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MARKETBEAT: Eastern Suburbs Residential Report - November 2016

Tags: Research Residential

Property values across the Auckland region have continued to rise over recent months while sales activity slows.

The two trends reflect the impact of the latest tightening of lending restrictions imposed upon investors by the Reserve Bank of New Zealand (RBNZ).

With investors now needing a minimum deposit of 40% their influence on the market has softened. This has left owner occupiers as the primary drivers of the market.

Within the Eastern suburbs therefore there has been less activity within the lower value sectors of the market which investors normally purchase in while owner occupiers have remained active within the upper value strata of the market. How long lower activity amongst investors will remain subdued remains to be seen. Looking back, following the imposition of the first round of restrictions, activity within the sector remained subdued from the final quarter of 2015 until February of 2016 when activity picked up sharply. It may be that we will see a similar tend on this occasion, however, it is equally possible that the 40% deposit requirement will restrict the ability of investors to engage in the market for a longer period of time.

Under the influence of the above trends the Auckland region recorded a median house price of $835,000 over the September 2016 quarter. This reflects a 0.6% increase from the previous quarter and a 10.6% increase from the same quarter a year earlier. The quarterly increase was lower compared to those recorded in March and June quarters. This can be attributed to both the winter season, where historically price increases tend to be lower, and the new lending restrictions.

The slow down in sales activity saw the volume of completed transactions declining by 25% over the September 2016 quarter compared with the same period a year earlier. While the new lending restrictions are largely responsible for the fall, the continued shortage of listings remains an influence.

The overall Auckland market remains tight, with figures from indicating that the total inventory for sale in September was only at 6,765, 35% lower than the 9 year historic average of 10,435. The number of weeks to sell inventory (based on current sales activity, assuming no further listings are taken on) are still on low levels, with the September 2016 figure being 12.4 weeks, significantly lower than the historic 9 year average of 24 weeks.

Value changes, when analysed at suburb level, are more volatile than regional movements given the smaller number of sales. Across the Eastern suburbs a strong lift in values was noted in the opening quarter of the year, when a record three month lift of over 14% was recorded by REINZ. This was followed by a slight fall in values over the June quarter, which was regained in the September quarter. The median price in the Eastern suburbs market lifted by 1.7% in the September quarter compared to the previous quarter and sat at $1,500,000. This was an increase of 8.7% or $120,000 compared to the same quarter of the previous year.

In line with the rest of the region, sales activity eased in the September quarter, reflecting the reduction in investor activity. In total 375 transactions completed compared with 481 a year earlier. However, market conditions in the Eastern suburbs market remain tight as illustrated by the fact that the average days on market figure is down to 36 days from 37 days recorded in the same quarter of last year showing that interest in the area remains strong, particularly from owner occupiers.

The number of building consents over the twelve months to September 2016 in the Orakei Ward which encompasses the Eastern Suburbs was 357. While construction activity of apartments saw a significant increase, building consents of all other dwelling types were down, resulting in an overall fall of 6.3% compared to twelve months earlier. The heightened building activity in apartments points towards a more active apartment market over future years in the Eastern suburbs residential market.

Spotlight on Parnell

Parnell is amongst the most affluent suburbs of Auckland, characterized by its tree lined streets and its hilly topography that allows for expansive views of the port, the Waitemata Harbour, Rangitoto Island and the Auckland Domain. It is a great example of a mixed density and mixed use suburb with a combination of large residential houses, townhouses and apartments sitting alongside a good supply of office and retail property. The combination makes Parnell a vibrant all-hours suburb. The appeal of Parnell is further enhanced by its location, being situated between the CBD, the Newmarket shopping precinct and the picturesque beaches of the Eastern more.

Spotlight on Mission Bay

Mission Bay is another affluent suburb of Auckland. It is located seven kilometres to the east of the city centre, on the southern shore of the Waitemata Harbour, between Orakei and Kohimarama. With its popular swimming beach located alongside Tamaki Drive, a wide range of local restaurants and cafes with a beautiful Rangitoto Island backdrop, sought after schools and close proximity to CBD, have long combined to make Mission Bay an aspirational location in which to more.

Read the full Marketbeat article here.

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