The title of your Auckland Central Market Update - August 2023

Auckland Central Market Report.

AUGUST 2023

Part of the group with a family factor.

Contents.

04. Market CommentTwo steps forward...

06. Article – Kelvin Davidson: Will the Reserve Bank signal another hike in the OCR?

08. Auckland Central Statistics July 2023

10. Recent Sales July 2023

12. Auction Statistics & Update with Cameron Brain

14. Article – Tony Alexander: Why house price rises are set to rise despite high interest rates

16. Property Management Market Comment

18. LoanMarket Update

20. Marketing your property

22. Ray White Auckland Central Meet the team

Two steps forward – One back but heading in the right direction.

Mixed messages in the housing market are likely to confuse the public, reports Director of City Realty Group, Daniel Horrobin.

On the one hand, positive reports about demand outstripping supply appeared in the NZ Herald One Roof on 4 July 2023:

“Demand finally outstripping supply”

A sharp drop in new listings volumes in some of the country’s biggest housing markets could be an opportunity for vendors.

However, the listings drought comes at a time when sales activity is picking up and auction rooms in Auckland and Christchurch are busier.

OneRoof is also increasingly hearing from agents that buyer demand is currently outstripping supply”.

A West Auckland Agent was quoted “Prices in general haven’t gone up, but people have started to make decisions”.

Likewise, Daniel reports positive activity from Ray White’s Sandringham office Auction Room in mid July. “I arrived at our Sandringham office Auction Room and couldn’t find a seat…

One auction, with eight registered bidders and five active bidders,which sold under the hammer”.

And Stuff reported more positive news for the housing market on 31 July 2023:

Months of falling house prices are coming to an end and factors are building to support the market according to one of the world’s largest banks.HSBC economist Jamie Culling.

The ‘one step back’ has been seen by banks providing a mixed message through their actions. Daniel says “Just when the market is showing signs of bouncing back, four major banks moved to lift their home loan rates, heaping more pressure on mortgage holders”.

“However”, continues Daniel “there will be heightened interest in the upcoming election, fast approaching, with National this month

announcing their intention if elected to:

• Restore full interest deductibility for rental properties

• Take the bright-line test back to two years (from 10)

• Reintroduce 90 day notice periods for tenants and

• Change the automatic roll-over of fixed-term tenancies into periodic tenancies

Daniel says: “This is not necessarily good news for first-home buyers but should a Nationalled government follow through, it will certainly restore investor confidence in the property market in general and specifically our CBD apartment market. It will also assist with the supply of available rental stock, which is so badly needed.”

In terms of rentals, landlords are asking tenants to pay $50 more a week on average than last year, with the national median rent on Trade Me up 9% annually in June. Rents in Auckland were up 11.7% annually to a median of $670. Nationwide, the number of properties listed for rent was down 19% in June, from the same time last year, while demand was up 35%. Migration has upped demand for city apartment rentals.

Overall, despite banks increasing interest rates, there are positive signs the city apartment market and the wider housing market is moving in the right direction.

Daniel has some final advice for those wanting to sell but waiting.

“The number of properties for sale in the central city has dipped below 500 for the first time in recent memory. That will change, and fast. With spring around the corner and buyer activity building, waiting may mean you are competing with a legion of vendors who waited just like you”.

Kelvin Davidson: Will the Reserve Bank signal another hike in the OCR?

The five things you need to know about the housing market this week.

1. OCR likely to be left alone this week

The biggest event this week in terms of the economy and the property market will be the latest Monetary Policy Statement (MPS) from the Reserve Bank, at 2pm on Wednesday. There’s almost no chance the RBNZ will change the official cash rate (OCR), but its projections and commentary about the coming 3-6 months will be very interesting – in terms of overall economic growth, employment, inflation, house prices, and of course the OCR itself. My expectation is that the OCR won’t need to be raised again in this cycle, partly because the lagged effects of previous sharp increases are still working their way

through the system, especially for those borrowers who are yet to fully reprice mortgages from older/lower rates onto current higher levels. But other economists aren’t so sure, with some anticipating one more OCR increase, probably in November. To that end, any tweaks within the MPS to the forecast cash rate path, perhaps to push back the timing for any eventual cuts, could suggest that the RBNZ is also still very worried about inflation – and that another OCR rise couldn’t be ruled out just yet.

As noted, I’m less concerned about that, and I think we can still say in general terms that mortgage rates have peaked. But if that’s wrong, the risks are still slightly more weighted towards the upside rather than the downside.

RBNZ Governor Adrian Orr. Expectations are that the Reserve Bank will keep the OCR at 5.5% on Wednesday but of more importance will be the language it uses on the health of the economy.

Photo / Mark Mitchell

2. Loan sizes still restrained relative to incomes?

The Reserve Bank’s latest figures (for Q2) on mortgage lending by debt to income ratios will be a fascinating set of data, due out Tuesday this week. Recently the amount of lending at high DTIs has already fallen – partly because higher mortgage rates naturally limit how much debt can be serviced from a given income – and the latest figures will probably show more of the same.

But we’ve always said that if formal DTI limits are introduced next year, it’s not so much about this cycle anyway; it’s more about preventing a repeat of the postCOVID boom when mortgage rates do eventually drop back again – by tying long run house price growth more closely to incomes, and limiting how many properties anybody can own at any given point in time.

3. Net migration will still be boosting property demand

Stats NZ’s net migration data for June are due out this week too, and although the figures have been showing signs in the past few months of just easing back a little (as departures rise and arrivals to NZ of non-citizens dip), they’re still very high –and that will be boosting overall property demand. If anything, June’s numbers may continue the gradual slowdown, but won’t change the overall story too much; which is ongoing population growth, and more need for housing.

4. New borrowers just want the cheapest rate

The Reserve Bank’s latest monthly data on new lending showed that the majority of people still fix (80%) their mortgages rather than float (20%). But within that fixed segment, there’s been quite a shift in the terms chosen – e.g. in March, 35% of loans were on 1-year fixes, 24% 2-years, and just 4% on three years. But in June, those figures had shifted to 28%, 18%, and 16% –i.e. a big rise in popularity for terms longer than two years.

Of course, it’s not hard to see why preferences have changed, given that three-year fixed rates have gone below the one-year rates since March. In other words, many new borrowers (or those topping-up or shifting banks) are simply still choosing the lowest rates on offer – probably because of affordability considerations right now, even if that raises the risk of overpaying further down the track, in the event that market rates drop sharply before that three-year fixed term has expired.

5.

Rental growth is picking up

Stats NZ’s figures last week showed that rental growth (based on new bonds lodged) rose from an annual rate of 3.5% in June to 4.1% in July – above the average of around 3% and also the fastest rate since June last year (5.1%). This is something that has always been on the cards, given increasing wages, but also restricted rental listings and rising demand (hence falling vacancy rates). Further rises in rents seem likely in the coming months, which is obviously favourable for landlords but not tenants –although the long-term pace of growth may still be capped due to the fact that rents are already high in relation to incomes.

- Kelvin Davidson is chief economist at property insights firm CoreLogic

Market Statistics.

Total Sales

July 2023

78

July 2022

There was a -13% decrease in the total number of sales year on year.

July 2023

$286,350

July 2022

Total Sales Value

July 2023

$28,750,330

July 2022

90 $46,076,272

There was a -37% decrease in the total sales value year on year.

Source: REINZ

$319,000

There was a -10% decrease in the total median sale price year on year.

Median Sales Price Median Days On Market

July 2023

35

July 2022

42

There was a -16% decrease in the total median days on market year on year.

Sales data is from REINZ and covers the entire Central Auckland property market.

JULY 2023

Auction Wrap.

Ray White Auckland Central’s auction business is gearing up for an exciting and bustling few months ahead. With the onset of the Spring Market, anticipation is building for a flurry of real estate activity. The timing coincides with the New Zealand Election in October, a period known to influence market sentiment and dynamics. As a trusted player in the industry, Ray White Auckland Central is well-positioned to navigate and leverage these converging factors.

A significant element adding to the anticipation is the large percentage of fixed-term interest rates set to expire soon. This potential influx of buyers seeking new mortgage options could inject further momentum into the real estate market. Ray White Auckland Central’s astute understanding of market trends positions them to offer tailored advice and opportunities to both buyers and sellers.

Amidst this dynamic landscape, Ray White Auckland Central boasts an impressive 71.43% clearance rate, with a commendable 45.11% of properties being sold under the hammer. These figures underline the agency’s

prowess in connecting sellers with motivated buyers and facilitating successful transactions. Notably, the consistent increase in active bidders at their auctions throughout 2023, averaging 2.7 participants, is a testament to the agency’s growing reputation and appeal in the market. As the spring and election season unfold, Ray White Auckland Central is poised to continue its impressive track record and uphold its commitment to excellence in real estate services.

If you are thinking of buying or selling at Auction and would like to know more, I would welcome the opportunity to see how we can help. Contact me anytime;

Tony Alexander: Why house price rises are set to rise despite high interest rates

A lot of frustrated buyers will step forward when the Reserve Bank signals cuts.

ANALYSIS: Since December last year the number of properties which buyers can peruse has fallen 15%.

In Auckland stock levels have fallen 20% from the peak in August last year. In Wellington stocks are down 49% from the same month while in Canterbury the decline is 11% from the peak in March. These falls don’t mean that buyers are struggling to find something to purchase as the average nationwide level of stock for the past five years has been almost 22,000 – below the end of July 2023 number of around 24,000. Auckland’s five year average is 8600, below the end of July number of 9000.

There has also been a lift in the net

proportion of real estate agents in my monthly survey saying that they are receiving more requests from potential vendors for appraisals – to 33% from just 13% in lateJune. But the good jobs growth recently and only small rise in the unemployment rate to 3.6% suggests that very few property owners are likely to be feeling that they have to sell and downsize or go renting for a while. But there will be some and this suggests that these people alongside those who have waited for the market to stabilise before looking to sell will be stepping forward over the remainder of this year.

But history tells us something about what happens when our real estate market picks up. More buyers step forward than sellers. The relevance is that maybe not so much this year but instead through 2024, stocks of

Low stock levels have put pressure on buyers. Photo / Fiona Goodall

listings around the country are likely to fall at a rate which may surprise many people. This will become one of the factors causing an acceleration in the pace of price gains next year.

As for prices in the near future, I wouldn’t be surprised to see one or two more months of falls before the year is out. That is what can happen when an asset price cycle turns. It is also the case that a lot of people wanting to buy simply cannot get the finance when banks are applying test mortgage rates close to 9%.

That then is where monetary policy becomes very relevant. At some stage the Reserve Bank is going to feel that inflation risks have shifted enough to allow them to send a firm signal that a cut in interest rates is just around the corner. When they do a lot of frustrated buyers will start stepping forward.

But we are nowhere near that point yet and the next monetary policy review coming up on August 16 is unlikely to contain anything

immediately positive for borrowers. Falling interest rates are best viewed as something coming in 2024 – but whether these falls get underway early or late in the year is essentially anyone’s guess still because there remains extreme uncertainty about the many factors which affect inflation. And it pays to note that there is little basis currently for believing that when rates fall the declines will be especially large.

Around the world there are signs that inflation is not going to settle as comfortably back near 2% as was the case before the 2008-09 Global Financial Crisis, and worries about deflation of 2019 seem near impossible to envisage. That is why not everyone is fixing their mortgage rates for just one year or even two. Some borrowers are going longer, willing to bet that the likes of climate-induced inflation and tight labour markets keep inflation and therefore interest rates relatively elevated for the next few years.

Independent economist Tony Alexander: “August 16 is unlikely to contain anything immediately positive for borrowers.”

Photo / Fiona Goodall

Market Comment. Property Management.

Property Management Comment: August 2023

Median weekly rents climb to record high on TradeMe

Here’s a summary from a recent article written by Miriam Bell on Stuff.co.nz

• The property website’s latest Rental Price Index put the national median rent at a record high of $620 a week in June, up from the previous record of $610 in May.

• In June last year the national median rent was $570 a week.

• Rents in Auckland were up 11.7% to a median of $670.

• Nationwide, the number of properties listed for rent was down 19% in June, from the same time last year, while demand was up 35%.

• On a monthly basis, supply was down 5% nationwide in May, and demand was down 6% which is in line with the typical market trends during winter.

• BNZ chief economist Mike Jones has said the pace of rent increases has picked up, and that was likely to continue, particularly in places where supply was stretched.

• Economist Tony Alexander’s latest survey of landlords showed the amount who planned to raise their rents over the coming six months had remained at elevated proportions of around 81% since March.

• It also showed the average increase landlords would like to get, subject to market conditions, had risen to 6.3% in July, from 5.9% in June.

• Alexander said that was likely to reflect the impacts of rising costs alongside growing tenant demand, and was assisted by the acceleration in population growth currently underway.

Landlords are asking tenants to pay $50 more a week on average than last year, with the national median rent on Trade Me up 9% annually in June.

The Bank of Mum & Dad (BOMD)

According to the latest research from Consumer NZ The Bank of Mum & Dad or BOMD, is the fifth-largest lender of owneroccupied loans for young home buyers.

Here are some of the most common ways BOMD can help you get into home ownership sooner: While I refer to parents, there could also be other family members or even friends that can also assist.

Craig Pettit

027 249 0010

Using equity in the family home. One way parents have been able to help their children if they are struggling to come up with the required deposit for their own home, is to borrow against the family home to make up the difference.

The Gifted Deposit. A gifted deposit is a sum of money given to a homebuyer by a parent or a close family member that is then used as part of the deposit on a home purchase.

The Guarantor.

If your parents have enough equity in their home, then they could act as a “Guarantor” on part of your loan.

The Co-Borrower.

Also known as a Joint Borrower or Co-Own. This option is more suitable for parents that are working full time as all incomes will be taken into account for debt servicing.

So as you can see there are many ways to get onto the property ladder whether you have support from your family or take advantage of the government assistance on offer.

Contact me directly to discuss your personal financial situation and I may be able to make suggestions that will make that home ownership dream a reality.

Marketing your home.

A COMPREHENSIVE MARKETING STRATEGY TO REACH ACTIVE & PASSIVE BUYERS.

The marketing strategy is designed to reach the breadth of the active and passive buyer pool in the most effective manner, based on their Media consumption.

Our marketing strategy comprises of 3 key components; property portals, social and multi-channel digital strategy and print media.

Property Portals.

PRIMARILY ACTIVE & SOME PASSIVE BUYERS

There are 3 key portals, TradeMe Property, Realestate.co.nz and Oneroof.co.nz.

Property Portals generally attract active byers in the market, OneRoof has a unique position as it reaches both active and passive property buyers due to the diversity of information it has on the platform including property

Digital Marketing.

ACTIVE & PASSIVE BUYERS

The Ray White City Realty Group has introduced a state-of-the-art digital solution that is powered by artificial intelligence to reach the breadth of the active and passive buyer pool across social media and multiple digital channels, including news and other high traffic websites. The programme is fully automated in the back end, it creates an audience

Print Media.

listings, estimated property values, market news and commentary. It is important to run campaigns across all 3 to effectively cover the breadth of the active buyer pool and a part of the massive buyer market. None of the property portals have complete market coverage and each of these portals have a set of unique audiences.

segment of active buyers specific to the property as well as reaching the passive buyer pool. The campaign is structured to deliver quality leads for the property, and it auto optimises spend across social media and multiple digital channels, skewing the spend towards channels that are performing the best.

PRIMARILY PASSIVE & SOME ACTIVE BUYERS

Print continues to play an important role to cover the breadth of the market reaching quality and highly engaged audiences. It takes criteriabased search out of the equation with respect to the active market and is the most effective medium to reach the all important passive buyer

market. This is clearly evidenced by the fact that the New Zealand herald has seen a massive 48% increase in its print readership over the last 18 months and average time spent reading the paper is over 50 minutes. The value of print is also well supported by agent feedback.

Why choose us?

We’re on the Up-and-up.

Based in the heart of Auckland City, Ray White Auckland Central is an award-winning agency in Auckland City that specialise in apartment sales for investment, luxury waterfront and lifestyle.

Our 183+ dedicated professionals who understand this unique market, are all top performers who have contributed to our phenomenal results. As the Auckland central market continues to experience unprecedented growth, our Lorne Street & Wynyard Quarter offices are well positioned to maintain its leadership in the market.

0800 002 420

www.rwaucklandcentral.co.nz

City Realty has a strategic partnership with LoanMarket, to provide clients with the best mortgage advice and rates with brokers throughout our offices that provide Home Loans, First Home Buyers Loans, Construction Loans, Refinance, Selfemployed Loans and Vehicle Finance – whatever the loan, LoanMarket can help.

Our office achieved the No.4 Ray White office in the world for 2018 and the No. 2 Ray White office in New Zealand for 2018 and we do the highest volume of sales across all agencies in New Zealand.

Meet the team.

Director AML Officer

Sales Manager Auckland Central

Auction Manager Sales Manager Wynyard Quarter

Daniel Horrobin Cameron Brain Pauline Bridgman

Mike Richards Belinda Henson

Ady Huang Aileen Wu Ben Parkes

Craig Warburton

David Lee Dom Worthington Dusan Valenta Gillian Gibson

Habeeb Urrahman

SALES TEAM - AUCKLAND CENTRAL OFFICE

Carl Russell

Casey Chen Chris Cairns

Grant Elliott

Cheryl Whiting

Bosen Han

Judi Yurak

Keisha Gutierrez

Holly Cassidy Jeong Lee

Chris Guilford

OUR LOANMARKET MORTGAGE ADVISORS

WE CAN NEGOTIATE A LOWER RATE. WORK WITH A QUALIFIED AND COMPETENT MORTGAGE ADVISER

Our strongest team yet. Selling right across Auckland Central

Kristine Liu

Lisa Hui

Marco Sahar Mark Li

May Ma

Michelle Yurak

Nick Armstrong Ryan Bridgman

Sam Huang Steve King

Steve Kirk

& City fringe

Jorvarn Hicks

SALES TEAM WYNYARD QUARTER OFFICE

OUR SALES SPECIALISTS

Victor Liu

Gabriela Galateanu

LoanMarket Mortgage Adviser LoanMarket Mortgage Adviser

Craig Pettit Laurie Warren

Max Beliak

Nicholas Dallyn

Ross Tierney

Leo Zhang Leo Zhu

Sunniva Gu

Krister Samuel

Lisa Zhang