Short commentary on Eastern Suburbs' real estate market statistics for November 2019
Christmas and New Year are inching closer! Everyone is winding down for the holidays but it seems like the housing market is heating up like the proverbial Auckland summer and picking up in its activity.
Ready for the holidays and Xmas cheer? We can already see the champagnes out and popping for homeowners sitting on prime land.
If you are impatient (!), you can skip to the relevant sections:
– Eastern Suburbs’ housing market statistics and general market observations (covering Orakei, Mission Bay, Remuera, St Heliers, Glendowie, Kohimarama, Meadowbank, St Johns)
Auckland's property market statistics for November 2019
Compared to October 2019
Compared to November 2018
- Median price up 2.4%
- Sales count up 8.5%
- Days to sell decreased by 3 days
- Median price up 0.8%
- Sales count down 0.1%
- Days to sell decreased by 1 day
Auckland market as a whole
House prices are on the rise again in Auckland according to the Real Estate Institute of New Zealand’s (REINZ) latest House Price Index (HPI).
One of the most significant trends in the November 2019 HPI was the trend reversal in the Auckland market. It went from having a 0.1% monthly decline in prices in October 2019 to a 2.1% gain in November 2019.
On an annual basis, prices in Auckland were 2.1% higher in November than they were a year earlier.
That suggests upward price movement in the Auckland market after a prolonged period when prices have been flat or even declining. The RBNZ has pointed out that “house price growth has strengthened in recent months, even with high price-to-income ratios, and it is unclear how long this strength will persist.” There are also early signs that banks are easing mortgage lending standards in response to the low interest rate environment, and it’s likely the low interest rates combined with the restricted supply are leading to the house price inflation.
As with last month, we are seeing lots of properties taking pre-auction offers, selling at auction or shortly after. There is definitely a buzz in the air.
Unfortunately, the Reserve Bank of New Zealand has declined to make any relaxation of the loan-to-value ratios, recognising that the housing market is slowly heating up and there was no need (at this stage) to add further fuel to a slowly sizzling BBQ. From the RBNZ’s perspective, housing debt risks have stabilised, and the current LVR policy remains appropriate.
Eastern Bays' and Remuera's market statistics and general observations
Covering the real estate markets of Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank, St Johns, Epsom and Mt Wellington
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.
Note 3: Epsom’s and Mount Wellington’s statistics are provided for general reference for homeowners based in those areas and are not included in the overall “Eastern Bays & Remuera” numbers.
Trends in Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank and St Johns real estate markets
The proof lies in the pudding.
We’ve since sold 2 more (expensive – circa $3.2 and $2.5 million) homes in Remuera and Orakei in December 2019 so have been very busy. Happy owners, happy buyers!
What we have noticed in recent deals is that you need some creativity to get the deals through. In other words, you need dealmakers and not order-takers. What you need are real estate agents who can structure deals and come up with creative solutions for problems, rather than just running back to you for an answer and behaving like transmitters.
We are (unfortunately for homeowners) still not back at the “Fear Of Missing Out” stage in 2016 where buyers are simply buying anything that has a “For Sale” sign on. As such, strategies to market your home, attract buyers, negotiate and work with them closely become extremely important.
We’ve got new listings in Mission Bay, Orakei, St Heliers and Glendowie hitting the market at the start of 2020. So stay tuned!
Will New Bank Capital Reforms Affect Values In Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank and St Johns
Short answer – possibly but not in the near future.
Let’s face it. These areas are where the most expensive properties in Auckland are situated. As such, they are most likely affected by the demand for high-end properties, which is generally more fickle and responsive to economic and credit trends.
The increase in bank capital announced by RBNZ in December 2019 has certainly sparked a lot of consternation, especially around the bankers. And we believe the impact on the housing market is significantly understated and under-discussed.
Firstly, RBNZ has expected the impact on lending rates to be an increase of around 0.2% on average. Whether this is the actual reality is a different question. The increase could far exceed the 0.2%, and it is undeniable that any increase in interest rates will dampen market activity, and lead to decreased housing prices.
Secondly, RBNZ also expects that there will be less access to credit for riskier customers. When mortgage lending standards were tighter and banks were testing serviceability ratios at higher levels earlier this year, the slowdown in the market (both in terms of volume and price) was obvious. The impact on any credit restriction on the housing market has therefore been clear – less credit likely leads to lower prices.
Mortgage lending statistics previously published has shown that the most indebted households in terms of loan-to-value ratios carry staggering high monetary levels of debts. It is therefore possible that retail banks may consider these to be ‘riskier customers’, and restrict lending to such customers who are typically buyers of luxury properties.
So Is Now A Good Time To...
So Is Now A Good Time To Sell In The Eastern Bays and Remuera?
Market Activity Is Picking Up
More houses are selling, and selling faster as shown in REINZ’s statistics. The median days to sell is falling and the volume is increasing.
The question then is: are you ready to ride the wave?
Now, houses with very few issues have always sold well for great prices. We are slowly moving into the phase whereby houses with some issues (for example certain plaster homes in great locations and few actual issues, or houses that are down long shared driveways on steep sections) are starting to sell whereas they would have been left stale on the market 5 months ago.
This is what we call the ‘cascading’ effect – the best houses sell, reducing supply for the increasing number of buyers who are then forced to look and settle for other homes. This also explains the increase in auction clearance rates.
Will this continue through to 2020? Who knows? But if you are thinking about selling, then you need to seriously consider this window of opportunity that presents itself after a very stagnant/stable 2-3 years for housing prices.
Keep reading on for the perspective of a buyer – which you will likely be after you’ve just sold.
2 major events in November 2020
- New Zealand General Elections – 21 November 2020
- US Elections – 3 November 2020
That’s so far ahead that you might be wondering whether it’s ludicrous to bring it up. But the housing market slows down in the face of general uncertainty and typically this occurs 3 months before the elections.
Working backwards, this would mean a cut-off of August 2020. If you factor in the usual winter slowdown (unless there’s a last minute rush), we would reasonably expect the ‘heated’ property market to last as long as the hot weather – so around May 2020.
What this means is that there is a window of around 5 months, starting from January 2020 to put your property on the market and sell for top dollar.
If you’ve not got the summer projects going to increase the value of your home and sell for next year, then you better start now.
So Is Now A Good Time To Buy In The Eastern Bays and Remuera?
Warren Buffet has a famous saying: Be fearful when others are greedy and greedy when others are fearful.
This statement relates directly to the price of an asset: when others are greedy, prices typically boil over, and one should be cautious lest they overpay for an asset that subsequently leads to anemic returns. When others are fearful, it may present a good value buying opportunity.
Our views are starting to change from the previous months (where we have said that it remains a good time to be buying if you are buying your first home or upgrading, and you can comfortably afford mortgage payments).
What we believe is that the buyers are starting to become more active in the face of low interest rates and increased market confidence. On that basis, you’d expect to face increased buyers’ competition when you are putting in offers, and expect to pay more. Buyers are starting to get ‘greedy’.
But the best time to buy is yesterday. It’s time IN the market that truly matters.
Trade-up Premiums Are Increasing - Sorry, Upgraders.
Seasoned readers will jnow that we’ve covered the lower ‘trade-up’ premium previously.
What we are seeing is that the premium is starting to increase, making a ‘trade-up’ increasingly harder. Why? Simply because buyers for top end homes are starting to stay firmer on their prices (rather than discounting) as they are receiving offers from the many upgraders who have just sold their homes. Homes in the lower-end are selling much better today but the price increase is insignificant.
A Reminder To Property Investors
For buy-and-hold investors, the Government has finalised new reforms to the Residential Tenancies Act that will strengthen renters’ rights:
- Limiting rent increases to once every 12 months and banning the solicitation of rental bids by landlords.
- Removing a landlord’s right to use no cause terminations to end a periodic tenancy agreement.
- Enabling tenants to add minor fittings – for example brackets to secure furniture, picture hooks, fire alarms, doorbells, baby-proofing.
- Increasing financial penalties and introducing new tools to take direct action against parties who aren’t meeting their obligations.
In short, it will become harder to terminate a periodic tenancy in the future as landlords will have to go to the Tenancy Tribunal to provide specified reasons. How this will impact on the desirability of buy-and-hold investments on smaller investors remains to be seen, although the devil remains in the (legislative) detail.
If you have tenants on a fixed term tenancy, one suggestion is that you and the tenants should have agreed that it will not become periodic at the expiry of the fixed term – this is to prevent the new tenancy reforms from applying to your fixed term tenancy agreement (and converting it to period) and then making it harder to change tenants once it’s periodic.
Good luck with your new purchase.
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Found this post useful and have more questions?
We have detailed statistics at my fingertips, including recent sales within the Eastern Bays and Central Auckland suburbs, so do not hesitate to contact us for a no-obligation discussion over coffee on your future plans to either buy or sell.