sector solves for a changing demographic, ongoing increases in rents and the return of capital value growth.” A total of 4,518 responses were utilised to construct this survey.