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SOUTH AUCKLAND LIFESTYLE ANNUAL 2007

VALUES STILL ON THE UP

Median lifestyle values in the Southern and Eastern Auckland region defied the higher interest rate environment and continued their upward surge during the first six months of 2007 according to sales statistics released by the Real Estate Institute of New Zealand.

As at June 2006 the Official Cash Rate stood at 7.25% while the median value of lifestyle property in the region was reported as $665,000, which was down nearly $63,000 on the figure recorded in the six months to December 2005. It was forecast by many market commentators at the time that the higher cost of borrowing had begun to impact upon the housing market in general, and the luxury market in particular, and that a period of price consolidation was likely to follow. However, despite a further three increases in the OCR in the subsequent 12 months, raising the OCR to 8.0%, median sales values reached a new record level of $810,750 at the end of the June 2007 half year.

 

The increase in values can partly be explained by the two part make up of the lifestyle market. Lifestyle property is described by Quotable Value as; “Rural, peri-urban or recreational properties, generally greater than one hectare, that have rural residential or semi productive rural uses.” Property within this classification includes both vacant land and sections with residential property in situ. Reports from local agents suggest that as a result of sharply increasing building costs and the delays involved in progressing through the resource consent and construction process that an increasing proportion of purchasers are showing a preference for improved sites as opposed to vacant land thus increasing average sales values. This anecdotal evidence is supported by figures released by QV which show the proportion of “improved” property sold in the Auckland region as a whole to have trended upwards since the start of the current century. In 2000 improved property accounted for 62.2% of sales while in 2006 improved property sales accounted for 72.9% of the market.

There is no doubt, however, that values are also being driven upwards by the appeal of rural living which continues to draw purchasers to the area.

The latter point is reinforced by another notable indicator in the ongoing confidence in the regional lifestyle market, the resurgence in sales activity witnessed over the last year. In the six months to June 2006 REINZ reported 221 transactions the lowest total since 194 sales were reported during the last six months of 2000. During the first half of the current year, however, the sales count rebounded to 326 the first time that the 300 sales total had been breached since June 2004 which was at the peak of the current property cycle.

Sales activity has been bolstered by the area’s population growth which is amongst the fastest growing in the country.

As the table below illustrates population growth has accelerated in the last five years in all three Territorial Authority Areas. While a proportion of this growth will clearly be accounted for within urban centres there is no doubt that areas recognised as “lifestyle” centres have experienced some quite significant growth over the last ten years.