Auckland Market Report June

AUCKLAND: APARTMENT REPORT

JUNE 2022 | PROPERTY REPORT

The group with the family factor 1

2

CONTENTS:

RAY WHITE CITY APARTMENTS Market Comment Auckland Central Statistics Article – Should new homeowners be worried about Low Equity Margins?

April Sales Article – Tony Alexander: Eight facts to keep in mind if NZ falls into recession Why Choose Us? Marketing Your Home Meet the Team

4 6 8 10 14 16 18 20

3

4

MARKET COMMENT

CITY APARTMENTS’ STRONG RESULTS CONTINUE IN JUNE. Ray White City Apartments continued the pattern of success shown in May, with a strong auction clearance rate of 79% achieved in June.

Director of City Realty Group, Daniel Horrobin, says: “This comes on the back of really strong auction results in the month of May which had an auction success rate of around 87%. And negotiations are continuing on a number of apartments which went to auction with Ray White City Apartments in June, which is likely to boost that 79% auction success rate even further.

“These two months of strong auction activity are bucking the trend we are seeing outside the apartment market. A reasonable number of residential suburban properties are getting no bidding at auction but we have had active bidding in our auction rooms on every single city apartment property.”

“These results are explained by us having seen investors come back into this market in force.

“They are seeing the opportunity to get in before the gates open up and migrants and international students again come into the city in large numbers. When these groups come into Auckland their first stop is normally the Auckland Central apartment market, where they sign up to short or medium-term tenancies.”

The average sales price investors must outlay for apartments is a lot lower than that of all Auckland residential property. Renting out apartments tends to provide the highest amount of net return on investment for property investors.

Daniel says: “We track the comparison between dayson-the-market for properties that go through the auction process and properties which are sold by other methods. Even outside the apartment market we are seeing that properties not sold by auction are taking a lot longer to sell and the longer a property sits on the market the more likely it is to get a lower price.

“Yes, auction clearance rates have dropped a little compared to those achieved at the peak of the market but total sales volumes have dropped even more steeply.

So, the method of sale that is still delivering the best results across the Auckland market, in terms of days-onthe-market and price, is auction.”

Ray White City Apartments’ June sales numbers were up 26% month-on-month compared to May. “This is a very strong result for the middle of winter.”

The Auckland property rental market is continuing to correct as we head into the year with average rents continuing to steadily increase in most areas (with our own portfolio showing a 2% increase from June 2021 to June 2022). We are also pleased to report an increase in inquiry, with Trade Me reporting rentals’ ‘days on market’ have come down by five to six days across the board.

We believe that the main reason for this correction is due to an increase in immigration levels. Immigration New Zealand reported almost double the number of people coming into the country in May 2022 compared to May 2021. We predict this trend of increasing demand for Auckland rentals to continue with the borders relaxing and more students and skilled migrants entering the city.

DA NI E L H O R RO B IN City Realty Group Director 021 595 976 | daniel.horrobin@raywhite.com 5

SH OUL D NEW HOM EOW NER S B E WORRIED A B OUT LOW EQUITY M ARGINS?

Rupert Gough

05 July 2022

ANALYSIS: The latest OneRoof House Price Report figures show the nationwide average property value fell by 2.9% in the three months to the end of June. Not all regions have dipped, with Canterbury’s average property value up 2.1% over the quarter and Taranaki’s up 1.4%. And some regions have fallen further than others, with the average property value in Greater Wellington down 8.3% over the same period.

Few homeowners will be happy about the sudden shift in the direction of the housing market, but just as increases in the value of your home don’t necessarily add dollars to your bank account, decreases won’t necessarily drain your bank account either. Falling values are only an issue for those homeowners looking to sell soon. Remember, it’s only a loss or gain on paper until you sell.

less than 80% of the property’s value (less than 80% Loan to Value Ratio). Besides only having limited funds to lend to higher-risk mortgages, lenders also add additional costs to compensate them for taking this risk. They do this in two ways. Some banks charge a oneoff fee (commonly referred to as a Low Equity Fee or LEF), while others charge a slightly higher interest rate (commonly referred to as adding a Low Equity Margin or LEM). For new However, one concern recent buyers may have homeowners, there are circumstances where is whether or not banks will charge additional a LEF is better -such as if the house value is fees if their mortgage goes from low risk to above 80% the threshold for more than a year high risk.

- and times when a LEM is a better option.

Recently, buyers have just had to settle for Lenders - and the Reserve Bank of New whichever bank will lend them more than 80% Zealand - generally view a mortgage as “low regardless of how they charge for the pleasure. risk” if the total mortgage on a property is

6

So now, with house values declining, will homeowners who were just below the 80% threshold now be forced to pay additional costs? For example, would someone who borrowed $800,000 to buy a $1m property in Wellington last year be at risk if their house is now worth $917,000 and their mortgage is at 87% LVR? An additional 0.75% Low Equity Margin on top of what could be a 5.35% interest rate would be quite a knock to their finances especially if they were coming off a 2.19% rate.

To guess how the banks will respond, we can look at how they have acted in the past.

In recent years, when a customer’s LVR has moved from 90% to 80%, the banks haven’t always automatically removed the Low Equity Margin; they have usually required someone to review the loan manually. Cynics might say this is because leaving the additional interest charges there earns the bank extra income.

In other words, the banks occasionally charge an additional margin on interest rates even though the property is low-risk.

off again the following month. Values can move around significantly from month to month. An automated process could be worse than asking for the margin to be removed manually.

So if the LEM needs to be manually turned off upon request, it seems logical to need to be turned on again by request. In other words, if your mortgage was below 80% LVR and now, as a result of the value of your house falling, has gone above 80%, you’re not automatically going to have to pay a Low Equity Margin (or worse, a Low Equity Fee which could be $5,000 or more)... unless you specifically ask for it.

Furthermore, the banks are unlikely to want to put financial pressure on their customers.

Homeowners face interest rates that have increased by 3% per annum in a year. Adding a further 0.25% to 0.75% per annum could push people to refinance with a lender that only charges a one-off fee.

In short, the risk of low-equity margins and fees being charged to current homeowners A less cynical view would be that nailing down seems unlikely. Homebuyers who bought in a value on a property is quite hard, particularly the past year can, at least, cross that off their in a volatile market, and incorporating an list of things to worry about. automatic interest margin could get messy.

For example, imagine trying to pay a mortgage - Rupert Gough is the founder and CEO of when the LEM was turned off one month, only Mortgage Lab and author of The Successful First to come back the next month, only to turn it Home Buyer.

7

8

AUCKLAND CENTRAL

MARKET STATISTICS

T O TA L S A L E S

MEDIAN SALES PRICE

June 2022

June 2022

June 2021

June 2021

There was a 36.9% decrease in the total number of sales year on year.

There was a 45.9% decrease in the total median sale price year on year.

70

111

$249,000 $460,000

T O TA L S A L E S VA L U E

M E D I A N D AY S ON MARKET

June 2022

June 2022

June 2021

June 2021

There was a 68% decrease in the total sales volume year on year.

There was a 5% increase in the total median days on market year on year.

$23,382,000 $73,704,000

42

40

9

JUNE SALES – AUCKLAND CEN Address

Bedrooms

Sale Price

809/70 Sale Street

1

1-Jun-22

640000

1307/147 Nelson Street

1

1-Jun-22

560000

610/152 Hobson Street

2

1-Jun-22

505000

205/430 Queen Street

2

1-Jun-22

360000

6c/82 Wakefield Street

1

1-Jun-22

85000

3N/6 Victoria Street East

1

1-Jun-22

550000

14A/8 Bankside Street

1

1-Jun-22

250000

2013/10 Waterloo Quadrant

2

1-Jun-22

495000

805/18 Beach Road

2

1-Jun-22

177000

905/18 Beach Road

2

1-Jun-22

187000

208/57 Mahuhu Crescent

1

1-Jun-22

70000

1305/53 Cook Street

2

2-Jun-22

350000

418/72 Nelson Street

2

2-Jun-22

255000

7H/135 Victoria Street West

2

2-Jun-22

400000

16B/8 Bankside Street

1

2-Jun-22

265000

504/1 Parliament Street

2

2-Jun-22

740000

409/133 Beach Road

1

2-Jun-22

30000

313/57 Mahuhu Crescent

2

2-Jun-22

130500

202/45 Union Street

2

3-Jun-22

775000

1201/41 Beach Road

2

3-Jun-22

1370000

Carpark 26/22 Nelson Street

0

4-Jun-22

125000

1130/72 Nelson Street

2

6-Jun-22

280000

116/121 Customs Street West

1

6-Jun-22

635000

6-Jun-22

570000

4Q/99 Customs Street West

10

Sale Date

2C/87 Halsey Street

1

7-Jun-22

265000

1511/30 Beach Road

1

7-Jun-22

86000

730/72 Nelson Street

2

8-Jun-22

265000

622/72 Nelson Street

2

9-Jun-22

257200

NTRAL Address

Bedrooms

Sale Date

Sale Price

5B/113 Vincent Street

1

9-Jun-22

43200

315/430 Queen Street

2

9-Jun-22

280100

10L/14 Waterloo Quadrant

1

9-Jun-22

222500

605/10 Ronayne Street

2

10-Jun-22

135000

418/430 Queen Street

2

13-Jun-22

319000

11F/2 White Street

2

13-Jun-22

340000

15A/6 Princes Street

1

14-Jun-22

910000

12D/81 Wakefield Street

1

15-Jun-22

47750

7H/82 Wakefield Street

1

15-Jun-22

50100

1E/75 Anzac Avenue

2

15-Jun-22

788000

12E/205 Hobson Street

2

16-Jun-22

1150000

631/72 Nelson Street

2

16-Jun-22

255000

2F/16 Market Place

1

17-Jun-22

185000

1703/8 Airedale Street

2

17-Jun-22

450000

40/139 Quay Street

1

17-Jun-22

70000

603/36 Eden Crescent

2

17-Jun-22

300000

11H/82 Wakefield Street

1

18-Jun-22

29000

1307/32 Swanson Street

2

20-Jun-22

490000

11G/2 White Street

2

21-Jun-22

257000

508/2 Beach Road

2

21-Jun-22

50000

1A/99 Customs Street West

1

22-Jun-22

125000

13D/81 Wakefield Street

1

22-Jun-22

42500

706/8 Ronayne Street

2

22-Jun-22

173000

917/22 Nelson Street

1

23-Jun-22

260000

2103/8 Airedale Street

1

23-Jun-22

476000

7B & 7C/14 Waterloo Quadrant

2

23-Jun-22

250000

9F/82 Wakefield Street

1

23-Jun-22

42000

24/11 Parliament Street

2

23-Jun-22

1050000 11 11

APRIL SALES – AUCKLAND CEN Bedrooms

Sale Date

Sale Price

1001/138 Anzac Avenue

1

23-Jun-22

65000

133/4 Dockside Lane

1

23-Jun-22

123000

11D/15 City Road

1

24-Jun-22

65000

615/145 Nelson Street

1

27-Jun-22

478000

11B/82 Wakefield Street

1

27-Jun-22

29000

3501/1 Courthouse Lane

3

27-Jun-22

2450000

302/15 Union Street

2

28-Jun-22

738000

5N/135 Victoria Street West

2

28-Jun-22

80000

6C/15 City Road

1

28-Jun-22

100000

12A/82 Wakefield Street

1

28-Jun-22

52000

820/147 Nelson Street

2

29-Jun-22

516000

2F/156 Vincent Street

1

29-Jun-22

308000

10I/147 Hobson Street

2

29-Jun-22

249000

601/1 Hobson Street

2

29-Jun-22

1075000

11A/82 Wakefield Street

1

30-Jun-22

75000

4G/82 Wakefield Street

1

30-Jun-22

42000

4D/82 Wakefield Street

1

30-Jun-22

60000

4C/16 Gore Street

1

30-Jun-22

83000

1008/30 Beach Road

1

30-Jun-22

40000

Address

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

12

NTRAL

13 13

TON Y ALEXANDER: EIGHT FACTS TO KEEP IN MIND IF NZ FALLS INTO RECESSION Tony Alexander

ANALYSIS: What will happen if we have a recession? Almost everyone considers it to be a bad thing, just as we consider having an accident to be a bad thing. But there is a world of difference between dropping the birthday cake on the way to the table and putting your car in a ditch just as there is between our economy pulling back 0.1% for two quarters in a row and shrinking 2.7% as we did over 2008-09.

28 June 2022

laying off staff, they have previously hired in large numbers to handle firm growth. But apart from the real estate sector, hardly any sector in New Zealand is running excess staff.

Employees are in very short supply and that means redundancies in the event of economic shrinkage will be very small. The same goes for business inventories. If our economy shrinks few firms will find themselves with If we have a recession in New Zealand, and it excessively high stocks of raw materials and is not certain we will, then we are more talking finished goods. Most firms are still trying to about dropped cake rather than a road crash. get stock levels to average. Having said that, The first thing to keep in mind is this. While watch for retailers having some big sales soon costs for our farmers keep rising, incomes for as the crunch in consumer spending already most are booming. Fonterra has just announced well underway hits retailers only now taking a record projected payout for its suppliers for delivery of goods ordered from offshore a long this season and prices are good for most of the time ago. things we ship overseas.

Third, our $17 billion international travel sector This partly reflects the fact that Russia’s invasion is kicking back into life and set to stimulate our of Ukraine and port blockade has caused global economy even though consumers offshore food prices to rise sharply. We export food. will be feeling the cost of living pain as we are – probably more so given they have Second, a recession often feeds downwards soaring home energy costs, which we are not on itself as businesses react to falling sales by experiencing here.

14

Independent economist Tony Alexander: “Banks have not been lending willy-nilly for some time in this country.” Photo / Fiona Goodall

Fourth, from next year a good number of foreign students will be back in the country, hopefully bringing some positive life to Auckland’s CBD in particular.

Fifth, high job security and banks having used mortgage test interest rates of 6.5% or higher means that very few mortgagee sales of residential property will occur his time around.

In addition, banks have not been lending willy-nilly for some time in this country. They did not do so ahead of the GFC (some finance companies did instead), and lending rules and capital requirements tightened further in the decade after 2008-09.

Sixth, the NZ dollar has not been unusually strong for a great number of years and in fact has weakened slightly in the past year. This is helpful for our export sector.

Seventh, local and central governments have a lot of infrastructure work to do.

Eighth, if our economy shrinks by 1% that means 99% of normal activity is continuing.

Just as not all businesses grow when the economy grows, not all suffer when the economy has a recession. Given the intensity of labour shortages there will be many businesses right now hoping that the economy does have a recession so they can hire people laid off from other sectors.

The trick for average people will be to remember these factors when everyone else starts running around like headless chooks in the event our economy does temporarily shrink. And once house building activity starts falling away potentially rapidly from early next year, remember that this will not mean the other 93% of our economy is going to do the same.

- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz

15

16

RAY WHITE CITY APARTMENTS

WHY CHOOSE US?

WE’RE ON THE UP-AND-UP. Based in the heart of Auckland City, Ray White City Apartments 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 apartment market continues to experience unprecedented growth, City Apartments & Wynyard Quarter is well positioned to maintain its leadership in the market.

City Realty has a strategic partnership with Loan Market, 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, Loan Market 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.

17

MARKETING YOUR HOME 18 12

A COMPREHENSIVE M A R K E T I N G S T R AT E G Y TO REACH ACTIVE & PA S S I V E B U Y E R S 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 multichannel digital strategy and print media.

PROPERTY PORTALS P R I M A R I LY A C T I V E & S O M E PA S S I V E B U Y E R S 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 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.

DIGITAL MARKETING A C T I V E & PA S S I V E B U Y E R S 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

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.

PRINT MEDIA P R I M A R I LY PA S S I V E & S O M E A C T I V E B U Y E R S Print continues to play an important role to cover the breadth of the market reaching quality and highly engaged audiences. It takes criteria-based 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.

19

MEET THE TEAM

CITY A PA RT M EN TS M A N AGEM E NT

Daniel Horrobin Director of City Realty Group

General Manager for City Realty Group

Cameron Brain Auction Manager for City Realty Group

CITY A PA RT M EN TS SA L ES P EO PLE

Ady Huang

Aileen Wu

Casey Chen

Chris Cairns

Licensee Salesperson

Licensee Salesperson

Licensee Salesperson

Licensee Salesperson

Chris Guilford

Craig Warburton

David Lee

Dene O’Kane

Licensee Salesperson

Dominic Worthington

Licensee Salesperson

Dusan Valenta

Licensee Salesperson

Elena Mackor

Licensee Salesperson

Licensee Salesperson

Licensee Salesperson

Habeeb Urrahman

Hunter Freeman

Jean Ooi

Licensee Salesperson

John Min

Licensee Salesperson 20

Vikas Verma

Licensee Salesperson

Judi Yurak

Licensee Salesperson

Licensee Salesperson

Gillian Gibson

Licensee Salesperson

Jeong Lee

Licensee Salesperson

Licensee Salesperson

Justin Choi

Katie Read

Licensee Salesperson

Licensee Salesperson

Keisha Gutierrez

Licensee Salesperson

Marco Sahar

Licensee Salesperson

Nick Armstrong

Licensee Salesperson

Krister Samuel

Licensee Salesperson

Mark Li

Licensee Salesperson

Ryan Bridgman

Licensee Salesperson

Santana Munns

Sapphire Munns

Steve King

Steve Kirk

Licensee Salesperson

Licensee Salesperson

Licensee Salesperson

Leo Zhu

Licensee Salesperson

May Ma

Licensee Salesperson

Rickus Moll

Licensee Salesperson

Sean Ma

Lisa Zhang

Licensee Salesperson

Michelle Yurak

Licensee Salesperson

Sam Huang

Licensee Salesperson

Siming Zhou

Licensee Salesperson

Licensee Salesperson

Victor Liu

Warren Thomas

Licensee Salesperson

Licensee Salesperson

21

CREATE. RECOGNISE. GROW. The group with the family factor