Auckland Central Market Report - March

Auckland Central Market Report.

MARCH 2023

Part of the group with a family factor.

Contents.

04. Market Comment

06. Article – Tony Alexander: Why collapse of Silicon Valley Bank is a good thing for NZ house prices

08. Auckland Central Statistics

10. Recent Sales February 2023

12. Article – Tony Alexander: Should Kiwis be worried about new interest rate warnings?

14. Auction Statistics & Update with Cameron Brain

16. LoanMarket Update

18. Marketing your property

20. Ray White Auckland Central Meet the team

Market Comment. Ray White Auckland Central.

Auckland central apartment market marching to the beat of its own drum

The Auckland central apartment market continues to march to the beat of its own drum, not experiencing anything like the year-on-year sales volume dropoff traditional stand-alone homes have experienced in the last year.

Discussing Auckland central apartment market results for February 2023, Director of City Realty Group Daniel Horrobin says: “We’re in our own little niche, largely driven by encouraging investor activity. There continues to be signs of confidence in the opportunities available in the apartment market, helped along by many sellers being willing to meet the market in term of pricing.”

Values have come back slightly, so that they align with net return expectations amongst investors who make up about 70 per cent of city apartment buyers.

“Investors are very active in this market and they are currently buying.”

The fact that the Governor of the Reserve Bank, Adrian Orr, raised the official cash rate again last month by 50 basis points to 4.75 per cent hasn’t had much effect on apartment investors. “That’s because these investors are typically playing with equity or they are cashed up.”

Daniel says they’re still seeing a bit of first home buyer activity in the city apartment market, with the ability to buy a twobedroom central apartment with a carpark for $500,000 being much more affordable than alternatives. There continue to also be owner-occupiers drawn to the high end of the city apartment market for lifestyle reasons, such as downsizers wanting to embrace waterfront living.

He says interest in city apartments has grown with the perception that the central city is bouncing back after Covid and has got its spark back, with more activities on and more tourists visiting.

Meanwhile the Auckland central apartment rental market has well and truly bounced back to pre-Covid demand. The number of city apartments advertised to rent has dropped sharply over the last eight weeks, with February being the month most tertiary institutions such as Auckland University restart for the year. Available central apartment listings on Trademe have dropped from numbers in the early to mid-600s to the early 300s.

“This increase in demand is due to an influx of international students coming into the city and also more people looking for temporary and permanent accommodation due the recent flooding in Auckland.” This has caused the drastic drop in the number of rental properties available, which in turn is driving rents up.

“We’re seeing high attendance at viewings for apartment open homes – in some cases more than 100 people turning up to a single viewing.”

Buyers or sellers wanting to understand the specifics of the Auckland city apartment market in more detail are able to draw on the expertise of Ray White City Group’s licensed agents.

DANIEL HORROBIN

daniel.horrobin@raywhite.com

Tony Alexander: Why collapse of Silicon Valley Bank is a good thing for NZ house prices

Positive signs for the housing market.

ANALYSIS: Three things have happened in the past week to make me reinforce my comments made here and elsewhere recently that we are in the endgame for the downward leg of the house price cycle.

First, on Tuesday REINZ reported a 0.1% monthly rise in its house price index in February. This followed a 1.4% fall in January and 1.7% fall in December and while the falls have almost certainly not ended, the pace of decline when smoothed out is decidedly slowing.

Second, and this is important for Auckland especially, net migration flows have turned on a dime. Just six months ago the net annual migration flow for New Zealand was a loss of over 13,000 people. Now we learnt also on Tuesday that the flow has switched to a net gain of 33,000 for the year to January.

We have seen this sort of radical flow change before, such as at the end of 2001, and the housing market implications are fairly obvious. Accelerating population growth means more demand for rental accommodation and houses to own. Migrants coming into New Zealand tend to go to the big cities and to Auckland in particular. This, when combined with a fairly sharp slowing of new dwelling construction later this year, is going to create an interesting demand/supply interaction.

For the moment though, the attention of

people is firmly on other things such as the soaring cost of living and recent extreme flooding. So popular recognition of the migration change is not likely to have much impact on people’s house buying plans for a few months. But that is where things get interesting.

One of the things people are looking atand the third factor this past week which is positive for the housing market - is the US government takeover of Silicon Valley Bank in the United States. The bank has gone under not because of bad lending but because of a run on deposits caused by their poor management of liquidity reserves.

So, a systemic banking sector decline is very unlikely. But people always get concerned when these things happen and the current bout of worry running through the US economy will depress economic activity and inflationary pressures. This takes away some of the pressure on the Federal Reserve to keep raising interest rates.

That pressure to at least slow down the pace of interest rate increases is reinforced by concern that further rate rises will expose more financial institutions to the particular problem encountered by SVB. The result has been the greatest three day decline in the US two year Treasury note yield since the October 1987 sharemarket crash.

Interest rates have fallen across the curve in the US and that has fed through to some hefty declines here. The cost to a New Zealand bank for instance of borrowing money at a one year fixed rate to lend fixed for one year has fallen from 5.55% a week ago to now 5.3%. The three year borrowing cost to a bank has decreased from 5.25% to near 4.75%.

Many of us have warned for quite a while now that wholesale borrowing costs in NZ are going to go all over the place for many months as we try to get a picture of where inflation is tracking and what monetary policy will likely do. Such volatility has not gone away and we could easily see these rates blip back up again next week.

That is why banks are unlikely to initiate a fresh round of fixed mortgage rate cuts, as happened a couple of months ago. But growing discussion of monetary policy tightening slowing is going to encourage more potential house buyers to back away from worst-case scenarios of rate rises even if believing rates will fall rapidly is not justified for this year.

If we throw in the strengthened evidence of first home buyers getting into the market contained in my latest surveys of mortgage brokers and real estate agents we get the scene being firmly set for at least a bottoming of the nationwide house price cycle potentially before the middle of the year.

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

Independent economist Tony Alexander: “A systemic banking sector decline is very unlikely.” Photo / Fiona Goodall

Market Statistics.

Total Sales

February 2023

February 2022

February 2023

$352,500

February 2022

There was a -51% decrease in the total number of sales year on year.

Total Sales Value

60 $26,379,799

February 2023

February 2022

123 $81,850,020

There was a -67% decrease in the total sales value year on year.

$498,000

There was a -29% decrease in the total median sale price year on year.

Median Sales Price Median Days On Market

February 2023

50

February 2022

37

There was a 35% increase in the total median days on market year on year.

Source: REINZ

Recent Sales.

AUCKLAND CENTRAL

FEBRUARY 2023

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

Tony Alexander: Should Kiwis be worried about new interest rate warnings?

ANALYSIS: Last week I noted that there is a growing list of things which will eventually be supportive of the NZ housing market but that for the next few months the negatives will easily dominate, with house prices falling further and real estate sales remaining weak. Nothing has happened over the past week to change that outlook.

In particular, my latest monthly Spending Plans Survey shows that consumers remain highly pessimistic and intend cutting their spending more than they were thinking a month ago. There also remains zero sign of investors following first home buyers back into the open homes.

Just before the high inflation number of October 18 last year and the Reserve Bank’s record raising of the official cash rate on November 23 a net 15% of consumers replying in my monthly survey said they intended cutting back spending. That proportion fell to a net 43% planning reductions in December.

This then improved to 30% last month but is now back at 37%. This is bad news for retailers but is likely to please the Reserve Bank as it awaits more indications that our economy is weakening and inflationary pressures are coming off. It might also be pleased with the new worsening in people’s plans for buying both a house to live in and an investment property.

But we have to be cautious about economic data in the near future because of the naturally depressing impact on sentiment of the recent extreme flooding events.

My survey is probably capturing that deep sense of concern we now have of the living environments for many people around the country.

However, the survey also still shows the return of first home buyers to the housing market. In February a net 5% of people aged over 30 intended pulling back on buying a house to live in. That worsened to 9% this month. But for those 30 and below

The outlook for the New Zealand housing market is negative in the short-term but first home buyers are returning.

Photo / Fiona Goodall

an unchanged net 25% still intend buying their own house.

This confirms the findings in my other surveys that first home buyers are back in the market – or at least the younger ones, given that the age of buying one’s first home has crept into the 30s on average nowadays. But to repeat, there is still no sign of investors returning. Credit for most is hard to get, interest expense deduction from rental income is falling away as each year goes by, and most will probably be giving thought to the problems owners of rented property in flood affected areas will be having now – on top of the obvious issues for the tenants.

Another development this week telling us that the short-term housing track is still downward is the growing view offshore that inflation is going to prove harder to get down than earlier thought. In the United States expectations for how high the Fed.’s funds rate have to go are rising as

economic data surprise more often on the strong than the weak side.

US wholesale interest rates have been rising for many weeks now and that has fed through into higher costs to NZ banks of borrowing money at fixed rates to lend to you and I for our new fixed rate mortgages and rolled over existing ones.

Is it likely that we will see a round of fixed rate rises here any day? It is not impossible but it doesn’t seem likely given that banks are failing to meet sales targets and there is a strong risk of rapidly losing market share as $170bn worth of mortgage rates come up for renewal in the coming year. What about the potential return of rates discounted as low as 4.99% for one year fixed?

That’s possible. But you’ll probably only know such offers exist if you ask your banker and threaten to take your business elsewhere. So ask. You’ve nothing to lose.

“The growing view offshore [is] that inflation is going to prove harder to get down.” Photo / Sylvie Whinray

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

Auction updateAuckland Central

With much distraction throughout Auckland in February, our Auctions only produced a 50% clearance rate, while March’s clearance rate (at the time of writing this) sits at 65%.

March’s auction results seem to be more of a reflection of what is happening in the current market with good active bidding on all auctions with multiple bidders. Sale prices and results have been encouraging with a car park selling in Grafton for $107,500 with 4 buyers competing against each other, to a quality

Wynyard Quarter apartment selling under the hammer for $3,000,000 with 4 registered buyers.

Investors are back in the auction rooms with the Auckland Rental Market seeing a strong surge, with some properties achieving 10% plus returns.

If you would like to discuss anything about the Auction Process or Why should you Auction, I would welcome the opportunity to discuss this with you.

Auctioneer & Auction Manager

027 424 1782

cameron.brain@raywhite.com

As we come close to the end of the first quarter of 2023, activity is certainly increasing.

Five steps to buying an investment property

Buying an investment property can be an excellent way to create wealth and like any investment doing the research before you take the plunge will help you save thousands.

Step 1: Find out how much you can borrow

Getting an idea of how much you can borrow is the first step to buying an investment property. It gives you a general idea of your target price range, so you can narrow your property search within your purchase budget.

Lenders will also consider the potential rental income you will get from the investment property when calculating how much you can borrow.

Step 2: Calculate your loan and purchase costs

As a general rule, you will need about 20% deposit for an investment property purchase, however if you have existing property, you may be able to use your equity to cover more of the deposit. The criteria for deposits will differ between lenders. A Loan Market mortgage adviser will help you identify which lender will best suit your investment loan needs from a wide panel of secure banks and lenders – that’s step three but really

working out your costs and loan options go together.

In addition to your deposit, you will need to consider the following costs:

• Loan application fee

• Valuation fees

• Statutory government charges

• Conveyancing and legal fees

• Lenders Mortgage Insurance (LMI) if you are borrowing more than 80% of the property value.

Step 3: Investigate your investment loan options

Property investment loans are available to suit just about any investment strategy. The common loan options for property investment include:

Line of Credit loans - invest in property sooner if you already own a property. Line of credit loans tap into the existing equity you have built up in your existing property to use towards a deposit

for your investment property.

Interest only loans suit investors who are focused on achieving capital growth in the short to medium term, and often go hand in hand with negative gearing.

You’ll also need to consider your loan repayment options, some property investors choose to pay interest in advance. Different repayment options will suit different investment strategies.

Property investment loans are not too different from any other type of home loan; you will need to compare rates, features, fees and charges.

Step 4: Get loan pre-approval

Your investment loan pre-approval will give you a head start on other buyers by having your loan application pre-approved, as well as ensuring you shop within your budget.

A formal pre-approval works the same as a formal loan application, except without the security details. With a pre-approval, your lender will assess your income, expenditure, assets and liabilities to determine how much you can borrow, as well as assessing the documentation normally required to get full loan approval. Be wary of any pre-approval that has many conditions attached to it. Your mortgage adviser can help you to apply for a formal pre-approval

Step 5: Buying your investment property

Conduct relevant searches including building and pest inspections. If you’re buying your investment property at auction you will need to complete all inspections prior to auction day.

View the contract of sale to check conditions and inclusions. Again, if you are buying at auction it is important to have your solicitor go through the contract of sale prior to making a bid. Make an offer or bid at auction to secure your investment property purchase. Remember, you’ll need to pay a deposit if your offer or bid is accepted so be prepared to cover at least five to ten per cent of the purchase price.

You should also check that the conditions of sale you expected are included in the contract; you may want to make the sale subject to finance and satisfactory building and pest inspections (these conditions will not apply to a sale by auction).

Finalise your investment loan approval by contacting your mortgage adviser with the details of the property.

If you have loan preapproval, full loan approval may take only a few days. Once your loan has been approved, you will receive a formal Letter of Offer that will need to be signed and returned to your lender as soon as possible. Settlement of your loan will then get underway, starting with the receipt of your loan documents. You will need to forward these to your solicitor, who will then liaise with your lender to schedule the settlement date. A settlement timeframe will have been set out in the contract of sale.Your first loan repayment will usually be due one month after settlement.

Don’t forget to organise relevant insurance, including building and landlord protection. You may also want to organise a property management service, if you have not already done so as part of the purchasing process.

To discuss the competitive investment loan options available speak to Craig or Laurie today.

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.

SALES TEAM - AUCKLAND CENTRAL OFFICE

Jean Ooi

Director AML Officer

Sales Manager Auckland Central

Auction Manager Sales Manager Wynyard Quarter

Daniel Horrobin Cameron Brain Pauline Bridgman

Mike Richards Belinda Henson

Operations Manager

Jane Martin

Ady Huang Aileen Wu Ben Parkes

Craig Warburton David Lee Dom Worthington Dusan Valenta

Gillian Gibson Habeeb Urrahman

Chris Guilford Casey Chen

Chris Cairns

Grant Elliott Jeong Lee

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

Judi Yurak Keisha Gutierrez Krister Samuel Leo Zhu

Lisa Zhang Louise Stephens Marco Sahar

Mark Li May Ma

Michelle Yurak Nick Armstrong Ryan Bridgman

Sam Huang Siming Zhou

Steve King Steve Kirk

Central & City fringe Max Beliak

SALES TEAM WYNYARD QUARTER OFFICE

OUR SALES SPECIALISTS

Victor Liu

Gabriela Galateanu

LoanMarket Mortgage Adviser LoanMarket Mortgage Adviser

Craig Pettit Laurie Warren

John Min