Housing Market

Property sales defy forecasts

The Auckland property market did the opposite to economic forecasts, and June sales numbers returned to normal trading levels with prices remaining stable. It was a remarkably solid month’s trading with no signs of market fragility.

Sales for the month at 820 were around where the company would expect them to be at this time of the year and were 4.3 percent higher than at the same time last year. The average price at $953,417 was more than $5000 higher than last month and 1.4 percent higher than in June last year while the median price at $910,000 was $4000 lower than May 2020 and 7.7 percent higher than June 2019. 

Taken in isolation, the month’s trading was very much ‘business as usual’. But it is far too early to see this result as an indicator that the property market will defy forecasts and ride out the Covid-19 pandemic unaffected. It does however suggest that over a three to five year time horizon buyers have confidence in property at today’s prevailing prices and that they are not holding back in the hope of a major decline in values.

Expat queries for investment properties on the rise

With online auctions, remote tours using virtual reality and mortgage rates at historic lows, Barfoot & Thompson are seeing an increase in enquiries from Kiwis living overseas looking into investment properties. Investment properties hold appeal for many reasons as they generate fixed-returns to the investors via a steady stream of rental payment from the tenants. Over time it has been shown that if you purchase a property in a good location, the property value will increase and you can generate more profit. Any expenses paid on an investment property, such as council rates, maintenance, or the fees charged by a property management company, can be potentially claimed back at the end of the financial year.

Gross rental yield measures up to mortgage interest rates 

On the rental front the average Auckland rental property is now delivering a gross yield above most mortgage interest rates, presenting a tempting opportunity for those considering investing in a rental property or expanding their portfolio. The gross rental yield for the typical Auckland rental was 3.27% through April and May, when the market also saw many special fixed mortgage rates dip under 3.00% to historic new lows. This means a balancing is taking place, even a shift, between the cost of borrowing and the potential gross gain on a rental property. Remember, if you have an existing investment property you can use the equity in the property to get financing to purchase another investment property.

In reviewing gross rental yield by suburb over recent years, the more southern, western, and northern areas of the city tended to perform best. At a suburb level, nearly 60 Auckland locations are delivering gross yield above 3.00%, and twelve above 4.00%, with suburbs south of Auckland city making up the bulk of these.

Reviewing data kept since March 2015, the average gross yield has been as low as 2.85% in late 2016 – when average mortgage rates were approximately 5.60% floating or 5.10% fixed for two years, and as high as 3.54% in March 2015 – when average mortgage rates were approximately 6.60% floating or 6.00% fixed for two years.* Currently, some of the lowest advertised rates by the major banks are 2.69% fixed for two years.

Barfoot & Thompson calculates the gross yield figure by comparing the average annual revenue from 3-bedroom** tenancies to the average price of 3-bed homes sold by the company over the past six months. So, with the average rental price for a 3-bed Auckland home at $584 per week, or $30,368 a year, and the average 3-bed sale price over the past six months at $938,688, the gross yield is 3.27%. The average gross yield has recently been as high as 3.47% (November 2019), however, recent increases in residential sale prices have seen the figure edge slightly lower. While this number represents just one calculation a potential investment buyer should consider, it is a change worth noticing. 

For more information on investment property opportunities speak to a salesperson  or property manager for more data-based advice.

*Historic interest rate data sourced from the Reserve Bank of New Zealand website.

**Three-bedroom properties make up the most significant portion of Barfoot & Thompson’s portfolio of approximately 17,000 rental properties, and so have been chosen as the standard example for the ‘typical’ Auckland rental.

House Prices Show Resilience In Post COVID Trading

With regard to the recent pandemic, it was hard to make market predictions with much credibility, as there was no previous period of time that would compare. As we move into Level 1 and restrictions related to COVID-19 are eliminated, recent activity can give us some insight. 

In the first full month of trading, permitted post the easing of COVID restrictions, Auckland house prices showed minimal change to pre-COVID prices. In fact, prices were resilient to change. The average price at $947,707 was down only 1.6 percent on that for April and 2 percent higher than for the same month last year.What did change significantly was the number of homes sold. In May we sold 396 homes, about half the number we sold in the same month last year and around three quarters of those we sold last month. The number of new listings for the month was 1,097. While down 7.5 percent on those for May last year, it is a number that does not support the view that investors will abandon the housing market in large numbers in the post-COVID era.

Overall, the Auckland market’s initial reaction to the COVID interruption has been uneventful. However, it will be another month before the market settles down and for a firmer indication of the future trading pattern to emerge.

Buying off the plans should not be overlooked by those living overseas

When considering buying property while overseas, you should not overlook the option of buying off the plans. Not only would you get a brand new property built to the latest building codes, but the price is fixed at the time of purchase. You also get the opportunity to buy into an exciting new development or precinct. Tenants love new builds, so buying off the plans is a great investment choice too.

However, not all developments are created equal and the array of options on the market is critically important when considering an apartment. Think about how close you are to local amenities, cafes, shops and education providers. A good example of this is the Wynyard Quarter which is an exciting suburb close to all of the action and the CBD. This is especially true since the recent opening of the NZ$1billion retail precinct of Commercial Bay, just a short walk away.

The latest release of 30 Madden Beaumont apartments by New Zealand property development and investment company, Willis Bond, has just started construction. The success of phase one where almost 100% were sold makes it a great case study that proves people are finding apartment-living in this precinct a great option. Investors, empty nesters, young families and professionals are now calling apartments home.

At a glance, these are the boxes you need to tick before you put down a deposit when considering buying off plan:  

• The size, quality, location, views and carparks.
• Experience and track record of the developer. 
• Who is the main building contractor and what experience in apartment construction do they have. 
• Make a list of must haves. The larger the apartment in more desirable locations, the higher the price. Carparks are usually an additional cost.
• The quality of fixtures/fittings, wardrobes, floor finishes, balconies, parking and communal spaces.
• Make sure sound-proofing meets the minimum standards for New Zealand (has to meet the building code).
• Double-check the actual square metreage you will have to utilise. Remember this will include ‘waste space’ such as hallways and cupboards.
• Consider light sources. Will there be plenty of natural light? What about the sun? 
• Think about your views now and in the future. Obviously the price will increase as the view gets better. Will your apartment be blocked by a future development? 
• Thoroughly investigate the body corporate; check that the annual fees are realistic and will cover expected maintenance.
• Get good independent legal advice. Make sure there is a solicitor’s approval clause in the contract, and if not, ask for it to be included. 
• Ask about security features.

For more information on investment property opportunities speak to a salesperson  or property manager for more data-based advice.

Auckland property market bruised but stable

The Auckland property market’s first month of trading under the COVID-19 lockdown left it bruised but with its underlying stability intact. Not surprisingly, it was the sales numbers for the month where the biggest decline was felt, and at 552 sales these were half those for March. However, those properties sold at prices not far below those in March, which were at their highest levels for more than two years, and for higher prices than they were 12 months previously.

The average price at $962,136, was down 3.2 percent on that for March, but still well in excess of the average prices for January and February, and 3.6 percent higher than the average price in April last year. The median price at $900,000 was down 2.7 percent, which is a modest reduction on prices for March, but again, well in excess of the median prices for January and February, and 8.4 percent higher than in April last year.

The trail of properties working their way through the sales system is now modest, and it will not be until trading results for May are available in early June, that a true indication of benchmark prices post-COVID are available.

Buyers and sellers should be realistic and meet the market

Sellers appear to be taking a cautious wait-and-see approach, a similar trend that occurred in past economic downturns. While each region would be impacted differently by COVID-19, main urban centres such as Christchurch, Wellington, and Auckland would be affected the least. Buyers and sellers should not panic, but they need to be realistic and meet the market. For sellers, this doesn’t mean they should automatically drop their price but they do need to listen to what buyers out there are saying.  

Rural and lifestyle markets impacted but with steady buyer interest

The Alert Level 4 lockdown significantly affected the rural and lifestyle markets with sales numbers for the month only a quarter of what would be expected for this time of the year. Interest in far north dairy farms remained steady while lifestyle blocks, particularly those to the north of the Auckland urban area such as Waimauku, Woodhill and the Ararimu Valley, retained the interest of buyers.

Accelerated innovation gets the real estate business moving  

As the country sat through lockdown with restricted face-to-face activities, we adapted our 97-year-old business with a suite of online tools to get business moving in a safe manner. Online auction is our most recent service offering which will be of great benefit to Kiwis living overseas wanting to house hunt. While others have had live-streamed auctions combined with phone bidding, we are the first real estate agency in New Zealand to allow people to place bids online.  

We’ve also introduced online contract signing, virtual appraisals, virtual viewing using video conferencing tools or 3D virtual tours, virtual renovations, and the virtual Furnish product that allows buyers to test their furniture in the new house.

Find out more about online auctions and the housing market on the Barfoot & Thompson website.