Short commentary on Eastern Suburbs' real estate market statistics for October 2019
There is no doubt that Summer is coming – and we are sure everyone has been looking forward to it. The weather has been perfect. Not only is it a perfect time for BBQs and a cool beer plus splashing in the pool, it is also great for properties to come onto the market. And unsurprisingly, there has been an uplift in listings and prices in our hood.
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 October 2019
Compared to September 2019
Compared to October 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
On a market basis, housing prices were largely flat. There is a big jump in new listings for Spring although this is still the lowest since 2011. Good news though after all the doom and gloom in the media about the property market crashing.
Motivated and committed buyers have returned to the market with rigour and passion resulting in sales for the month increasing. We are seeing lots of properties taking pre-auction offers, selling at auction or shortly after. There is definitely a buzz in the air.
Perhaps this is because both vendors and buyers are starting to accept that the stable market conditions that have held on for more than 2 years are not going to be changing. That means in the absence of any major external economic shock, buyers should ditch any hopes of a major price decline. So start giving your best before prices increase further – because the Westpac economists sure are predicting that.
Although the Reserve Bank of New Zealand has announced on 13 November 2019 that it is keeping the Official Cash Rate (OCR) unchanged at 1.00%, surprising many market commentators, all eyes are on the possible changes to loan-to-value ratios.
If the loan-to-value ratios are relaxed for either (or both) the investors and homeowners, then we can expect a late spring surge right into the Christmas/New Year break. There is certainly quite a bit of pent-up demand from mum-and-dad investors sitting on a significant chunk of equity as a result of recent house price rises, and we are seeing these buyers back into our open homes.
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 have definitely seen increased activity in the market. More buyers are coming to our open homes and we are getting more enquiries on houses. In fact, we just sold a Remuera property after being on the market for a mere 16 days – pre-auction was received and we have two bidders at auction which brought the price $110K above the starting bid, and ABOVE CV. That is a great result for the vendors who only had to do two weekends of open homes. Needless to say, they are over the moon!
In the current market and today’s digital age, buyers are also very knowledgeable. They do extensive research and know very well what properties sell for in the area. With websites like homes.co.nz and oneroof.co.nz, they can easily find out what properties sell for, and determine a value for themselves. These websites also have free ‘valuations’ based on their algorithms – learn why you should be careful around using such free ‘valuations’ here.
Buyers also have a lot of choices at the moment. There are hundreds of listings on the market. If you have paid more to be boosted on TradeMe as a Premium Trademe Listing, you often can get pushed to the second or third page after a week or so, especially in suburbs like Remuera and St Heliers that have a higher turnover rate and a bigger catchment area.
We are expecting a tick up in sales this November – so keep a close watch!
Historically Low Number Of Homeowners Selling In Orakei, Mission Bay, Kohimarama, St Heliers, Glendowie, Remuera, Meadowbank and St Johns
Across these areas, just 2.6% of homes changed hands in the past 12 months, compared to a 3.6% average across the past 5 years. Out of these areas, we have Orakei registering the lowest percentage of turnover (aka homeowners who have decided to sell) at 1.7%.
What this clearly suggests is that homeowners in the last 12 months have been more reluctant to change their homes (whether they are downgrading or upgrading) – and this is something we have consistently been hearing on the ground.
Many homeowners have told us clearly that they are happy to move, but only if they found the right home. With the general fear of missing out (FOMO) gone from the market, the wishlists and ‘non-negotiables’ from homeowners start getting longer. These homeowners prefer to stay put and renovate (either having a major extension or a complete/partial do-up of their home), rather than move on and buy another home.
Obviously, this creates a circular effect – with less homes up for sale, there are less active buyers in the market given the lack of choice.
So Is Now A Good Time To...
Sell In The Eastern Bays and Remuera?
What if you own a plaster home?
Remember: there are plaster homes and there are plaster homes.
There are plaster homes that are obvious leakers and are in fact leaking – you can see these from the rotting timber, peeling paint and swollen floorboards etc. These sell for pretty much land value (or less) as the buyer pool for such homes is very narrow – banks are loathe to lend on these. If you own one of these, you are likely restricted to only cash buyers.
Then there are plaster homes on the other end of the spectrum which are well-built without fatal design flaws. They come with treated timber and have cavity, ground-clearance, decent eaves etc. They are also well-maintained.
And there are plaster homes that fall in between these two ends of the spectrum.
As such, it’s imperative that your agent can work through all these issues with you and does the necessary preparatory work before you hit the market – and there’s often quite a bit to do. The correct presentation and marketing of plaster homes can literally make or break your listing, and can be the difference between selling for a top price and selling for just land value.
And it goes without saying that you need an agent who has recent (not just in a boom where literally anything sells) experience selling these for top dollar. Plaster homes already have an unfortunate stigma. Don’t make things worse by hiring an agent without an exceptional marketing plan and a detailed strategy on how to minimise issues before a campaign launches.
Property insurance – and how it can cause house prices to fall
One thing worth keeping an eye on is the changes around property insurance and how insurance premiums are calculated across different areas and risk profiles. The Government’s trying to figure out what it can do to promote climate adaptation/mitigation, while keeping property insured, but hasn’t made any decisions.
For example, the Department of Internal Affairs is looking at what risk information could be included in LIM (or Land Information Memorandum) reports. Risk-based insurance pricing is something very common in other jurisdictions (such as the USA) and we can all fully expect it to arrive on our shores as a result of re-insurance pressures.
If all these comes to play, ‘riskier’ properties such as waterfront properties or properties on cliffs susceptible to erosion can see a significant impact on their values as their buyer pool shrink due to the higher insurance premiums. Sure, these properties are scarce and there’s always a demand for such properties, but there’s a limit to the price (and uncertainty as to future increases) that people will pay. It cannot be doubted that the buyer pool will be impacted (likely negatively) and if that’s the case, in the absence of buyer competition, premiums will be hard to achieve.
If you own such properties or contemplating buying such properties, think carefully about your next steps.
Buy In The Eastern Bays and Remuera?
As with previous months, our views remain unchanged – it remains a good time to be buying if you are buying your first home or upgrading, and you can comfortably afford mortgage payments. Why?
- In the November meeting, the Reserve Bank has retained the official cash rate (OCR) at 1.0%. Even with signs of the economy slowing within 2019, the Reserve Bank is expecting economic activity to “to increase during 2020 supported by low interest rates, higher wage growth, and increased government spending and investment”. What this likely means is that there may be further stimulus in the form of relaxation of loan-to-value ratios.
If that happens, you can expect significant competition from the mum-and-dad investors who, as we have previously pointed out, have retreated significantly from the housing market in the last year or so based on the Reserve Bank’s mortgage lending data. And these investors are wanting to get back into the action given the low retail deposit rates and the general low-interest rate, low-return environment – but see below on the new changes to the Residential Tenancies Act.
- We’ve covered the lower ‘trade-up’ premium previously. And we continue to stand by that view – now is a great time to be upgrading if you can comfortably afford the mortgages. Here’s a simple illustration: a 10% discount on a $2 million property translates to a $200,000 discount. If you are selling your $1.5 million house at the same 10% discount, you would have profited from a $50,000 discount ($200,000 – $150,000) when upgrading, compared to in a boom market where everything went up by roughly equal percentages. And because buyers at the higher price levels are less, there’s much more bargaining power.
- 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.
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.