Short commentary on Eastern Suburbs' real estate market statistics for June 2019
Oh boy, have we not had a few foggy mornings the past few days? Are you also thinking that the real estate market is shrouded in mystery and you are not sure where it is headed? Fret not. The real estate market is not that difficult to navigate if you just focus on the fundamentals.
If you are impatient (!), you can skip to the relevant sections:
– Eastern Suburbs’ (Orakei, Mission Bay, Remuera, St Heliers, Glendowie, Kohimarama, Meadowbank, Glen Innes St Johns, Stonefields) market statistics and general observations
Auckland's property market statistics for June 2019
Compared to May 2019
Compared to June 2018
- Median price stagnant
- Sales count down 9.1%
- Days to sell remained the same
- Median price stagnant
- Sales count down 3.2%
- Days to sell increased by 5 days
Let’s have a look at headline numbers for Auckland.
Median price has actually remained stagnant which just goes to show that the Auckland market has been quite flat. While transactions are down compared to last month, it is not that far off from the same time last year and is again just a result of the winter period in Auckland where stock levels are low and taking a while longer to sell.
Watch what the Reserve Bank does to support the housing market
Keep a close watch on what the Reserve Bank of New Zealand does in the coming months.
The Reserve Bank has continued to reinforce the importance of financial stability with ongoing consultation on increased capital requirements. But of key interest is that they have also stated they could ease the current loan-to-value ratio (LVR) restrictions if ‘risks decline’.
Another very important thing to keep a look out for is the easing of serviceability requirements by the Reserve Bank – this has already been done in Australia. Readers would know that I’ve long held the view that the current market conditions are largely due to the tight financing environment of banks which reduces the amount of borrowing power that buyers have access to. 2 months ago, the Australian regulator has flagged changes to so-called serviceability requirements by allowing banks to set their own minimum interest rate floor (rather than a fixed 7%) and make their calculations using a 2.5% buffer. This seems especially appropriate given the low interest rate environment. This would then translate into stronger bidding for properties by buyers who can now borrow more – so watch whether the Reserve Bank follows suit.
All in, this should greatly improve buying prospects, and given the current low interest rates (with a strong prospect of the cash rate dropping again in August), buyers will have increasing confidence to go forward with their purchases. Migration numbers are holding up well (if not increasing again) and unemployment remains low.
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 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
The Eastern Suburbs is facing the same winter lull period as the rest of Auckland. Properties are still selling, albeit taking a while longer than previous months.
As with previous months, there is a lack of quality listings coming onto the market. There are still lots of buyers looking for family homes on full sites. That being said, buyers are also much more selective. As they no longer have a fear of missing out (given stagnating prices), they are not going to pay over the odds for something that does not fully fit all their requirements. As such, sky high prices are no longer possible but realistic market values are still being achieved.
Understanding The Property Market - what's a buyer's market and a seller's market?
Deciding the right time to buy or sell doesn’t always have to be a guessing game or a game of roulette. By getting to know the market as it stands (kudos on reading this), market trends and fluctuations and a great marketing strategy, your end goal, be it buying and/or selling, can hopefully be achieved within your required timeframe.
Buyers’ vs sellers’ market
One thing to look at when you decide to enter into the property market is whether Glendowie, Kohimarama, St Heliers, Orakei, Mission Bay or Remuera is currently a buyers’ market or a sellers’ market.
It’s important to drill down to the individual suburbs as trends can be quite different across each suburb and at different price levels
What’s a buyer’s market?
In simple terms, a buyers’ market benefits the people looking to buy a property. Generally, there are more properties on the market than buyers. Sellers are essentially vying for their attention as sales are harder to come by in this environment. Buyers can benefit through increased negotiations over price as well as having more choice and less competition regarding the properties they are looking at.
I think most can agree that we are slowly moving into (if not already in) such a market given the flat-lining of median prices in the general Auckland market over the past year and the very gentle decline in prices in certain neighbourhoods. The number of properties being auctioned is declining (and auction clearance rates can be even more so) and many vendors are preferring to pick other methods of sale. The Days On Market are increasing, as homes take longer to sell. Sales levels are low as vendors prefer to yank the property off the market and rent it out instead.
Under such market conditions, the marketing of your home becomes critically important when houses do not ‘sell themselves’– and more so than the experience or ‘negotiating skill’ of the agents. If your home attracts the buyers over other homes on the market, then you have already won most of the battle and the negotiating power swings right back into your favour. It’s just a simple case of supply and demand – have you ever paid more for something that no one else wanted? Not me, for sure.
Remember – the job of your agent is to bring the buyers and offers to you. More views = more buyers = more offers = better $. What is your preferred agent doing in addition to the usual methods to attract these buyers? Is he/she stuck with ‘old-school’ ways of listing the property in local papers / Property Press (have you seen how much they’ve shrunk) and praying someone sees it?
Or is he/she deftly employing the latest strategies to promote your property online where your buyers are? You are paying for the advertising after all – and be careful around ‘free advertising’.
They are just not worth it (that’s why they are free) and here’s why:
- Facebook is not free – it didn’t get to being worth approximately US$570 billion (yes you read that number right) without the advertising revenue. This is why the ‘number of followers’ of a page do not matter. If you don’t ‘pay to play’, the agent’s posts advertising your home will simply not be seen.
- Agents generally get ‘free’ TradeMe standard listings. But paying for a premium TradeMe listing often makes sense because they get way more views – and that’s where all active buyers look for homes online. If your new listing is buried in page 3 of any suburb, you can bet that your sale price will suffer from a lack of buyers’ interest.
- Google advertising is not free. Most agents don’t use it for various reasons, primarily because they don’t understand how it works. But they can be stunningly effective – also another reason why Google is worth approximately US$792 billion (yes, that’s the right number too). If the big brands are using it to advertise, why are you not using it to sell your home?
In short, your house needs to be actively marketed to reach as many buyers as possible in those avenues that the buyers are browsing properties (aka online). Old-school techniques no longer work as well, and the law of diminishing returns quickly set in for those.
Invest in agents that have invested their time, money and effort into understanding and mastering these platforms for your benefit.
What’s a seller’s market?
A seller’s market on the other hand is essentially the opposite. There are multiple buyers looking and fewer properties for sale. This generally forces more competition and can increase sale prices as a result. In such cases, you can stick a sign into the lawn and the house basically sells itself. In such markets, auctions are a dime a dozen as they are simply excellent methods of sale in extracting the most from buyers in a frenzied, competitive environment.
How can you make use of your understanding of these numbers and trends?
If you are selling and buying at the same time, it can be a bit of a balancing act depending on the current market environment. I’ve discussed the ‘trade-up premium’ in my previous market update and how it is declining. This is especially great for buyers.
For example, if house prices are generally on the rise this can be great for when you sell. But this also means you may be forced to pay over the odds for a property when you buy in the same market as you compete against 10 other bidders. Reversely, if house prices are low you may get a good deal buying but when you come to sell you own, it may not reach your full expectations. The trick is to maximise your sale price (but not be overly greedy) and to buy spectacularly by negotiating a bargain.
The seasonal impact
Across the seasons, you will generally encounter different times for when it is most effective to buy and sell.
Although each year can differ depending on the economic climate, generally speaking in Auckland, the summer and spring seasons are when most of the property sales occur. Even what seem like the smallest things, like extra sunlight and warmth, can affect how a house is viewed. As a result these seasons are more conducive to properties changing hands. A lot of people in the market tend to avoid the busy Christmas and New Year period.
Other factors to consider
There are many other factors you need to consider when you decide to buy or sell a property. Regardless of market conditions and current trends, you need to look at your personal circumstances. If you need to sell by a certain time for example, you don’t have a choice and that has a bearing on the method of sale. However, perhaps trying to sell earlier and having a later settlement date, instead of starting to sell close to any deadline date would be a better option.
Some other important factors that you need to consider include:
- Economic climate – is the current climate meaning people are holding onto their money?
- Interest rates – are they low and making buying an easier prospect for you?
- Neighbourhood developments – is a nearby development (for e.g. a retirement village) going to affect whether you buy a property, or how does it impact you when selling?
- Defining features of your property – is there something that sets your property apart from ones nearby? Or, is a characteristic of your property (for e.g. pools) highly sought after at the moment?
So Is Now A Good Time To...
Sell In The Eastern Suburbs?
The market is stable. This means it is a good time to sell and then buy. There are two main reasons for this
1. You know roughly what you are going to get for your property and
2. You know roughly what you are going to have to pay for the next property
Certainty in the market means it is easier to make plans for your future.
What could happen in a hot market?
Just imagine if you were selling and buying in a hot market. Sure, your property is going to sell for a good price, but you probably have to buy your next one for a ‘good’ price too. The process from selling to buying does not happen instantaneously.
In this market, the median days to sell is 45 days, with a 4 week settlement period, plus some time to look for your next house, that’s generally a 3 month period. In a rising and hot market, once you sell, you would be in a hurry to look for your next home as there is so much competition everywhere. You might end up settling for a property that you are not completely happy with because you are afraid you won’t be able to afford another one or houses are getting snapped up fast. For e.g., you could compromise on having a long driveway in St Heliers back then but now it annoys you every day.
That might mean you have to change houses again in a couple of years because you bought something that was meant to solve a short-term problem. In a down market, it is obviously not going to be good on your pockets to sell since the offers you are getting are likely to be lower every time as time progresses.
What will happen in the current market?
However, in a stable market, based on past comparable sales, you would know roughly where your property sits and how much you will get. You also have time to slowly look for the next property that you absolutely love as property prices are not going to increase drastically so there is no fear that you would be left out of the property market.
Some of my clients have looked at the current dismal market and decided that they are going to wait maybe two years for the market to improve. However, there is no guarantee that a couple of years later the market will improve. And if it did, the property you want to buy will go up in price too. The worst is if the property market declines (and you suddenly wish you had sold earlier) and now you have to absolutely sell. This will most certainly impact the final sale price as you are a ‘motivated seller’.
In short, if you are thinking of selling and buying in the same market, then a stable market is the perfect time for you.
Buy In The Eastern Suburbs?
Absolutely yes. With record low mortgage interest rates (and slated to go even lower at the end of the year), this is the perfect time to be buying. There are many deals to be had in this market as some vendors just need to move on. That’s not saying you can buy a property for half its market value (the market is not at that state) but you can definitely get more for your money in this market than just 2 years ago.
If you are in this market to speculate, then it’s difficult to say whether it’s the right time to buy. I don’t have a crystal (and if you do, pretty please tell me) and so cannot predict when the market is going to bottom out or peak. However, if you are in the market for the long term, then definitely buy now.
I believe in the strong fundamentals for the New Zealand property market and that there is still room for demand growth as New Zealand is still a very desirable developed country to live in. Plus our political realities mean that we are just not able to churn out properties quickly or build at the speed of China without all that resources and so supply will always be constrained.
So stop hesitating and go out to have a look at homes! You may find a really great gem and buy for a lot less. Don’t say I didn’t tell you this!
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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.