Short commentary on Eastern Suburbs' real estate market statistics for May 2019
Let’s dive right in.
Auckland’s property market seems to be suffering from winter chills. Admittedly, this winter has been mild. And the same can be characterised of the Auckland’s and Eastern Bay/Remuera’s property markets. The rejection of any capital gains tax and record-low mortgage interest rates are providing much-needed support to the housing market, and first-home buyers are especially active. Immigration continues to run at historically high levels.
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 May 2019
Compared to April 2019
Compared to May 2018
- Median price up 1.2%
- Sales count up 13.0%
- Days to sell increased by 4 days
- Median price up 1.2%
- Sales count down 21.8%
- Days to sell increased by 5 days
Let’s have a look at headline numbers for Auckland.
Auckland’s median price has gone up by 1.2% year-on-year and month-on-month. Sales volume has performed better than last month but compared to same time last year, the volume has decreased quite significantly. This shows that while the media talks about property prices crashing, in actual fact property prices are remaining stable.
There are less transactions simply because 1) homeowners are choosing not to come on to the market (stock levels have been falling) and 2) those that do go on the market can afford to hold out if they do not achieve the price they want.
As such, property prices have not decreased drastically and sale volume has gone down. What we are looking at is a lengthening of the median days to sell to 45 days.
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
In our neck of the woods, we are seeing less listings coming onto the market. Buyers are lamenting a lack of stock, especially for family homes. On the other hand, there have been more off the plan townhouses and apartments coming to the market, making the Eastern Suburbs a more affordable area for many first home buyers.
So Is Now A Good Time To...
Sell In The Eastern Suburbs?
Potential Insurance Hikes Affecting Home Prices?
Insurers have within the last year upped the ante on risk-based pricing, using more granular data to more accurately charge customers for the risks they pose. According to the RBNZ, “owners of particularly high-risk assets should be aware that their insurance costs are likely to rise and the level of cover that they can obtain may become more limited in the future.”
From a real estate perspective, points to consider would be (1) resale-ability of such properties and (2) the resale prices.
Homeowners would know that having insurance cover is a pre-condition to getting a mortgage. Therefore where insurers are making it difficult to provide insurance to particular areas or at high (or even prohibitive costs), the buyers’ demand for such houses naturally shrinks.
As such, RBNZ predicts that the effect of higher insurance costs will be to permanently lower the price of properties which experience (or on the part of potential buyers are expected to experience) a big hike in annual insurance costs. This is already happening in other parts of the world (such as flood-prone Florida) as insurers (and re-insurers) seek to fully price in the true risks in staying in particular areas. (Of course, whether
Why is this particularly relevant to the Eastern Bays? Simply because many gorgeous waterfront apartments and properties along Tamaki Drive are prone to floods, being so near the coastline. And given the changing climatic patterns, this issue is likely to raise its head even more in the coming years.
If you are an owner of such a property, an examination of potential insurance hikes on your future household finances may be necessary. And a potential disposal of your property may certainly be an option in the near future. Continued coverage of this issue in the media (in the absence of actual significant price hikes) may put buyers off. However, the enviable lifestyle of occupiers of waterfront properties is undeniable – there will always be demand for such properties. The only question is – how much demand?
The Trade-Up Premium for Houses in Kohimarama, Glendowie, St Heliers, Orakei, Mission Bay & Remuera
Growing family, changing needs and looking to expand? Let’s talk about the trade-up premium?
CoreLogic’s statistics have shown that the price gap between 3- and 4-bedroom properties has fallen in many parts of the country over the past year, suggesting that it’s become a bit easier to ‘trade up’.
What’s the trade-up premium?
The trade-up premium is the difference in median values between three bedroom properties and four bedroom properties (or the extra money that needs to be found for somebody to move up from a first/starter home into their next step up the ladder). And the trade-up premium has shrunk in the past year.
As you can see in the chart below (courtesy of CoreLogic), three bedroom properties have ‘outperformed’ four bedrooms in many areas over the past year – for properties in Auckland City (where Kohimarama, Glendowie, Mission Bay, Orakei, St Heliers and Remuera homes are) and on the North Shore, this has just meant smaller falls in median property values.
So now looking at the actual trade-up premium itself (see graph below), this translates into “a sizeable fall in Auckland City and the North Shore”. In other words, larger properties have become relatively cheaper (compared to 3 bedrooms) in these areas over the past year, suggesting it’s become a bit easier to trade up.
Of course, like what I have mentioned in previous market updates, bank lending remains a drag on buyers’ activity. Therefore whether potential upgraders can actually take advantage of this situation is a different matter.
Why? Because they will still need the required equity (at least 10%) of a more expensive home, and show that they can service the larger mortgage. The serviceability requirement has been a difficult one to navigate, given that the banks continue to impose strict income/expense testing, as well as needing to be satisfied that borrowers could service their new, larger mortgage (after trading up) at theoretical interest rates of 7-8%.
CoreLogic’s Buyer Classification series is recording a relatively low market share for movers (i.e. existing owner occupiers who are relocating) at present. In other words that they’re tending to sit tight and perhaps renovate their existing property at the moment, rather than move (see the third chart). This is also borne out by mortgage lending statistics published by RBNZ which has not really expanded over the past year.
Of course (as CoreLogic noted), this may not necessarily be due to restrictions on credit. It could just be a choice for some would-be movers, especially those who may have bought recently and are not keen to have a ‘paper loss’ actualise on the sale now, even if they can make a bigger ‘gain’ by upgrading cheaply.
This is pretty much the psychology of ‘LOSS-AVERSION’ at play – where participants prefer to avoid a loss (lose for e.g. $10K on a sale) rather than make a gain of $50K (buy a bigger 4 bedroom house for a lower trade up premium of $350K, compared to $400K which they would have paid in 2018).
In a bit more detail, the biggest fall in the trade-up premium (across the areas looked at here) has been on Auckland’s North Shore, where the value gap has dropped by $53,000, from $283,000 to $230,000 (that’s nearly 20%!). That remains high (in terms of numerical figures) by the standards of most other parts of the country. But the trade-up premium is still the lowest for the North Shore since 2015.
Bargain hunters who are upgrading to bigger homes in the North Shore should certainly be out in force.
What Does This Mean To You If You Are Selling Your Home In The Eastern Bays or Remuera?
For SELLERS who are DOWNSIZING from such larger homes, here are some points to consider.
Someone’s (i.e. a buyer’s) gain is likely to be your pain. And this is an unfortunate fact of life. But this goes back to the point I made earlier about buying better in this market.
If you are downsizing and buying a smaller home, someone who is selling that smaller home is also incentivised to upgrade and may be willing to sell for less. Just think about your motivations for selling – including the maintenance and upkeep of a larger family home that no longer fits your needs – and weigh that against your personal financial situation.
You of course want to maximise your chances of success. So my pointers for buyers who are upgrading below applies.
But for downsizers, you really need to think carefully about how your home will be presented and balance that against over-capitalisation/spending on renovations. If your home is in serious need for refurbishment, you need to measure the cost of such refurbishment and the final sale price, and compare that with the final sale price if you sold ‘as is’. Many times, you may find that the expense, effort and risk in doing up that dated home just isn’t worth it.
Talk to me today, and I can best advise on what buyers are looking out for and whether it’s worth it to refurbish and renovate. What do you lose? Worst case – you will receive free advice from me.
Oh and one last thing: be careful around appraisals. Overly high appraisals are nice to receive. But a house is really only worth what it says on a signed agreement by both parties. Wouldn’t you agree?
So you need to consider this. Do you really want to suffer through the sale process when such overly high, aspirational appraisals do NOT actualise?
But the real estate salesperson who gave me a high appraisal said “it’s all about finding that dream buyer who will fall into love with your house and pay that premium price”?
Sure. And I’ve got a bridge to sell to you.
Absolutely, there will be a dream buyer who will pay the right price – but that’s known as the MARKET PRICE. Is it really likely that someone, in this age and in this market, armed with public information about recent sales from TradeMe/Homes.co.nz, will pay over the odds for your house? Sure, if it’s architecturally significant and in a fantastic location with seriously stunning views. But even then, it wouldn’t be unlikely to be over the odds because there are always market comparables and buyers today are far more savvy and do more research (which is widely available). Just like you would.
It’s nice to dream. And of course you can always reduce your price expectations during the campaign. But you know what will really cost you? Time on the market.
The LONGER the listing is on the market, the more likely you are going to take a BIGGER HIT ultimately. Buyers will assume (1) something is wrong with the house or (2) the vendors are unrealistic. And they will do 1 of these 2 things: (1) not bother showing up or making any offer (even if you would have accepted the reduced amount then) or (2) demand a huge discount because they think the bargaining power is with them. In the absence of any real buyers’ demand for your home, asking for the ‘premium price’ will be very far at the back of your mind at that stage.
So what should you really consider?
Why not choose someone who has a great marketing plan to maximise your success, gave you a REALISTIC appraisal, sell SUCCESSFULLY at the same realistic price in the end and save yourself a whole world of time, pain and anxiety (not to mention avoiding the sour taste of being lied to)?
Real estate salesperson cannot conjure up buyers (I wish!) or make them pay for what they don’t wish to pay for. After all, the salepersons are not the ones buying your home. Period. It’s not even about negotiating skill (how do you objectively measure that?). Surprise – there are even real estate salespersons who fail to sell their own homes in this market.
Give yourself the best chance of success, not by choosing the real estate salesperson with the highest appraisal, but by utilising the best possible marketing plan and attracting the most number of buyers with a solidly executed campaign.
And with that, the price you want will accordingly be taken care of when there’s plenty of buyers’ demand.
Buy In The Eastern Suburbs?
My advice to BUYERS WHO ARE UPGRADING (and of course would be sellers) based on the trend around the trade-up premium?
– The helpful CoreLogic analysis effectively highlights that now may be as good a time as any to upgrade to a bigger property (obviously provided it’s still affordable). Hence you should think carefully about your needs and motivations for moving. If you can afford it, the bank is willing to lend money to you and you feel like you have ‘outgrown’ the home, then you should seriously consider moving. After all, you are going to make a ‘gain’ when you buy, compared to a much smaller actualised loss (if at all).
– Remember – location is key. Houses can be fixed later but location (and the surrounding amenities) can’t be.
– If you can sell for the same price that you have bought at in the past couple of years (or even suffer a small loss), then it’s still a win all round if you can buy well.
– If you can sell for a higher price than you have bought, then there’s little point in reminiscing what it ‘could have been’ if you have sold last year or the year before (and remember – you would have paid a higher trade-up premium so would you have actually gained?)
– Selling first and then buying unconditionally puts you in the best possible position to leverage your buying power and therefore pay as small of a trade-up premium as possible. I am increasingly seeing vendors take offers that are lesser in value but with less/no conditions – basically, they are exchanging money for certainty. In this lending environment, it would be hard to blame them and often, the first offer is really the best offer.
– Finally, when selling your home, you really want to maximise your chances of success. Be realistic about pricing (see points 1 and 2 above). And you want to maximise your chances of success by making sure your house stands out from the crowd when there’s plenty of unsold housing stock in the market.
What does all this mean? This means you should really think about your choice of real estate salespersons and fully assess whether they are on top of current marketing/buying trends and go to where your buyers are. Don’t just go for someone who does not have a proven marketing advantage or is a family friend. Or dropped you some random leaflet. Or knocked on your door over the years.
To maximise your chances of success and strengthen your negotiating position, your house needs to be in front of as many buyers as possible, and of course at a reasonable cost (you wouldn’t dream of putting your house on TV, would you?) That means you want your real estate salespersons to be able to fully utilise online platforms like Facebook and Google – because just being on TradeMe today simply isn’t enough when there are tons of listings on it.
A coherent modern marketing plan that showcases your home in the best possible light in front of the largest audience in the most cost-effective way can truly make a difference in your sale price. Talk to us today and learn how we can maximise your chances of selling for more WHILE COSTING LESS. Magic, isn’t it?
What else is in buyers' favour when buying houses in Kohimarama, St Heliers, Orakei, Mission Bay, Glendowie or Remuera?
- Record low mortgage rates (and looking to go lower in the foreseeable future)
- Increasing levels of stock in the market as houses take a longer time to sell
- Speculation around easing of loan-to-value ratios by the Reserve Bank of New Zealand – this translates into lower deposit requirements
- Speculation around the easing of credit assessment (i.e. serviceability ratios) like our Australian counterparts
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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.