Short commentary on Eastern Suburbs' real estate market statistics for December 2018
It’s a New Year. Time flies.
It’s very important to look ahead to 2019. With all the upcoming changes to legislation relevant to the property market (covered in the last omnibus residential report for the Eastern Suburbs), and the always-looming economic tailwinds, it will be interesting to see how the property market performs.
Undeniably, whilst 2018 has not been a great year for property owners, you should remember that the past 5 years or so have been fantastic. Home prices in the Auckland central region have been up a massive 8.3% each year on a compounded basis, proving by far and large a fantastic return on investment (especially when you consider that many homeowners are leveraged via their mortgages). As such, the current market simply means is that the frenetic pace of price increases in the Auckland real estate market have slowed. This will lead to a more stable, and ultimately more resilient, property market in the long run.
But just remember: if you only own one property for owner-occupation, you are almost always buying and selling in the same market. This means that when you sell high, you will also be buying high (relative to historical house prices even if you are downsizing).
Let’s dive straight into the December sales and reflect on how the year has gone for the popular Eastern Suburbs of Remuera, Kohimarama, Orakei, Mission Bay, Glendowie, St Heliers, Wai O Taiki Bay, Stonefields, St Johns and Meadowbank.
If you are impatient (!), you can skip to the relevant sections:
Auckland's property market statistics for December 2018
Compared to November 2018
Compared to December 2017
- Median price up 0.2%
- Sales Count down 37.4%
- Days to Sell remains the same
- Median price up 0.2%
- Sales Count up 24.3%
- Days to Sell increased by 5 days
The Real Estate Institute of New Zealand’s (REINZ) statistics for December 2018 demonstrate that the Auckland housing market remains resilient with prices increasing slightly.
To be precise, seasonally adjusted median house price for Auckland actually rose and is up 0.2% compared to December 2017. According to REINZ statistics, the Auckland City region saw an annual increase of 7.8% resulting in the highest median price for the City in six months at $986,000.
The bigger story though is that of sales – it’s not surprising that December is a quiet month in terms of sales volume as Auckland vendors disappear for their well-earned holidays. But December 2018 has been an especially quiet month of December with the lowest number of properties sold for the month of December for 7 years. Buyers are simply being starved of choices in the market, whilst sellers are refusing to budge which then leads to longer median days to sell.
Median days to sell has increased compared to last year which may explain the lower sales count as some vendors may have bought at the peak of the market or overcapitalised and are now finding that they may have to sell at a loss.
Eastern Suburbs' market statistics and general observations
Covering the real estate market of Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, Glen Innes, St Johns, Stonefields and Wai O Taiki Bay
Note 1: Suburbs with less than 5 sales (for e.g. Wai O Taiki Bay) will not have the median property price displayed for statistical and privacy reasons. Also, note that the median property 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.
Trends in Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, Glen Innes, St Johns, Stonefields and Wai O Taiki Bay real estate markets
An important point to remember about real estate prices
Here’s just to put things in perspective: house prices tend to go up in the long term.
The price of a home can go up or down, but if you look at the median price of houses in New Zealand, they typically have increased over the long term. In Auckland, the increase was even bigger, because the median house price was $429,000 in August 2008 (as a point of reference), compared to $852,000 in August 2018 – a whopping 98.6 per cent increase. As I previously mentioned, home prices in the Auckland central region have been up a massive 8.3% each year on a compounded basis for the past 5 years.
And that’s just one reason why property remains a good long-term investment. Other reasons for buying and owning your own home include the following:
- Having to pay the mortgage means that in most cases a portion of your mortgage payment goes towards paying off the principal of your loan. This helps you to build equity in your home, which can be used to upgrade or rightsize to your next home when you retire. It can therefore contribute to your retirement planning (although your eggs should not all be in this basket for liquidity reasons).
- The intangible benefit of ownership remains attractive. Assuming that there are no covenants or council restrictions placed on your property, you’re within your rights to make changes or renovate your property to your own taste. But just be wary about making it too much of your own – unless you plan to live in it forever – because it can make selling the home harder in the future. Not many in areas such as Remuera, Glendowie, Mission Bay or St Heliers will appreciate a bright purple house. There are, however, some renovations you can do for cheap and raise your home value quickly.
A flat market in good times?
What’s interesting about this current market is that previous flat periods have tended to coincide with economic recessions. But the current flat period has come when economic growth and overall prosperity has been very positive. As I’ve suggested, this is not altogether unexpected. Sellers have strong holding power and will simply refuse to list or go on the market when they have no urgent need to move.
Fitch’s view is also that the market is stable. Fitch (adopting a more bullish stance) expects annual home price growth of 3% over the next two years down from 14% in 2016. Demand for housing in New Zealand is expected to weaken as credit lending restrictions will continue to keep the number of first-time buyers and investors low. Although New Zealand’s high household debt levels (at 93% of GDP as of 2Q18) place downward pressure on prices, supply remains constrained, which along with strong, above-trend economic growth and stable mortgage rates, will keep home price growth positive.
So Is Now A Good Time To...
Sell In The Eastern Suburbs?
Everyone wants to buy low and sell high. And the law of statistics naturally dictate that this just isn’t possible for everyone. If you are selling and buying in the same market, accepting a slightly lower price to move on and buy a more attractively priced property will ensure that you set yourself up for success. After all, you make your money when you buy well. And you get to enjoy the new home that suits your needs better.
If you are thinking about selling in 2019 for a great price, what I would strongly suggest is that you examine the following key factors, bearing in mind that buyers are getting more spoilt for choice today (see below):
- Why are you selling, and what’s your time frame? The less urgent you are about selling, the better your chances of selling at a good price are. But this is subject to having a fantastic marketing plan. Otherwise, your home risks becoming a stale listing.
- What type of property are you selling? For example: is this a development site, a do-up, a first-home, an executive luxury mansion or an ‘upgrader’? Depending on the location in the Eastern Suburbs (for example some houses with sea views on Glen Atkinson Street in St Heliers or Ronaki Road / Selwyn Avenue in Mission Bay) and the relative condition, the type of property greatly affects the time on the market and the sale price. Needless to say, when it comes to real estate above $3 million, the buyer pool shrinks significantly.
- On a related note, is there anything that you should do to your house to improve the desirability to the ideal buyer persona (your house will not appeal to every one)? But be very careful about over-capitalising, especially in this market. Not everyone shares the same taste in jet-black splash-backs or an extensive outdoor deck.
- Last but not least: Not all real estate agents are created equal, and not all marketing plans are the same. In this market, you want to maximise your chances of success and not leave it to the vagaries of the general market (i.e. list and pray). Does your real estate agent have a unique modern marketing plan that can expose your house (and ensure that it stands out) to the most number of buyers?
Are Negotiating Skills The Most Important?
You may think that negotiation skills are the most important in a real estate agent. You want a tough-as-nails negotiator who can extract that extra $200K from the buyer. That’s absolutely understandable, and right – but only if and when you even find the right buyers. What good are the negotiating skills when the buyers don’t even show up?
Avoid ‘list and pray’ agents. Hiring one can really set you back in the sale of your prized home in Remuera, Orakei, Mission Bay, Kohimarama, St Heliers or Glendowie.
Choosing The Right Real Estate Agent Can Make A Difference
And don’t just take my word when it comes to choosing real estate agents. New York Times has recently published an article about choosing real estate agents (and many of those points have been echoed in my earlier article) – and concluded that the right agent (and not just a friend’s or relative’s recommendation) can make a world of difference. Highly recommended read given the general concepts.
“If you’re looking for a heart surgeon, no one says: ‘Oh, Dr. Smith is so nice. Go to him.” Why should selling your most valuable financial asset be different?
Buy In The Eastern Suburbs?
It really depends on your needs and what you are looking for.
Generally, given the overall stability of the market, buyers now are gradually having the luxury of time and choice on their side. In short, many are on a ‘wait and see’ mode and will require some nudging (all the more the choice of listing agent becomes critical). However, the supply of houses should improve as the New Year period, after the January holidays, always records a spike in listings.
Many buyers will certainly be looking carefully at the cues and policy signals from the New Zealand Government, Reserve Bank and the major banks.
Buying The Next Home For Owner Occupation?
There’s still a strong foundation to support buying for owner-occupation in this market. This includes low mortgage interest rates (and a relaxation of LVR rules for both owner-occupiers and investors), still-high (but slowing) population growth, a strong labour market without almost no unemployment and a continuing deficit of new properties being built. Building consents are still up 19 percent year-on-year but down slightly from the previous month. (Whether this is a permanent decline remains an open question.) All these point towards significant support for underlying property values.
As a ‘pickier’ buyer today, you will certainly be looking closer at possible issues such as building consents, the overall maintenance of the house relative to its age and the location and surrounding suburbs.
The recently loosened LVR restrictions will most certainly benefit first-home buyers and some investors who can now obtain a mortgage with a lower deposit.
Focusing on your buying needs can be almost as important as the price. Finding the right house can be difficult in a seller’s market with all the competition. Right now, with the lessened competition, you can consider more of your own needs and afford to be pickier. But do not expect to find a property for a bargain price unless the seller is uniquely motivated or distressed. It’s also likely that the houses you find attractive remain as attractive to others.
Buying the Next Home For Investment?
This is a trickier question to answer.
It does certainly depend on your property investment goals – for example are you looking to landbank, develop under the Auckland Unitary Plan, buy and hold for long term gains, or cash-flow focused?
Yields in the popular Eastern Suburbs have always been low given the desirability of real estate in these locations and that properties here are generally for owner-occupation.
With many awaiting the final recommendations of the tax working group around capital gains tax, implementation of healthy homes legislation changes and the ‘ring fencing’ of losses from investment properties, there is still some downside in the sails for property investment in Auckland, and especially the Eastern Suburbs.
That being said, there are some good deals to be had. There are some sellers who are motivated, and may have done the necessary surveying or planning. Developers or landbankers who are cash-rich and experienced can often obtain good deals and are undoubtedly looking. (Talk to me if you would like to be kept informed of possible deals as I speak to potential sellers on a daily basis.)
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.