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Size matters in New Zealand’s residential housing market

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With more Kiwi’s looking to home ownership as a vehicle for investment as well as a home, recent data from Bayleys Research has shown that not all properties are created equal


With more Kiwi’s looking to home ownership as a vehicle for investment as well as a home, recent data from Bayleys Research has shown that not all properties are created equal, and that shifting trends in buyer behavior reveal that size really does matter in New Zealand’s residential housing market, says Bayleys head of Research Ian Little.

FOUR BEDROOM HOMES A POPULAR CHOICE IN AUCKLAND

According to data sourced from the Real Estate Institute of New Zealand’s (REINZ) latest statistics on a 12-month moving average basis, Auckland-buyers are pushing prices of four-bedroom homes upward more than any other detached housing typology.

“In the last two months we have seen a shift as median sale prices in Auckland begin to stabilise,” says Mr Little.

“Despite this, sales of four-bedroom homes across the city continue to report price increases, due to heightened competition for the preferred configuration.

“In Auckland City the median sale price for a four bedroom property has grown significantly more than that of other property configurations, now reporting a median sale price of just over $1 million, which is 10 percent higher than the overall median sale price.

“There are many likely reasons four bedroom property purchasers are most active in Auckland, however given the current emphasis on development, the likely motivation is future growth.

“Property developers have been snapping up these large family homes which are typically centred on an equally sizeable section and located in residential areas which are prime for redevelopment.

“Anecdotal evidence also tells us that younger Kiwi’s are becoming a little more adept when it comes to their property purchases.

“They’re looking to these larger sites with a view to the future, trading proximity to the city for more dollars per-square-metre, to live in now with the potential for renovation, refurbishment or resale down the track.

“Land is a hot commodity in Auckland and the demand for four bedroom properties shows that Kiwi’s are paying attention to the trend,” says Mr Little.

SMALLER STAND-ALONES FAVOURED NATIONALLY

Outside Auckland the data paints a conflicting picture as median sale prices across different typologies continue to experience growth, yet there are early signs that competition for four-bedroom properties is easing.

“Despite indicating that four bedroom properties have experienced the most growth in the four years since 2013, the data shows that nationally stand-alone properties with three-bedrooms are selling in greater volume at an average of around $400,000 which is closely aligned with the national median sale average of $428,000.”

While a trend toward larger scale properties and future development is emerging, building upwards is another.

ONE AND TWO BEDROOM APARTMENTS LEAD GROWTH IN AUCKLAND

“Despite the apartment sector growing in popularity across the country, apartment sales in Auckland city now account for approximately two-thirds of all apartment sales,” Mr Little says.

“Sales across Auckland’s apartment sector have, like the wider residential property market, began to slow, however the data shows that one bedroom property sales have rebounded following a slight dip in recent months.

“Two-bedroom apartment sales are still experiencing median sale prices rising, while three-bedroom apartment sales are starting to regress.

“Between 2015 and 2016 three-bedroom apartments in Auckland experienced a huge increase in demand, partly owing to the down-sizer movement where cashed-up retirees looked to the plethora of new developments for a more low maintenance lifestyle.

“Now with huge demand for rental accommodation we are seeing a growing trend toward one bedroom apartments which can be purchased at a lower price point and rented at yields of around five percent.

“Independent tenancy data from rental properties across Auckland city have shown that the proportion of one-bedroom properties being let has increased by 85 percent in the two decades since 1997.

“That shows a huge appetite for compact rental accommodation, and with service providers such as Airbnb giving property owners more options to create revenue, there’s plenty to justify the investment,” says Mr Little.

APARTMENT SECTOR PERFOMS WELL NATIONALLY

Outside Auckland the data shows a different story, with median sale prices across all apartment formats increasing.

“With one-bedroom apartment sales growing in popularity outside Auckland, three-bedroom apartment sales have slowed, yet both sectors still show growth.

“The success of the apartment sector outside Auckland can be largely put down to availability. Prior to 2014 apartment dwellings have not been particularly prevalent across the country. Now with population growth prompting a more lateral approach to housing, we are seeing a number of quality developments gaining favour in areas like Tauranga, Nelson and Canterbury,” Mr Little says.

“The data suggests that migration trends and product availability are having an effect on buyers’ preferences and with a new wave of developments available on the market, buyers’ have more choice extending past the traditional detached home.”

It’s evident that New Zealand’s residential housing sector is still in the throes of a ‘two-speed’ market. That is, Auckland’s property performance which has begun to steady, compared with regional New Zealand which continues to experience price gains across the board.

As well as this trend, migration continues to reach cyclical highs and the data shows that Kiwi’s are carefully considering their property choices. How many bedrooms are an increasingly important indication of what type of house or apartment they should buy and where they will get the best value for money.

One and two bedroom apartments and four bedroom houses are performing most strongly in Auckland’s current market, while two bedroom apartments and three bedroom stand-alone houses have shown the most signs in growth across the rest of the country.

“The data shows that there’s an appetite across the country for a variety of residential housing formats,” says Mr Little.

“It appears that presently buyers’ tastes are heavily influenced by economic factors and those looking to buy for capital gain should look carefully at their target area to assess its dynamics and scope for the future.”

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