We’re nearing the mid-point of 2018 and things seem to be simmering away without any obvious signs of changing. We recently held an adviser training day for the team and one of our guest speakers were Opteon (formally Sheldons) valuers. It was interesting to hear their take on the market situation and what they predict moving forward.
Generally speaking, the property market is stable after some softening over the last 12-18 months. This for me continues to be a very generalised argument though, and is based on averages across cities rather than looking more closely. For example, good quality stock in Auckland City fringe ($2m - $3m) continues to bring high levels of enquiry and in this market houses are selling often above the expected price. I have multiple examples of clients being well outbid for properties in this price range. For me, this suggests that the higher end of the market is confident and likely has a lot to do with bank credit policy and the ability for higher income earners to borrow.
In contrast to that, houses in South Auckland are struggling to sell at auction and according to Opteon are down close to 20%. Again, pointing to bank credit policy where borrowing for investors and lower income earners is still difficult. These are markets that have experienced over the top growth in recent years, so prices coming back was always inevitable. There is still plenty of enquiry in this space and we are seeing a lot of first home buyer activity. Almost all our settlements through our Manukau office at the moment involves someone buying property which is great for that market.
Construction prices continue to keep house prices in new developments up. What we are seeing though is land prices in certain areas slightly further out of the city fringe coming back. Land values in places like South Auckland (Pukekohe/Papakura and Flat Bush) and North West Auckland (Kumeu/Huapai) have quite clearly come back. I don’t see this as a bad thing. More and more first home buyers are now able to get new properties at a reasonable price.
Construction finance is still hard to get. Speaking to builders, the buyers are wanting turn-key rather than progress payments because that’s what banks are happy to approve. The builders who are able to offer this are flourishing, and in my opinion will continue to do so, while the others are a lot quieter.
Land prices are holding firm. I was in Tauranga recently talking to some builders and compared to 18 months ago land is smaller yet more expensive. Activity is high down there as well with a lot of Aucklanders buying new build investment properties or buying to move. A client of mine recently purchased two brand new dual income investments in Papamoa for $930,000 each with a rental income of $1,100 per week. Not sensational numbers, but better than most investors are getting and there are other examples of Auckland clients buying multiple investment properties at once outside of Auckland.
One of the more interesting predictions I’ve seen recently is from Westpac who are estimating net migration to drop from 70,000 to 10,000 by 2020! Whether it will play out or not is anyone’s guess as is the impact it will have on the market. One thing’s for certain, Winston will have something to say about it.
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