Auckland Central March Market Report

Auckland Central Market Report.

Part of the group with a family factor.

CITY

Contents.

04.

Market CommentA Collective Sigh Of Relief

08.

Auckland Central Statistics February 2024

12. Auction Update with Cameron Brain

16. Property Management Market Comment

20. Marketing your property

06. Article – Ed McKnight: How much money can you make as a property investor?

10. Recent Sales February 2024

14. Article – Auckland city apartment to be auctioned with $1 reserve

18. LoanMarket: Home loan borrowers breathe a collective sigh of relief

22. Ray White Auckland Central & Wynyard Quarter

A Collective Sigh Of Relief.

The OCR survived unchanged following the latest review. Director of City Realty Group, Daniel Horrobin says: “The last thing we need is another bump in the road as activity in the property market picks up speed.”

Our mortgage adviser Jamie Maclennan from Loan Market comments: “On February 28th the Reserve Bank made the first Official Cash Rate announcement for 2024 and to many it will come as a relief that they left the OCR on hold for the fifth consecutive time. Thankfully, the Reserve Bank has taken into account that our data is up to three months old and taking note that inflation and other key indicators are easing in other parts of the world.”

“We also believe the announcement from the Reserve Bank that they will be introducing DTI’s (debt to income ratios) by mid 2024 is a clear indication they expect to start easing interest rates in the not too distant future”.

In fact, to quote a Stuff headline from March 4th: “Two of the country’s biggest banks have announced more interest rate cuts”.

This is all positive news as sellers grow in confidence.

Realestate.co.nz reports: “Our latest property report saw last month’s stock level hit an eightyear high, as new listings returned to ‘normal’ February levels. New listings were up by 44.8% nationally, compared to February 2023 when listings hit a record low”.

They report activity from property seekers also significantly improved with 20% more people visiting the site compared to February last year and, interestingly, international buyers searching organically from overseas were up 16.4% yearon-year.

TradeMe property stock levels in Auckland Central are edging closer to the 600 mark after dipping below 500 properties towards the end of last year.

Daniel says: “We auctioned nearly 50 apartments out of our Auckland Central office during February and are building up to a similar number for March.”

Investor sentiment is also on the move as independent NZ economist Tony Alexander’s monthly survey reports. He says: “There is a trend-rise in the proportion of those who were intending to hold their property for at least 10 years now planning to sell. Their time frame has shifted”.

Central city rental property remains in high demand as immigration numbers remain strong. Daniel says: “There is serious momentum as confidence from both sellers and buyers gains traction”.

Daniel says: “We auctioned nearly 50 apartments out of our Auckland Central office during February and are building up to a similar number for March.”

Ed McKnight: How much money can you make as a property investor?

Remember, property prices can go down as well as up.

ANALYSIS: With government’s announcement on the return of interest rate deductibility for property investors fresh in mind, it’s worth asking: just how much money can you make from investing in property?

Some Kiwis stick with the mantra that properties double in value every 10 years, thinking that if they buy a house for $800,000, they’ll sell it for $1.6 million a decade later, and make a minimum of $800,000 profit.

Unfortunately, the above scenario is wishful thinking (but scotching the “doubling every 10 years” myth is for another column). Property investors don’t always make money. Property prices go up and down. Property is not a one-way bet. And investors need to think about their rental returns, and not get bedazzled by capital gain.

To show how much money investors can make, I’ve selected a random a threebedroom property in New Plymouth (I’m

purposefully not mentioning the address as the house, as far as I know, has not been used as an investment property).

Based on rental data and house price growth in New Plymouth over the last decade, the property would likely have sold for $360,000 in 2013 and generated rental income of around $390 a week.

The modelling used in the graph below also includes changes in interest rates and inflation as well as the three different property tax changes that occurred in the last 10 years.

According to the model, the house would have more than doubled in value by the end of 2023 and the owner would have enjoyed just over $400,000 in capital gain.

But again, it wasn’t a one-way bet. When you look at the returns on an annual basis, the money made (and lost) is more volatile.

In 2016, our investor would have made a lot of money, almost $52,400. That’s because property prices in New Plymouth rose, and rental income would have covered

Savvy investors focus on rental returns first and capital gain second. Photo / Getty Images

most of their costs.

In other years, though, our investor would have lost a lot of money. Property prices plunged in 2022, so they would have lost almost $45,000.

Overall, the gains outweigh the losses, but the path to those gains is a bumpy one.

There are three lessons to take from this:

1. You don’t make money every year

In the first year, the value of our investor’s house rose by $19,000. But the rent didn’t cover all the costs so they would have had to top up the property by $3000. Overall, they would have been just $16,000 better off.

The following year, house prices increased slightly faster. Our investor made $28,000 from the jump in property values, but they still had to top up the property by $3000, so they were only $25,000 ahead that year.

The following year wasn’t so good. Our investor’s house dropped in value by $1000, and they had to top up the property by a bit more. In total they lost $4460.

And those bumps continue. In their best year, 2021, they made $176,000 on the back of booming house prices. But the very next year, they lost $44,800 as house prices fell.

The message is clear: if you invest in property, you need to be ready for the ups and downs.

2. House price growth makes more money than cashflow

Ninety-nine percent of the returns from this property were the house going up in value. Only 1% of the net returns came from the rental income. Deep down, most investors know that the bulk of the returns come from house price growth. These numbers show this is true.

3. You need to hold for the long-term

In the long-run, our investor would have made $404,900 from owning this property. And if you graph the numbers differently, it looks like they made money almost every year.

But our investor had to go through the ups and downs shown at the top of this column to get those significant returns. You’ve got to hold for the long-term. At least 7-10 years. The longer you hold, the more likely you are to make money.

Property owners who make money in property tend to hold for seven years on average. According to CoreLogic’s Pain and Gain report, those who lose money tend to hold for just two years.

Right now, higher interest rates are hurting investors. Property prices are only just recovering. Those who hold on for the longer term are more likely to make money than those who only dip in and out of the market.

Opes Partners resident economist Ed McKnight: “Deep down, most investors know that the bulk of the returns come from house price growth.” Photo / Fiona Goodall

There

There

There

There

FEBRUARY

2024

Our Auckland Central auctions are held weekly on Thursdays at 12:30 pm, hosted at our dedicated auction room located at Level 3, 246 Queen Street. Whether you’re a buyer seeking your dream property or a seller looking to capitalize on the buoyant market, our auction events offer a prime opportunity to engage with the Auckland Central real estate market.

Don’t miss out on the excitement and opportunity – mark your calendars and join us for our upcoming auction events at Ray White Auckland Central.

Cameron Brain.

Auctioneer & Auction Manager

027 424 1782

cameron.brain@raywhite.com

Ray White Auckland Central Auctions in 2024:

Buyer Activity Surges in March Auctions

March has proven to be a vibrant month for auctions at Ray White Auckland Central, marked by a significant uptick in buyer activity both at open homes and in our auction rooms. The numbers speak for themselves: there has been a notable increase in the volume of buyers attending open homes, as well as a rise in active bidders participating in our auction events.

Auction Properties in High Demand

Properties listed for auction have been particularly attractive to prospective buyers, with nearly four times the number of buyers showing interest compared to properties not listed for auction. This surge in demand underscores the effectiveness of the auction model in generating interest and competitive bidding for properties in the Auckland Central area.

Steady Increase in Bidders

The average number of bidders per auction has also shown a slight increase compared to February, with an average of 2.7 bidders participating in each auction event. This uptick in bidder numbers reflects the growing competitiveness within the market and the willingness of buyers to engage in auction bidding.

March Auction Clearance Rate: 50%

The auction clearance rate for March stands at an impressive 50%, indicating a healthy balance between supply and demand in the Auckland Central property market. This figure underscores the effectiveness of auctions in facilitating successful property transactions for both sellers and buyers.

Exciting Auction Pipeline Ahead

Looking ahead, the Auckland Central auction pipeline is brimming with anticipation, with over 60 auctions scheduled in the coming weeks. The diversity of properties on offer is remarkable, ranging from carparks in the Auckland CBD to brand-new apartments in sought-after locations like St Heliers.

more information and to view our current auction listings, please visit our website or contact our team directly.

Auckland city apartment to be auctioned with $1 reserve

Owner-investor “tidying up his affairs” wants a quick sale on March.

The reserve for the auction is set at $1 14, 2024

This two-bedroom, two-level city apartment in Quay Street is currently rented for $630 a week, which makes it an attractive investment for landlords. And the chance to purchase it for a song will likely make it even more so.

The apartment is being auctioned on March 14, 2024 with a $1 reserve. And listing agent Grant Elliott of Ray White Auckland Central says, “You could buy this twobedroom cash cow on your credit card.

“Leasehold and cheap? You bet,” he says in his listing. “A little tired? Not as tired as you might think.

“What’s the catch? The bank won’t lend on it; you’ll need a little bit of cash and the ability to read. Upside? It’s perpetual passive income for virtually spare cash... like...forever.”

Elliott says the owner bought the corner apartment 18 years ago for $280,000 and wants a quick sale: “He has tried to sell it before, and now he’s getting on, he doesn’t want it to be left as an inheritance mess. He is tidying up his affairs.

“The most attractive way to sell is to put it up for auction. It was the vendor’s choice to sell it with one week’s notice, which puts

Listing agent Grant Elliott says the decor of 20 years could do with a refresh, which would see the apartment fetch a higher rental.

the pressure on buyers.”

The risk of the apartment selling very cheaply is accepted: “If we only get one buyer that turns up on the day it will be on the market even if the first bid is $1.”

Elliott says the current tenants have been in the apartment for quite some time, paying $630 a week. “You could get a lot more if it had a refresh. It still has a colour scheme from 20 years ago and the blinds are falling apart.”

Being a corner apartment, there are side windows and plenty of sun. It comes with a car park.

The apartment is above a commercial block at 20A/8 Quay St, Auckland City, close to several several fast-food outlets and opposite the container port.

The agent says another apartment in the block sold last year for $88,000.

The ground rent for the unit is $17,344 annually and it has a Ngāti Whātua 150year lease.

Prices for leasehold apartments vary depending on a range of factors, including time of lease remaining.

How did it go?

The auction started at $1 and sold 52 bids later at $62,000

There were 8 bidders in atendance.

Owner-investor “tidying up his affairs” wants a quick sale on March 14, 2024

Ray White New Zealand Property Management

2024 Setting Higher Standards

At Ray White, we aim to revolutionize property management to help address industry knowledge and compliance gaps. In an unregulated field of competitors, we are a brand committed to excellence and reshaping property management standards across New Zealand.

WHY RAY WHITE

Educational Excellence: All offices hold NZQA Level 4 certificate experience, backed by a minimum required 20 hours of annual training for all staff.

Financial Integrity: We manage rental funds through dedicated client funds accounts (trust accounts), undergo independent financial audits, and carry public indemnity insurance.

Customer-Centric Approach: Tailored products and services for all landlords, yes, even those managing tenancies themselves.

RAY WHITE CHOICE

DIY Landlord Services - Customer Choice Redefined

We can see that DIY Kiwi landlords now face increasing compliance standards and risks, so Ray White has introduced ‘Ray White Choice’ - our suite of pay-as-you-go property management services for those who choose to do it themselves.

Our services include:

• Casual Letting: Hassle-free advertising, applications and vetting, and all tenancy-related lease documentation for a seamless tenancy.

• Rent Management and Arrears Support: Timely payment notifications, detailed ledgers, and arrears management support.

• Routine Tenancy Inspections: Regular property inspections to ensure compliance with landlord regulations and insurance requirements.

• Initial Tenancy Inspection: Thorough pre-tenancy property inspection with photographic evidence and maintenance advice.

• General Consulting and Advice: Expert guidance on rental reviews, documentation, tenancy rules, and more.

Experience the difference with Ray White Choice - our new range of industry-exclusive services helping empower DIY landlords with flexibility, convenience, and support.

Is it time for a change?

Kurt Smith

Home

027 742 5227

jamie.maclennan@loanmarket.co.nz

loan borrowers breathe a collective sigh of relief

On February 28, the Reserve Bank made the first Official Cash Rate announcement for 2024, and to many, it will come as a relief that they left the OCR on hold for the fifth consecutive time.

This starkly contrasts the recent announcement by ANZ that they predicted two more increases in the OCR were coming in both February and April. Thankfully, the Reserve Bank has considered that our data is up to 3 months old and noted that inflation and other key indicators are easing in other parts of the world.

For unknown reasons, New Zealand only updates its inflation figures every 3 months compared to most other countries that do theirs monthly. Hence, the information we use is always relatively out of date. Even though the most recent unemployment figures

were lower than expected at 4%, there is clear evidence in the labour market that it is getting easier to find staff and wage pressures are also starting to ease. These factors all contribute to the Reserve Bank’s future decisions when considering interest rate drops.

We also believe the announcement from the Reserve Bank that they will be introducing DTIs (debt to income ratios) by mid-2024 clearly indicates they expect to start easing interest rates in the not-too-distant future (late 2024 or early 2025).

So what are DTIs - several countries overseas, such as

the UK and Ireland, have introduced DTIs as a means to stop the housing market from becoming overheated when interest rates are low. During Covid, when interest rates were as low as 2%, house prices increased by 45%, and people could borrow up to 9 or 10 times their gross annual income. The introduction of DTIs will restrict owner-occupiers to a maximum of 6 times their gross income and Investors to a maximum of 7 times their income.

The question on everyone’s mind now is, will the RBNZ lower the cash rate, or is there one more hike ahead?

Opinions vary on this; we believe the April 10 announcement will be the next turning point. If the inflation data continues to head south towards the magic 3% barrier, then the rates will remain on hold, but we don’t believe the RBNZ will signal anything other than a neutral stance until later in the year.

So, what if I have a fixed rate due in the next few

months?

Our opinion still remains firm on the fact that we will see them at least talking about interest rate cuts by the last quarter of 2024, therefore if you have a fixed rate coming due soon, you should consider the 6-12 month options as these will allow you to ride the interest rate reductions down when they start happening either on a floating rate or short term fixes.

As always, feel free to give us a call if you wish to discuss anything.

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?

Based in the heart of Auckland City, Ray White Auckland Central & Wynyard Quarter are an awardwinning 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 Queen 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.

Director City Realty Group

AML Officer Sales Manager Auckland Central Auction Manager

Daniel Horrobin

Cameron Brain

Pauline Bridgman

Mike Richards

Ady Huang Aileen Wu

Ben Parkes

Craig Warburton

Dom Worthington

Dusan Valenta

Gillian Gibson

Habeeb Urrahman

SALES TEAM - AUCKLAND CENTRAL OFFICE

Carl Russell Casey Chen

Chris Cairns

Grant Elliott

Kristine Liu

Cheryl Whiting

Bosen Han

Judi Yurak

Keisha Gutierrez

Krister Samuel

Holly Cassidy

Jeong Lee

Chris Guilford

Amit Rana

Danika Ansley

Derek Yin

Sales Manager Wynyard Quarter, Sandringham & Mount Roskill

Belinda Henson

Daniel Boderick

Our strongest team yet. Selling right across Auckland Central & City fringe

SALES TEAM - WYNYARD QUARTER OFFICE

OUR LOANMARKET MORTGAGE ADVISOR

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

Marco Sahar

Michelle Yurak

Nick Armstrong Ryan Bridgman

Sam Huang

Steve King

Steve Kirk

Jorvarn Hicks

LoanMarket Mortgage Adviser

Jamie Maclennan

Louise Stephens

Ross Tierney

Leo Zhang

Leo Zhu

Lisa Zhang

Max Beliak

Gabriela Galateanu

Andrew Bond Ainsley Lewis

The group with the family factor.