October 2018 Residential Report for the Eastern Suburbs, Auckland

Short commentary on Eastern Suburbs' market statistics for October 2018

I can see the glorious Summer break fast approaching!

In this November 2018 issue of Ruoxi’s Reflections, discover what is happening at the ground level in the Eastern Suburbs and the Auckland property market. What do all these numbers mean for you as either a SELLER or a BUYER?  Will the housing market crash? What are the latest selling and buying strategies?

Auckland's market statistics for October 2018

Compared to September 2018

Compared to October 2017

  • Median price up 1.5%
  • Sales Count down 16.7%
  • Days to Sell decreased by 3 days
  • Median price up 1.8%
  • Sales Count down 15.2%
  • Days to Sell decreased by 1 day

According to the Real Estate Institute of New Zealand’s (REINZ) statistics for October 2018, Prices continue to hold up around the country with the median price for residential homes reaching a national record of $562,000 in October – a 6.0% increase on the same time last year.

Median prices for Auckland has increased 1.8% year-on-year and 1.5% month-on-month, and number of properties sold has increased 15.2% year-on-year. This demonstrates that the Auckland housing market has picked up with the increased listings in Spring (consistent with seasonal trends) and with prices still holding firm

Median days to sell has decreased slightly to 36 days, which is always encouraging for sellers to know and adapt to the market. This is the lowest median days to sell since December 2017.

With such strong sales, the current market in New Zealand is taking a different path to what is happening in Australia at this point in time. It is also rather clear that these sales cannot just be attributed to the introduction of the ‘foreign buyer ban’ as Statistics New Zealand’s September 2018 quarter figures revealed the lowest level of foreign buyers since they have been keeping records.

The latest figures also indicate an improving market with higher levels of activity which is typical of the Spring Selling season. Although buyers are still out there looking in the warmer weather, they are definitely getting a bit more cautious about making their next purchase.

Eastern Suburbs' market statistics and general observations

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

Note 1: Suburbs with less than 5 sales (for e.g. Stonefields and Wai O Taiki Bay) will not have the median price displayed for statistical and privacy reasons. Also, note that the median price for each suburb may see large fluctuations given the relatively low number of sales on a monthly basis.

Note 2:  The REINZ uses unconditional sales data (when the price is agreed) rather than at settlement, which can often be weeks later. It is therefore more accurate and timely.

Eastern Suburbs' trends

I strongly believe that understanding the ‘neighbourhood’ market trends (i.e. at a micro-market level) is way more useful to buyers and sellers in these suburbs than the national/regional statistics. 

This time, the Eastern Suburbs have generally followed the trend across the wider Auckland region. 

Median prices on the whole for the Eastern Suburbs (Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, St Johns, Stonefields and Wai-O-Taiki Bay) have increased 6.1% as compared to last month but decreased 8.7% as compared to same time last year. The relatively high median price in October 2017 is due to a number of high profile sales in the Eastern Suburbs during that time, some to the tune of almost 12 million dollars. This will most definitely affect median prices. 

Number of properties sold have increased 47% year-on-year, demonstrating that market confidence has returned from this time last year (just prior to the national elections). Median days to sell this time is slightly longer than the last month, but it is not statistically significant.

What does this mean if you are looking to SELL?

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent
Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

The macro-economic view

If you are looking to sell but afraid that the market is going downhill, fear not because I expect prices are likely to remain stable. Why? Here’s a data driven analysis examining supply VS demand.

Demand for houses in Auckland

There has been quite a bit of doom and gloom in the housing market. One of the central arguments underpinning such pessimistic predictions is that house prices are unsustainable given the amount people earn in wages (i.e. the debt to income ratios).

However, Statistics New Zealand recently released data showing that real (i.e. inflation adjusted) incomes have improved on average about 2% per annum over the past ten years. Whereas mortgage payments as a proportion of average household income have not increased as much, being 16% in the year to June 2008 and 16.3% in the year to June 2018. Tony Alexander, the BNZ chief economist, has pointed out that the reason there has not been much of a change is because of the low interest rate environment New Zealand is currently in. 

Of course, that may change as a result of external economic events or inflationary concerns.

Official Cash Rate unchanged through to 2020

However, the Reserve Bank has kept the Official Cash Rate unchanged at 1.75% (a historical low level) and expects to stay this way for 2019 and 2020. They also expect GDP growth to pick up in 2019. And the Reserve Bank (as I’ve suggested last month) has announced that it is reviewing and possibly loosen the Loan-to-Value limits in view of current market conditions. If the Reserve Bank eases those limits, then credit will increase and so will house prices. 

Low interest rates will continue to support economic growth and employment. Low lending and mortgage rates will encourage people to spend and businesses to expand and invest.

Highest Employment On Record

Employment in New Zealand is at the highest level on record. Statistics New Zealand has also pointed that the seasonally adjusted unemployment rate of 3.9% in the September 2018 quarter is the lowest unemployment rate since the June 2008 quarter (when it was 3.8%). The population continues to grow, and the expanding economy is drawing more people into work.

Given all these factors, it seems unlikely that interest rates will rise and negatively impact the household expenditure on housing costs. This likely means that concerns over unsustainable housing prices are overblown. To put things in international perspective, the UBS Global Real Estate Bubble Index released in September 2018 put Hong Kong at the very top of cities around the globe in an overvalued bubble. That was above Munich, followed by Toronto, Vancouver, Amsterdam and London. Auckland did not even make the list.

Supply of houses in Auckland

Another reason why housing prices are unlikely to decrease drastically is simply because housing supply is constrained. Why?

Shortage of builders 

The shortage of builders and associated trades means that there is a set number of houses that can be built each year. Immigration is slowing, with the net gain in migrants being 62,700, down 8,300 from September 2017. Any hopes of skilled immigrants arriving to ease the labour shortage in the building industry will be dashed.

Housing consents not reflective of actual houses built

Many people often assume that the number of housing consents being issued (which is at the highest level since 2004 – 13,000) reflects the number of houses being built. That is a shallow analysis. This is because most construction in Auckland involves demolishing existing houses to build townhouses or terrace houses so the net addition to the stock is less than the number of consents issued. In fact, in 2016, there were 10,500 consents issued but only 6,500 houses completed in the past year. 

All the above suggest that housing supply is unlikely to increase drastically. This would in turn mean that there remains strong underlying demand (given the ongoing shortage in Auckland) to support house prices.

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

If you are currently on the market

If you are on the market selling, and there is a strong motivation for you to move, it can be a good idea (after a discussion with your real estate salesperson) to reveal to your buyers the reason for the sale. Currently, properties are sitting on the market just a little longer, and with the large number of listings on the market (typical of the spring/summer selling season), you need to grab buyers’ attention and let them know that you would not be wasting their time. This will encourage them to come to your open homes and compete amongst themselves to make offers which will in turn drive sale prices.

What does this mean if you are looking to BUY?

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

The good news for all buyers is that we are in the part of the housing cycle where the general consensus across the various banks’ economists is that housing prices in Auckland are unlikely to increase much over the next couple of years. 

The bad news is that prices will continue to climb, consistent with the long-term trend. RBNZ expects house price inflation to remain at positive levels through to 2020, albeit at lower levels compared to the red-hot period between 2012 to 2016. 

To put things simply, this means that it is a good time to be buying, especially with more housing stock to choose from. With talk of the LVRs loosening, this may create additional demand from investors and buyers who have been shut out. This will therefore mean more competition for that dream house in the Eastern Bays. Vendors are also typically more motivated to sell around Christmas – provided that you can find a lawyer around town during that time to handle the paperwork. Line your ducks up early. 

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent

Foreign Buyer ‘Ban’

Some buyers argue that the recent ‘foreign buyer ban’ (learn more about the ban here) would significantly reduce demand and therefore prices will fall in the near future. The steps taken by New Zealand to restrict such buyers are increasingly common across the world as a result of political backlash against such foreign buyers and the crowding out of local residents.

However, across the Auckland region, 4.0% of home transfers in the September 2018 quarter were to people who didn’t hold NZ citizenship or a resident visa. Even in the Waitemata local board area (i.e. Auckland inner city area) where offshore buyers have traditionally featured more prominently, only 9.8% of home transfers were to people who didn’t hold NZ citizenship or a resident visa, down from 22% in the June 2018 quarter. In the Orakei local board area (which covers the Eastern Bays), only 15 out of 555 transfers (i.e. 2.7%) were to people who didn’t hold NZ citizenship or a resident visa in the September 2018 quarter. What does this suggest? The foreign buyer ban will have little effect on house prices when there is so little of such influence (as borne out by statistics) in the first place.

Homeowners

Have you seen the latest rates offered by the major banks? All below 4%, the lowest in 2 years.

If you have not done so already, I suggest you speak to a mortgage broker soon to see how much savings you can achieve. Sometimes it might be worth it to even break the fixed term tranches as the savings could allow you to go on a holiday for Christmas!

In the meantime, catch you around the Eastern Suburbs (do not be shy to say hello)!

Found this post useful and have more questions?

I have detailed statistics at my fingertips, including recent sales within the Eastern Suburbs (or any suburbs), so do not hesitate to contact me for a no-obligation discussion over coffee on your future plans to either buy or sell. 

Contact Ruoxi for a 10-min chat today!

Ruoxi Wang, Eastern Suburbs' Specialist, ray white, orakei, mission bay, kohimarama, st heliers, st johns, glendowie, top real estate agent, new zealand premium homes, nz premium homes
Disclaimer: Yes, I am a licensee salesperson under the REAA 2008, but I am not your salesperson and this article does not create any relationship between you and me (other than reader and author of course). All the information on this website is published in good faith, for general information purpose only and should not be seen as specific financial or investment advice. I do not make any warranties about the completeness, reliability and accuracy of this information. Any action you take upon the information you find on this website is strictly at your own risk. Copyright: The material contained in this website, including property information and images, may not be used in any way without the express permission of NZ Premium Homes or Ruoxi Wang.
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