Where to from here?
As another year comes to a close, Auckland and Northland’s residential housing sector has entered into a consolidation phase after its massive growth spurt. So, what opportunities does this unlock for property owners in the year 2018?
Characterised by rolling farmlands, orchards and uninhibited beachside communities, property performance in the north has been fuelled by the dairy, produce and tourism sectors – as well as those looking for a bolthole to escape. Residential activity was more moderate than the previous year, but was still buoyant in both the first and second quarters of 2017. The region bucked the pre-election trend experienced in Auckland with exceptional outcomes for willing sellers and buyers. While volumes are down by 21% between October 2017 and October 2016 quarters, the median sales price is up 4%, or $16,30 for the region. This suggests a more discerning market, with quality property brought to market still receiving plenty of buyer appetite.
We forecast the government’s focus on regional New Zealand and the substantial investment in local infrastructure will drive long-term value gains, drawing owner occupiers, first home buyers and holiday makers from wide and far in 2018.
Emulating activity trends of the Hibiscus Coast and North Shore, the Rodney North market experienced a slowdown in activity throughout the year. However, demand for property in Rodney North has more recently picked up, and looking ahead to spring, with a new government now in place, the market seems poised to have a busy run up to Christmas.
First-home buyers and permanent residents will benefit from a shorter daily commute to Auckland’s CBD and while restrictions on property investment are poised to encourage a flurry of activity in quarter one 2018, we do not expect a dampened investor presence, or ban on foreign investment to affect property sales adversely throughout the year. Bayleys in the North’s latest research shows only 4 percent of all transactions by Bayleys in the North between April 2008 and September 2017 were made by ‘international’ purchasers.
Nestled within a diverse location of well-established and burgeoning areas of new subdivisions in Auckland’s north, the market experienced a cooling in house sale volumes throughout the year, but rebounded very quickly following the new government announcement. Activity levels have risen immediately and vendors and buyers are finally getting on with agreeing deals that a month ago didn’t seem possible.
What is interesting is the plateau in pricing as sales activity remains low, albeit we note a rising number of listings is likely to emerge in the new year. The median sale price rose by 4% overall for the September quarter to $887,500, but considering the large number of new builds in the $1,000,000-plus range in the area, this is a subdued result likely reflecting the stock brought to market at the time. Greater focus on the area to support Auckland’s burgeoning northern population will likely provide stronger sales activity in December and the new year.
AUCKLAND NORTH SHORE
A wide array of property types appealing to many different buyer segments has been a benefit for residential property activity on the North Shore. This environment has enabled sales activity to fluctuate with buyer behaviour who have had differing levels of influence from credit and lending constraints over 2017.
We expect the even spread of property type will underpin value retention for the coming year for the North Shore. Areas or property typology targeted by investors experiencing uncharacteristically sluggish activity at the moment will likely experience a rebound in activity as first-home buyers and owner occupiers fill the void. Larger homes in coastal areas such as the eastern bays, Takapuna, Devonport and Northcote Point will continue to hold value as and when they come to market, despite smaller percentage gains than reported in previous years due to the high base value.
Home to New Zealand’s largest residential growth area, Auckland’s western suburbs have thrived this year with substantial subdivisions across Riverhead, Hobsonville, Westgate and Massey proving a popular vehicle for first home buyers and owner occupiers.
Looking ahead, improved accessibility via the Government’s light rail network will create greater connectivity to the CBD with more local job opportunities created through dining, retail and commercial precincts. We expect that this prolific growth will continue throughout 2018 as property purchasers are incentivised to buy off-plan and new developments. Despite this, we do not expect values of existing property in central-western suburbs like New Lynn, Avondale and Mt Albert to be left behind. Larger, standalone homes in these areas have reported high value gains in recent years which will continue, holding appeal for families seeking proximity to schooling, amenities and the CBD.
It has been a game of two halves for Auckland’s apartment sector. Property investment has been hampered by purchasers unable to source sufficient levels of funding. However, seasoned owners and investors are still actively looking to snap-up quality property where available. Boutique apartment developments located in suburbs like Kingsland and Orakei, that are aimed at owner-occupiers, remain the more popular apartment typology. This is due to a growing number of Aucklander’s transitioning from larger homes to low maintenance apartments as well as those looking to enter a specific suburb at a more affordable entry price than a standalone property.
Residential housing in city-fringe suburbs like Parnell, St Mary’s Bay, Pt Chevalier and Ponsonby have held their value through the year’s fluctuations with purchasing appetite for quality properties remaining high. Purchasing in these locations has nearly always been above market trend due to the location, a phenomenon experienced globally with a city fringe location in proximity to a growing CBD. The popularity of buying in these areas will be the catalyst to price growth next year, albeit we will likely see a more sustainable rate of growth due to higher base prices.
Properties in the eastern suburbs of Auckland central such as those located in Mission Bay, Remuera, St Heliers and Glendowie, have performed in a similar pattern to those closer to the CBD, and the continuation of the upward trend in value growth is expected. The eastern suburbs area is one of the most affluent areas of the country, with properties located within the area commanding some of the highest prices in New Zealand. This is reinforced by the fact that the fastest growing price bracket over the last three years has been the $2 million-plus band.
Spurred on by a booming local economy which is driven by strong commercial growth around Mt Wellington, housing in Auckland’s east is in hot demand, with terraced housing developments providing more accommodation for a wider demographic of buyers. Lifestyle property sales around Beachlands, Clevedon and Whitford have experienced an unusually tough winter with changing market conditions - something we expect to change in the new year when buyers become more comfortable with new market conditions. Heading into the new year, standalone houses located within proximity to the airport will always hold value while investment-grade stock selling sub-$600,000 may experience fluctuations in demand due to the introduction of new Government policy on affordable homes. We’ll be keeping an eye on the implications of KiwiBuild for Auckland’s east – where there is a plethora of land suitable for large scale residential development.
Enjoying a significant rise in property values in recent years, South Auckland has reasserted itself as a rich source of buyer opportunity that is likely to continue over the new year. The golden triangle between Auckland, Hamilton and Tauranga where almost half of New Zealand’s GDP emanates has already focussed buyer attention in the south, but it will be driven further by the Government’s plan to abolish urban boundaries and ramp up housing construction in areas like Paerata, Pukekohe and Karaka. Significant investment in local infrastructure, coupled with improved amenities and the construction of transport hubs will see the south be the subject of many headlines in the new year for the range of properties on offer for all buyer types.
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