There has been talk of interest rates going up, house prices slowing and of immigration putting pressure on the housing market in Auckland. We asked local real estate office managers to give their opinion on the current market: the forecast regarding interest rates, trends for house prices, supply and demand, rental affordability and other influences.
BARFOOT & THOMPSON, PONSONBY
The forecast for interest rates is to remain reasonably steady over the year and they are still low in comparison to years ago with affordability at a good level. Many buyers in Ponsonby are looking for their family home or home of residence, hence it
carries emotion.
We have evidence of properties slowing, with the number of days on the market pushing out, and we are seeing evidence of fewer buyers on properties. Auctions are still the preferred method of sale but there may only be one or two bidders at the auction.
For many years there has been little or no correlation between rental levels and property values in the central -west suburbs and most local landlords consider their investment to be in the capital of the property rather than the rental return. The local market has followed the city trend overall of rental levels increasing but not at the same percentage gains as many southern and eastern suburbs have seen over the past few years. Our rental stock levels have remained stable and have actually increased over the past few years with the completion of numerous apartment buildings and generally there is good supply covering all price points from entry to executive rental properties.
People migrate to Ponsonby/Western Bays for various reasons but lifestyle and close proximity to CBD are two key factors.
BERNADETTE MORRISON
BAYLEYS, PONSONBY
Sales growth across the market has eased, but this mustn’t be mistaken for sale values, which continue to climb. Strong demand continues to propel the Ponsonby property market, and the area is consistently touted as one of Auckland’s hot-spots, demonstrated by the new record median sale price of $1,477,500 in the last quarter. Given the upward trend of million-dollar sales and the DNA of sales in the area, we have avoided the same degree of flattening as the wider domestic market.
The unprecedented sales growth experienced last year (and conditions implemented for control), along with a continued shortage of supply and degree of financial uncertainty has had a tentative effect on buyers and sellers, who are seeking encouragement to dip their toes into the market. However, our sales team adapts, and in more challenging markets clients look to engage salespeople with skills, knowledge and networks rather than those with the lowest fees.
Predominantly owner-occupied, the greater Ponsonby rental market is not a target for investors. However, it is interesting to note that our rental division has reported a surge in tenants seeking executive accommodation (more than $1000 p/w). While properties commanding such high sale prices do not always make for a favourable return on investment (ROI), the emerging wave of developments is certainly helping to satisfy the appetite for rental properties.
Alongside immigration, construction delays are mounting pressures on existing housing stock with
a host of sub-issues including the shortage and rising cost of skilled labour, cost of materials, tightened lending criteria, existing infrastructure and its inability to meet demand (think sewage in Coxs Bay).
Unlike East Tamaki, Glen Innes and Hobsonville - Greater Ponsonby has not been earmarked for extensive intensification, and sprouting developments are supplementing the local market rather than underpinning it. This has had a positive effect on local sale values which continue to plough upward as the area remains exclusive, desirable and competitive.
STEVEN GLUCINA
L J HOOKER, PONSONBY
The property market has experienced at least a 10% drop in activity since the lending criteria changed late last year. The number of new listings were up 17% in January this year, compared to last.
Banks have certainly put up more hurdles for buyers to jump over. However, to off-set this over 70,000 migrants came to live in the country last year, interest rates are still relatively cheap (although expected to rise) and around only 6000 new homes were built in Auckland last year.
Builders can’t get them up quick enough and the Unitary Plan has opened up some great opportunities, as some property owners now have the right to subdivide their properties in some areas in Grey Lynn, Pt Chevalier, Mt Albert and Sandringham.
The demand is still high for well-presented character homes, or stylish town houses and funky apartments, especially in the central suburbs of the city, in preferred school zones, with good motorway access and on the transport corridors. Property has always been about location though!
Current statistics* show that 46% of the properties were sold to buyers with more than one home, 26% are buyers who have sold one and moved to another, 20% are first home buyers who have required
a mortgage and the balance, 8%, are new buyers coming into the market and paying cash, with no mortgage required.
This may all change with the General Election, which is less than six months away, especially if there’s
a change of political power, who will know what will happen if the bright line test was moved out to five years? Housing will certainly be a hot issue with the politicians leading up to 23 September.
If sellers are considering a decision, my advice would be sooner rather than later! As many buyers will be procrastinating about buying a month or so out from the election, we have all seen this happen in the past, and if there is a change of government, it could be another couple of months before everything settles back to normality... then it may be Christmas card time and 2018.
Rentals still remain very strong and the demand since the start of the year has been phenomenal, rents have certainly risen with numerous applications for landlords to choose from. Many investors are only seeing perhaps a 2% return on the current value of their investment property and will soon be facing extra costs like insulation to make their rental properties comply with pending legislation.
Many younger folk have faced the inevitable in that buying a free-standing home in the central suburbs is
a hard goal to achieve, especially without two very strong incomes coming in to support the large mortgages that are now required.
Some buyers will be also relying on good family support, like relatives deciding to give with a warm hand and not with a cold one later on and we're seeing the younger generations enjoying inheritances much earlier than before. We have seen some buyers who started their property search three years ago in suburbs like Grey Lynn and they are now looking in New Lynn and beyond. Most have regretted standing back waiting for a downward ‘correction to happen’, only to watch with disbelief, as the market has continued to rise well beyond their budgets.
*Core Logic NZ Ltd
ROSS BRADER
PROFESSIONALS SELL REAL ESTATE LTD
Interest rates have come off their lows, with banks now increasing floating rates even though the OCR is static. However, HSBC are still offering 3.99% fixed for 18 months. The higher rates go, the less affordable mortgages will be - house prices accelerated as interest rates plunged and will probably level off, or perhaps result in a lower rate of increase over the next 12 months.
Homes that tick the boxes still achieve premiums with multiple offers presented, and in some cases still sell under the hammer, whereas homes with issues are taking a hit. We’ve certainly noticed lower-priced 'investor' properties have less demand, with the 40% deposit requirement in place. The upside is that some first-home buyers and those with lower budgets can get into the market without competing with investors.
As a result of the new rules, higher interest rates and banks setting stricter criteria, we’ve changed the way we market homes. The majority of auctions are failing to sell and we’ve had to go back to asking prices or proven negotiation methods. We’re now presenting conditional offers and subject to sales and although they may take a little longer to conclude, sellers have been happy with the outcomes. Sometimes great results take time and we’re back to negotiating sales, rather than just leaving it up to the auctioneer.
Rents have increased so landlords who purchased years ago will be feeling smug, but returns on rentals, if buying today, are so low it’s difficult to make anything stack up with the 40% rule also a barrier.
Immigration is one factor that will push rentals higher and prevent house prices from falling, and motorway traffic due to increasing population is getting worse by the day. So the inner city suburbs from Ponsonby to Pt Chevalier will no doubt become even more desirable due to the shorter commute.
SIMON DAMERELL
RAY WHITE, PONSONBY
The residential real estate market, like many others internationally, is in a state of flux and as with anything where uncertainty prevails, nervousness abounds.
The banks, implementing Reserve Bank policy, have greatly tightened lending criteria.
The obvious aim is to dampen demand in an attempt to bring prices back to a more 'affordable' level. World economic and political events also create a degree of uncertainty and this is adding to the general state of nervousness. This is affecting housing demand.
On the other side home owners aren’t 'trading up' so the supply of homes has also decreased, thereby putting a degree of balance back into the market demand/supply equation. We predict prices in greater Ponsonby and other city fringe areas will remain strong into the foreseeable future as the factors making this one of Auckland’s most liveable neighbourhoods haven’t changed.
The trend is likely to be fewer homes sold, longer days on the market, but prices at worst, holding at current levels or rising more slowly than over the past few years.
The tightening the of supply of money also affects developers, so the supply of new apartments is also affected. We predict that the increased supply of new apartments will be largely met by those people who have, so far, not been able to afford to purchase in and enjoy all greater Ponsonby has to offer.
Auction clearance rates have declined as a result of financial and political uncertainty also. However, the figure at which auctions are passed in, gives a transparent indication to buyers as to where negotiations need to commence, post auction, and such properties are frequently sold within a short period after the auction.
Our observation is that expat Kiwis are returning to New Zealand in far greater numbers than previously seen, often moving into properties which they had rented out in their absence. This is displacing tenants, adding pressure upon the private rental market.
As frequently occurs when there is negative employment, financial or housing data, new migrants become the focus of people’s anxiety and blame. The facts are that there is little evidence to suggest new migrants are playing any significant part in our tight local housing market.
JONATHAN SISSONS
SOTHEBY’S
All economic indicators predict that the interest rates will increase. However, it is important to note that interest rates are still historically low. The recent and the predicted future increases in interest rates tend to have a greater impact on first and second time home buyers but has less effect on the higher -priced properties more typically found in the greater Ponsonby and Western Bays market.
Property prices continue to achieve new records. However, the growth rate has slowed compared to last year and the days on market are slightly longer. Some buyers have advised that they believe the market prices will drop and are prepared to wait and see. Yet immigration figures continue to be high, increasing the demand for inner city properties. The demand continues to outstrip supply therefore keeping prices high.
New Zealand Sotheby’s International Realty brings a bespoke approach to each property we market. Ensuring no stone is left unturned to find the best buyer for each property. This includes advice in presentation, photography and advertising.
The depth and strength of the brand is unparalleled with extensive reach internationally with 880 offices worldwide selling $95 billion in property last year.
We have an exceptional number of referrals from our international network being a combination of expats from Australia and Great Britain returning to New Zealand to new immigrants from Asia and more recently there has been a huge spike of enquiries from the United States of America.
For example, this morning I received a phone call from a family in Denver, Colorado who are looking to immigrate to New Zealand and want to buy a home in the inner suburbs of Auckland.
All buyers both domestic and international are attracted to the convenience that inner city suburbs offer with easy access to the central city for employment combined with the culture and lifestyle associated with the greater Ponsonby and Western Bays area.