Short commentary on Eastern Suburbs' real estate market statistics for February 2020
Before we delve on the virus infecting the entire world and its impact on the Auckland property market, we need to deal with what has occurred in the month of February.
From there, we can then make some measured guesses, based on the February data and our ground observations, on what the next month will entail – we will have an entire section on this as we can understand concerns from homeowners, potential vendors and buyers.
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 February 2020
Compared to January 2020
Compared to February 2019
- Median price down 1.8%
- Sales count up 46.5%
- Days to sell decreased by 4 days (current – 39)
- Median price up 4.3%
- Sales count up 41.6%
- Days to sell decreased by 17 days
Auckland market as a whole
Median house prices across New Zealand increased by 14.3% in February to a new record median price of $640,000, up from $560,000 in February 2019. This was the largest percentage increase in 53 months. In Auckland, median house prices increased by 4.3% to $888,000 – up from $851,000 at the same time last year – the highest price in 35 months.
All this is a continuation of the recovery of the Auckland property market that we saw late last year. In Auckland, the number of properties sold in February increased by 41.6% year-on-year (from 1,390 to 1,968) – the highest number of residential properties sold in the month of February in 5 years.
This showed that many vendors had the confidence to bring their properties to the market and at the same time hunt for new properties, thereby continuing the positive cycle. It will also be reflective of the uncertainty generated from the capital-gains tax debate last year. The overall uplift in sales volumes is a result of that underlying confidence that has been around for a few months now coupled with strong economic fundamentals and record-low interest rates.
For our team personally, we have sold 7 properties thus far in 2020 across the Eastern Bays and Remuera, and we still have more listings (including 5 current ones) to go.
Our properties were selling, and selling fast – either under the hammer at a pre-auction offer or 2 weeks after they launch. Again, our clients, who took advantage of our advice to hit the market fast and early, benefited from the motivated buyers who were not (yet) affected by the ongoing coronavirus news.
In February the median number of days to sell a property nationally decreased by 12 days from 47 to 35 when compared to February 2019 – the lowest days to sell for the month of February in 13 years. Auckland saw the median number of days to sell a property fall by 17 days from 56 to 39 year-on-year – the lowest days to sell for the month of February in 4 years.
And as mentioned, many more properties go under the hammer. Auckland had the second highest percentage of auctions in the country with 32.4% (637 properties) sold under the hammer, up from 21.4% (298 properties) in February 2019 – the highest percentage of auctions for Auckland in 27 months.
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
We are currently still receiving enquiries on all our properties, and open home numbers remain steady. Our new Orakei listing which we just launched (CV $2.55 million) received a good turnout and positive buyer feedback – there was no chatter around the coronavirus but more focused around whether the property suited the buyers’ needs.
Another property which we have just launched in Greenlane (CV $1.575 million) attracted 27 groups through which is a fantastic turnout, and no lack of active buyers’ interest.
2 of our properties in Orakei and Remuera last month were transacted under the hammer – both with auctions that were brought forward and to eventual Asian owners (including an offshore one who is currently stuck in China). There was active bidding in one and sold at above the pre-auction price.
Our different types of properties – from do-ups to brand new builds – are getting an increased amount of overall buyer interest, with the bulk of queries being from homeowners looking to upgrade or first-home buyers rather than investors.
So Is Now A Good Time To...
So Is Now A Good Time To Sell In The Eastern Bays and Remuera?
What's The Coronavirus Going To Do?
The novel coronavirus that causes COVID-19 has upended many systems around the world, from stocks to tourism to the convention industry. With this uncertainty hanging over the economies around the world, how will the real estate market in Auckland respond in the short term? What might occur on the broader horizon?
We have already established a fact: the property market in Auckland was improving in February 2020 just as the coronavirus was breaking. Absence of the coronavirus (and the oil price war), the underlying economic fundamentals remain present.
When it comes to predicting prices, we go back to the fundamentals: Demand and Supply.
- Record number of townhouses, flats, and units consented in the past year (Jan 2019 to Jan 2020) according to Statistics New Zealand but these are not yet constructed and spread across the entire Auckland
- Continued shortage of land in central Auckland and affordable properties
- Number of properties for sale are still below historical highs
Positive Demand factors:
- Ultra-low historical interest rates – and likely going lower – the Official Cash Rate has been cut to 0.25% in an emergency meeting by the Reserve Bank of New Zealand and likely to remain the same for the next 12 months
- The capital increase on banks that were supposed to be started in July 2020 has just been postponed to July 2021. This is great news as that means the banks would have additional amounts of money to lend (as opposed to being locked up in additional capital)
- Safe-haven status conferred on real estate, especially in New Zealand, compared to other asset classes such as stocks and bonds which are far more volatile (as seen in the past week). Even gold prices fell last week!
- Everyone needs someplace to live – virus or otherwise
- The housing stock for sale will be more attractive to many than what is for rent (which makes buying and owning one’s home always more attractive)
- Immigration remains positive (i.e. no sign of exodus)
- China is recovering and reopening factories and its businesses
- It’s not like the 2008 great financial crisis. 2008 was a credit crisis but that’s not happening now and banks are not (yet) seizing up. Back then, housing prices were already declining for 2 years prior to the GFC. Today’s situation is a demand shock, with people withdrawing from the market and the supply chain being disrupted. More importantly, it’s temporary. We’ll get through this. There will be a vaccine developed eventually and activity will resume.
Negative Demand factors:
- Substantive decline in the stock market, reducing Kiwisaver balances and just general confidence. People will often want to wait for the market to settle before making a big purchase or decision. (But money from the stock market can be and is often redirected into real estate and other assets)
- Closure of businesses, especially in the retail and tourism sectors which have been hard hit by the 14-day self-isolation requirements. This may have a ‘trickle-down’ effect such as increasing unemployment and tightening of budgets, which will affect non-essential purchases such as luxury homes
- Worsening of the situation and continued drag, especially in the Eurozone, on the global economy
So what do we think?
Like the sun will rise every morning, all these will pass and the situation will improve and eventually recover.
- What we are expecting is that buyers will slowly move into a wait-and-see mode, although this is really hard to predict given the rapidly changing nature of the virus outbreak on a daily basis. There’s still a window of opportunity to catch buyers who do not yet have second thoughts.
But buyers are also driven by their bank approval situation and life circumstances. If they have existing pre-approvals and they have a need for housing (for e.g. just married, baby on the way, school zones etc), many buyers will continue looking for houses rather than put their life plans on hold. So what we expect are lower open home attendances, with only the motivated and serious buyers out hunting. In short, the ‘winter’ selling season has likely come earlier this year and houses do sell in winter.
- If you are thinking about selling, here’s a fundamental truth – you are always selling in competition, and not in isolation. There will undoubtedly be some vendors who decide to not list their properties today, which would mean there’s a great deal less competition for the buyers out there if you go on the market now. This would also mean that if you are looking to upgrade or buy your next home, you can likely get a good purchase after you have successfully sold. We have referred to this (a few time) as the ‘trade-up premium’ and none is more so true today. If you have sold at a great price, then you can be sure you will likely be paying a good price if you are buying in the same market.
- Think about your life plans, and act accordingly. Don’t try to time the market. Focus on choosing the best agents, present your house spectacularly and market it using modern and unique marketing strategies which will be especially attractive in this age as people spend more time at home in front of their digital screens and only visit the properties which they are serious about. Think Facebook Live videos, live virtual tours of your property and the use of video to meet with potential buyers etc. Make sure your preferred agent can adapt and keep up with the latest technologies to snare that buyer.
Finally, we take steps to protect you and your property during open homes. Here’s how:
- we log all buyers’ contact details and refuse entry when they do not provide any
- we ask that buyers who have been overseas in the last 14 days not attend the open home (and they are not supposed to under the new self-isolation rules)
- we have hand sanitiser available for use by anyone viewing the property
- we open all internal and external doors before the open home commences, to minimise the risk of transmission via door handles
- we adopt the below ‘contact conscious’ policy
So Is Now A Good Time To Buy In The Eastern Bays and Remuera?
Your down payment fund was safely in cash or in the right Kiwisaver funds and you were very thrilled with the massive year-on-year returns. You’d planned, perhaps for years, for the 2020 home-buying season. Then, just as the perfect home hit the market, the coronavirus turned the world on its head.
Should you still go through with the purchase?
Let’s face it. Stocks, bonds, oil prices, Bitcoin and gold have fallen, entire industries are putting themselves on pause and all manner of small businesses are taking hits.
There is so much we don’t know about what the next few months will bring, including whether it will even be over in the next few months.
All that may make it seem like an odd moment to consider buying a house. But there will be many people who are confident about their job security — or moving for job offers that haven’t evaporated. There will be others making room for new family members or looking to be closer to older ones who may need care. Are you one of them?
Much of the inventory has to come from people who are moving up, selling down or moving on and will themselves need to have the courage to buy themselves a new place.
And you are not alone in this. Many real estate buyers were trying to weigh multiple moving pieces back in late 2008, too. That crisis was different — the S&P 500 would ultimately lose half its value from its peak, and home prices tanked too.
That’s not the case this time (so far, at least). And what has happened since 2008 should provide buyers some comfort right now. Buyers who bought then have made incredible gains (upwards of 100%) since then.
We will repeat what we have said on previous occasions. It is difficult or near impossible to time the perfect time to buy real estate.
As the great Warren Buffett once said: Be fearful when others are greedy and greedy when others are fearful.
If you are ready to buy, get going now.
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.