The country’s shifting residential market is leaving many asking the question, is it a good time to buy? Or is it a good time to sell? Here Bayleys looks at the lifespan of home ownership as an indication of your next property move.
Data released by research firm CoreLogic has found that the average investment property holding time in Auckland is now less than one year, with investors accounting for 44 percent of the market in Auckland and 39 percent nationally.
The research provides an interesting illustration as to how far through the property cycle we currently are, and thus providing insight as to whether sellers should sell, and buyers should buy.
Widely believed to be recurrent in nature, the property market is said to operate like clockwork. The favourable market we have experienced in recent times has been called a ‘sellers’ market’ and sits atop the clock in 12 o’clock position, while a shift in power moves the sector toward a ‘buyers’ market’ at six o’clock, indicating an easing of competition and sale prices.
Typical property cycles take between seven and 10 years to move 360 degrees around the clock, with current market indications pointing to a current position of around five o’clock – an offshoot of softening sales activity but pleasing sale prices underpinned by a pressure on supply.
Bayley Corporation managing director Mike Bayley says, “We have known for awhile that the frenetic sales activity witnessed across Auckland’s residential housing market has been unsustainable. This has been the catalyst for the Reserve Bank of New Zealand’s ‘loan-to-value’ restrictions, financial institutions tightened lending criteria and the 2015 tax-registration requirements for foreign buyers.”
“With the benefit of data in hindsight, we can now say that is exactly what the market has been doing in 2017 – taking a breather.
“Sale volumes have softened while the rate at which year-on-year house prices increase are relaxing and now showing signs of a ‘feathered’ gradual decline. This is simply a stabilisation of prices, eventual in every property cycle,” says Mike Bayley.
Data has shown that in Auckland over the last 10 years, residential property has been typically held for less than a year and between two and three years, indicating the significant role of property investment for the purpose of collecting capital gains.
Across the country however it’s a different story with properties often held for longer, most commonly selling at the three-to-four year mark or the eight-to-ten year mark indicating that sale trends are more closely related to lifestyle rather than strictly financial gains, and secondly that regional markets experience a lag time between more mature markets such as Auckland and Queenstown.
The data shows that in Auckland;
• 34 percent of properties were held for less than five years
• 25 percent were held for more than 20 years
• 20 percent were held between five and 10 years
Across the rest of New Zealand;
• 28 percent of properties were held for more than 20 years
• 25 percent were held less than five years
• 24 percent were held between five and 10 years
It is logical to assume that buying and selling property in the same market offers the same market conditions and therefore a greater risk to value gains. However those which have bought in the last property cycle, stand to better their position with a sale in the current market.
“For vendors looking to sell their residential property now… Yes, you have missed the peak,” says Mike Bayley.
“However we are still seeing the opportunity to sell in the second best residential property market New Zealand has seen this generation.”
“Realistically-priced homes continue to sell, both in the auction room and through negotiation. Meaning that if you are considering a sale, the current market conditions offer a favourable climate with value gains set to temper as we move further toward six o’clock in the cycle.