August 2019 – Real Estate / Property Report for Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Meadowbank, St Johns & Remuera

Short commentary on Eastern Suburbs' real estate market statistics for July 2019

With the spring selling season starting after an extremely wet August on record, we are seeing increased market activity, especially in certain buyer segments such as the first home buyers and the small investors (aka those with 2 properties). 

First home buyers are slowly coming into a force of their own, with the Reserve Bank of New Zealand (RBNZ)’s borrowing statistics showing a steady increase in mortgage borrowing by this group of buyers (from $699 million in July 2017 to $1038 million in July 2019 – which is an almost 50% increase). 

The certainty around the scrapping of the capital gains tax is starting to filter through to these investors but the lift remains relatively mild given the ongoing headwinds against residential property investment – higher insulation standards and tax ring-fencing for losses are now in force. 

We would suggest keeping a close eye on the RBNZ’s next move (probably in November) around the loan-to-value ratios and a possible further cut to the Official Cash Rate (OCR). It’s been clear that the first iteration of the loan to value ratio (LVR) restrictions in 2013 “disproportionately restricted” purchases of houses by first home buyers, whilst disproportionately benefiting investors or mum-and-dad homeowners who could access their equity to buy more houses. Given the August cut of 50 basis points in the OCR, we will not be too surprised if the RBNZ reduces LVRs, especially for homeowners, to continue to provide support to the housing market and the general economy. 

Contents

Auckland's property market statistics for August 2019

Compared to July 2019

Compared to August 2018

  • Median price down 0.6%
  • Sales down 10.6%
  • Days to sell decreased by 4 days
  • Median price down 3.5%
  • Sales count down 4.1%
  • Days to sell increased by 2 days

Auckland

The fall in prices remain relatively constrained.

The House Price Index produced by the REINZ (Real Estate Institution of NZ) (see chart below) indicates that housing market value nationwide year-on-year has lifted 2.9%, down in Auckland by -1.5% and increased outside Auckland by 6.8%.

House Price Index Auckland - Ruoxi Wang Dickson Lee NZ Premium Homes Ray White Epsom Housing Market Statistics Real Estate Agents

In Auckland, the number of properties sold in August decreased by 4.1% year-on-year (to 1,761 down from 1,837) the lowest in 4 months. August’s low level of sales probably understates the strength of demand, given that new listings are traditionally very low over August and may still yet to increase as late-reported sales are added back to the overall August figures.

The median days to sell continue to increase from 44 days (increase from 42 days in July 2019). 

For vendors who are thinking about bringing their properties to auction, Auckland’s percentage of sales by auction was at 18.8% (331 properties), down from 22.0% in August 2018 (404 properties). Clearly, the vast majority of vendors are preferring to go by methods of sale other than auctions.

The Australian property market is rebounding - will New Zealand follow?

There seems to be a rebound in our Australian counterparts. Auction clearance rates in Sydney and Melbourne has risen to around 75% and prices lift nearly 2%. This has so far come on low volumes, but they now look to be rising.

More importantly, the Australian banking regulator has loosened the serviceability standards (as I’ve also discussed in the previous market update). Under the new rules, banks will merely add 250 basis points to the rate paid in order to assess whether or not the loan is suitable for the borrower – rather than a previous flat 7%. Borrowers will now be able to borrow more in the lower interest-rate environment. Expect that market to start sizzling like the summer BBQ if the external economic environment remains benign.

ruoxi wang real estate specialist agent mission bay orakei st heliers kohimarama glendowie glen innes stonefields st johns meadowbank remuera

Remember: follow the money. Always.

As I mentioned in July 2019’s property market update, “it’s important to know that interest rate cuts are only one piece of the puzzle. The banks’ serviceability tests are the more critical (and often neglected) reason for the housing market’s slowdown.”

For the uninitiated, when banks assess mortgage applications, they use qualifying/assessment rates which can be considerably higher than the actual rates being paid (rather than assessing servicing off the actual interest rates that are being advertised) to make sure that you can afford to service the mortgage.

Therefore if such qualifying/assessment rates do not change, the actual interest rate reductions do not benefit potential buyers (other than those who already have a mortgage or are pre-qualified) who cannot qualify for such loans in the first place. 

And as predicted, the RBNZ has followed its Australian counterparts and the banks have reduced the serviceability rates. Borrowers are now reporting a larger (sometimes even up to 15%) increase to their pre-approvals. Coupled with the low interest rates on offer (one Chinese bank even has a 3.19%!), we do expect the owner-occupier segment of the market to sizzle. Smaller mum-and-dad investors may also be slowly coming back into the market as term deposit rates continue their decline and attractiveness. 

One thing to watch out in end-November is RBNZ’s announcement on capital ratios for banks which the RBNZ has been consulting on in the past few months. In the event the bank shareholders are asked to increase their stake so that they absorb a greater share of losses should their bank fail, then all bets will be off in terms of bank lending as the cost of lending (for the banks) starts to increase and filter down to the mortgage borrowers.

Another thing to watch out for is that of differential mortgage rates to account for the risk profile of different borrowers. Currently, banks do not provide different interest rates for borrowers of different profiles (other than distinguishing between investor/homeowner and low/high LVRs). There’s speculation that this is in the works and that the ‘better’ borrower (in the eyes of the lending bank) will enjoy better interest rates than a more ‘risky’ borrower (for example someone who owns a waterfront property in an earthquake-prone area and has patchy income streams). Would this reduce accessibility to finance to a significant proportion of the ‘riskier’ population given the higher interest rates that would then be applicable? Perhaps. If so, then we expect to see interest in property reducing. 

From a global economic perspective, activity in many of New Zealand’s major trading partners has been slowing as the US-China trade war drags on. Events such as Brexit and the ongoing protests in Hong Kong have added to the downside risk for global growth. Monetary policy seems to be easing, with the European Central Bank and People’s Bank of China announcing easing in credit conditions to support lending. The US Federal Reserve is also expected to cut rates further this year. How this affects underlying demand and confidence in Auckland’s property market remains an open question, but downside risks persist.

Eastern Bays' and Remuera's market statistics and general observations

Covering the real estate market of Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank and St Johns

ruoxi wang real estate specialist agent mission bay orakei st heliers kohimarama glendowie glen innes stonefields st johns meadowbank remuera

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 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

Down to the micro suburbs which we are laser focused on. Median price has dropped 20% from the same time last year. 

While it seems to a cause for concern,  sales volume has remained relatively stable so it is probably more a reflection of the fact that properties that do come onto the market and are sold are those of the lower price bracket. As mentioned earlier, the first home buyers market is still hot and in the Eastern Suburbs that’s around the early 1s price bracket which explains the lower median price. 

While there are a couple more listings coming onto the market now that the weather becomes warmer, the consistent feedback from buyers is that there is still a lack of quality stock. A number of stale or expired listings do come on again with a different or the same real estate agent (after a couple of months of no result or a year of hiatus) with no change in marketing strategy or difference in the interior condition. Is it anyone’s surprise that they continue to sit there on the market with not much interest?

So Is Now A Good Time To...

Sell In The Eastern Bays and Remuera?

ruoxi wang real estate specialist agent mission bay orakei st heliers kohimarama glendowie glen innes stonefields st johns meadowbank remuera

My advice remains similar to that in my previous market update. With the increasing number of buyers coming back to the market as set out above, now can be a good time to get ahead of the traditional summer selling season and list your property (but only if you choose the best real estate salesperson for yourself).

We are expecting house prices to remain stable in the next couple of years at least (aka revert to the 10-year average growth). First home buyers are still out in force, and we have seen borrowing capacity increasing generally to around the $1 millon mark. 

This means great buying opportunities if you are now looking to UPGRADE – either in terms of location (better school zones), size (2/3 bedroom homes to larger homes) or amenities (new pool etc) given the smaller trade-up premium (which I’ve previously covered extensively). In short, the trade-up premium is the difference you will pay to upgrade to another home.  This premium has been shrinking in the past few months as a result of the slow-down in sales (and sale prices) of higher-priced properties, making such properties more ‘accessible’ to upgraders. 

If you are thinking of DOWNSIZING or moving out of Auckland, you may be wondering whether it’s worth it to put your property on the market now. Here are 3 points you should consider:

Point 1

When selling your property, you need to remember that competition is key. Remember, when your home goes on the market, it does not go in isolation. It is always in competition from neighbouring similar properties. Right now, the market is lacking stock, especially well-presented homes. 

If your house is fantastic for a first-home buyer, then you stand a fantastic chance if you have the right marketing. My listing at 422 Ellerslie-Panmure Highway experienced fantastic buyer traffic – 135 groups through, over 13K+ TradeMe views, over 20 repeated viewings, 5 building inspections, 9 registered bidders, 50 over bids and 1 spectacular price. So when an agent tells you that the market is slow, consider if it’s the market or the marketing

If your house is on the higher-end of town, then be prepared to wait longer for a good offer, provided that your real estate agent has a fantastic marketing strategy in his/her sleeves. In this market, marketing is becoming more and more critical in ensuring a successful sale and the skills of real estate agents in this space matter.

If you are thinking of developing, or wanting to sell to a developer for a high price (learn why CV can be an unreliable guide), then just be aware that development finance is hard to come by these days. Developers have reduced appetite to be developing (and construction companies are going bust). 

Point 2

Many vendors have put their properties on the market, only to pull them off if they didn’t get the prices that they wanted and then plan to put them on again next year. There’s absolutely no guarantee that the market will be better then (if anyone is giving such a guarantee, then I’ve got a bridge to sell to you). But your life still needs to go on, and how long would you need to postpone retirement for? That being said, we are not expecting a market crash next year barring any major financial disaster, although (as mentioned earlier) downside risks persist in global economic conditions.

If you really want to make use of that extra year, I would suggest reviewing the previous marketing campaign and think about what went wrong or could have been done better. Look at the feedback from buyers and see if there’s anything that you can do to address them (for e.g. simple touch ups or renovations), provided the cost is not overly prohibitive.

The definition of insanity is doing the same thing over and over again and expecting a different result – Albert Einstein

The current market is unfortunately not the market that rewards loyalty to any particular agent or company – certainly not if you want to achieve your goals. (This is also why I work towards earning the trust of my clients each and every time, regardless of the length/nature of the relationship.)

If your agent is clearly under-performing in that previous campaign, reviewing that relationship and changing the agency can make a world of difference. You owe it to your family and yourself to pick the best real estate agent.

Point 3

Buyers are SCARCE in this market and the ‘fear of missing out’ (FOMO) is gone. A lot of effort needs to be going into nurturing existing buyers to become interested in your home.

What does this mean for you? Your real estate agent needs to be working harder and be a dealmaker (not an order-taker). Attributes such as being able to speak their language (to understand their objections and react accordingly), strong negotiating skills, tenacity etc become extremely important. We’ve all been to open homes in which the agent(s) just couldn’t care less. This is not what you should be expecting of your real estate agent that is selling your home in this current market. 

I’ve previously covered in detail the factors going into your decision as to whether you should sell or buy first in the current market, along with this key trick.

And if you are thinking that you can take the extra year to renovate or do up the property, that can be a fantastic idea. But be really careful about overcapitalising.

Buy In The Eastern Bays and Remuera?

ruoxi wang real estate specialist agent mission bay orakei st heliers kohimarama glendowie glen innes stonefields st johns meadowbank remuera

Two words: Increasing Competition.

Buyers (especially first-home buyers) will now face increasing competition. This is borne out by increased open home numbers, especially in homeowners in the recent properties that I’ve sold, and what my team has been seeing.

  • At price ranges below a million, buyers are surprisingly active and have been ticking up. Many of these have been saving up with considerable firepower over the last 3 years, and now need to buy, having been previously priced out and/or waiting for a crash that has yet to eventuate.
  • Anything that’s above $1 million but below $2 million, buyers are still appearing and far more reticent and selective, but I’ve certainly observed a pick up in the number of buyers recently.

Here’s a quick summary of factors providing vital support to the local property market:

  • relatively strong immigration numbers (even after the adjustments)
  • low interest rate environment and lower serviceability calculations
  • low LVRs which is being reviewed
  • high costs to build new – with current high land prices, consenting process/costs and high construction costs, these factors provide a natural floor to prices of existing homes. This is because new homes cannot be built at a ‘cheap’ enough price, or cheaper than existing homes (i.e. if you are given a choice to pay $1million for a new or older house, you will always pick the new house, which means that the older house needs to sell at a cheaper price compared to the new house).

If you are going to go for an auction, then you must read my exclusive buyer auction guide.

If you are entering into a ‘price by negotiation’ or fixed price/offers above or deadline sale situation, then you should read the following:

1) Myths around the finance clause

2) How to win in a multi-offer situation?

Good luck – and let me know if you need help with buying. I can offer free advice around what a property is truly worth based on market comparables, identify your neighbours (rentals, state housing etc), deal with zoning issues and provide you with quick review/advice on legal issues. 

Take The Seller Quiz Below!

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. 

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.

Comments

mood_bad
  • No comments yet.
  • chat
    Add a comment