Ray White Auckland Central Market Report - May

Auckland Central Market Report.

Part of the group with a family factor.

Contents.

04. Market Comment - LVR restrictions easing - does this signal the bottom of the cliff?

08.

Auckland Central Statistics April 2023

06.

Article – Diana Clement ‘The end of rate hikes is near’: Will May’s OCR rise be the last?

10. Recent Sales April 2023

12. Auction Statistics & Update with Cameron Brain

14. Article – Kelvin Davidson: House price falls: Who scored the best bargains in the worst market since the GFC?

16. Property Management Market Comment

20.

Marketing your property

18. LoanMarket Update

22. Ray White Auckland Central Meet the team

Market Comment. Ray White Auckland Central.

LVR restrictions easing – does this signal the bottom of the cliff?

On 1 June this coming month, bank LVR rules are easing somewhat. Not a lot, but a step in the right direction. “Does this signal a bottoming out of property values? Watch this space,” says Director of City Realty Group, Daniel Horrobin.

Ray White’s Loan Market Mortgage brokers are optimistic these changes will free up lending but at the same time, point out inflation and associated high interest rates remain a stubborn hindrance to borrowing.

On a positive note, the BNZ has announced this week that they are opening their doors beyond existing customers to new-to-bank customers, which is a significant development in that space.

Daniel says: “Many are predicting the Reserve Bank will increase the OCR a tad on the 24th of this month and hopefully that will see the back end of those increases”. Adrian Orr has recently stated: “What we’re seeing is what we are hoping to observe, which is less spending to better match the supply capacity, inflation pressures easing, and the economy working its way through the current environment.”

April saw properties for sale in the CBD dip below 600 for a time but remain reasonably steady. Buyer activity is encouraging with open home attendances reasonably healthy in recent weeks.

This is reflected in auction clearance rates. Ray White’s Central City office, which deals with the majority of our central apartment sales, sold three-quarters of properties on the day in our last auction for April, with the remainder successfully sold post auction.

This level of clearance looks likely to continue in May, with three-quarters of properties sold on

the floor in Central City’s first May auction. In almost all cases these auctions are attracting multiple bidders, providing our sellers with onfloor evidence of perceived value on which to base their decisions. Investors continue to drive hard bargains.

On the other hand, early indications are that total market sales in the CBD reported for April have not replicated a comparatively healthy March. This is no surprise as the month of March has historically been one of the most productive for sales activity.

In the rental space, demand for central city apartments continues with the number of properties available down again month on month to well below 350 currently. Landlords continue to profit as rents rise as a result. Students and professionals are significant drivers of demand.

Trade Me’s latest rental price index shows growing demand for smaller abodes is driving record-breaking new highs in rents, according to March 2023 figures. Nationwide the median weekly rent for an apartment was up 8 per cent year-on-year to $540 per week. We are yet to see the rents now being achieved translate into increased apartment values but it would logically follow.

Ray White’s licensed agents are well equipped to help both sellers and buyers on their property journey, being well-briefed on market dynamics.

Daniel Horrobin.

Diana Clement: ‘The end of rate hikes is near’: Will May’s OCR rise be the last?

That could all depend on the Budget and RBNZ’s inflation forecast.

Interest rates and the Budget are at the forefront of most economists’ minds right now. The latter is due to be delivered by Finance Minister Grant Robertson on May 18, while an announcement around the former is due to be made by the Reserve Bank of New Zealand six days later on May 24.

Most of the major banks are picking a 0.25 percentage point increase in the Official Cash Rate, but they also expect that will be the last of big hikes.

A cash rate peak of 5.5% has long been signalled, and while the Reserve Bank’s surprise rate hike of 0.5 percentage points last month was widely interpreted as a warning shot to banks who were toying with reducing mortgage rates to attract new customers, most experts believe interest rates have peaked.

That will be a relief to the thousands of homeowners who are set to refix in coming months, but annual inflation is still running at 6.7%, according to the latest Consumers Price Index (CPI) figures, and strong jobs figures could mean there is capacity in the economy to absorb higher interest rates.

The Reserve Bank doesn’t think house prices will rise anytime soon – in fact the exact opposite is true, otherwise it wouldn’t be planning to ease the loan to value ratio rules for owner-occupiers and investors.

Cost of living will be high on the agenda in the Budget, and given that we are in an election year there may be surprises in store for the housing market and mortgageholders.

Infometrics chief executive and principal economist Brad Olsen, however, doesn’t think the Budget will offer anything new for homeowners or those with a vested interest in residential property.

“It’s probably no news, which might be good news, after all the changes we’ve seen in previous years, with interest deductibility [no longer being allowed against income on rental properties], Healthy Homes and similar. The focus [of the Budget] is more likely to be around the cost of living,” he says. He expects the biggest housing-related changes will come later, in the run-up to the October 14 election. “There is potential that the government signals a strong level of building focus in the Budget. It could be the government wants to bolster or support a higher level of construction, even when the private sector is not willing to do as much that would be likely required.”

Finance Minister Grant Robertson: Does he have any Budget surprises up his sleeve? Photo / Marty Melville

However, Olsen concedes the contents of the Budget have the ability to influence the RBNZ’s cash rate decisions over the next few months.

In its weekly economic update, ASB economists say the key data to watch ahead of the May 24 OCR decision will be the net migration figures for March and RBNZ’s survey of inflation expectations. They believe both will point to an imminent end to aggressive rate hikes.

“Strong net immigration should continue to boost labour supply growth and in turn put downward pressure on wage growth. Meanwhile, inflation expectations are expected to cool, in line with receding headline inflation and the dip in surveyed pricing intentions. Combined, we expect the data to be consistent with the RBNZ nearing the end of its tightening cycle.”

ASB’s economists are picking a 0.25 percentage point rise in the cash rate on May 24, and that the OCR will “remain at 5.5% until Q2 2024, at which stage the OCR is gradually trimmed to 3% by mid-2025”.

Kiwibank’s economics team is also expecting a 0.25 percentage point hike at the end of the month, and is picking that this will be the last one for this cycle, headlining their recent update: “The end of rate hikes is near.”

The jobs market is more a worry, however.

“In the May Financial Stability Report, the RBNZ noted that just a small share of

borrowers are struggling with the higher interest rates. But in aggregate, households are able to manage the rising debt servicing costs as mortgages are repriced onto higher rates. Historically low levels of unemployment helps. But watch this space. Pressure on household budgets is building and will be tested by the forecast rise in unemployment,” the team wrote in its weekly update.

“Looking ahead, the labour market is expected to begin loosening; it must for inflation to retreat. We are forecasting the unemployment rate to begin lifting from around the middle of the year on its way to 5-5.5% in 2024.”

Westpac chief economist Kelly Eckhold says New Zealand is getting close to “a longawaited turning point where the fruits of the RBNZ’s efforts to restrain demand and inflation pressures should be becoming apparent”.

“As inflation pressures recede, we see scope for rate cuts in 2024 and 2025, although not as quickly as the market is pricing in,” he writes in Westpac’s weekly economic note.

“As a result, we now see value in fixing for terms as long as three years. While there isn’t a lot of difference between the expected cost of fixing for shorter vs longer periods, a longer period provides more certainty around the size of repayments. We would still regard fixing beyond three years as relatively expensive.”

Market Statistics.

Total Sales

April 2023

April 2022

April 2023

$280,000

April 2022

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

Total Sales Value

52 $21,521,500

April 2023

April 2022

107 $81,306,700

There was a -73% decrease in the total sales value year on year.

$465,000

There was a -39% decrease in the total median sale price year on year.

Median Sales Price Median Days On Market

April 2023

44

April 2022

38

There was a 15% increase in the total median days on market year on year.

Source: REINZ

Recent Sales.

AUCKLAND CENTRAL

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

Multiple bidders & busy auction rooms!

The current state of the real estate market has created an environment where multiple bidders are actively competing to secure properties at Auction. This trend has resulted in busy auction rooms, with an increase in attendance and bidding activity.

One of the main reasons for this surge in interest is the perceived uncertainty of the property market, with buyers and sellers unsure about what the future holds. Auctions provide a transparent and efficient platform that brings both parties together, helping to establish a fair market value for the property.

The statistics back up the popularity of auctions, with a clearance rate of 65.69% indicating a high level of success in securing sales. Additionally, the average day on the market of 31 days suggests that sellers are eager to find a buyer and are turning to Auction as a solution.

The current market conditions have resulted in a competitive environment for bidders, with multiple parties vying for the same property. This has created a sense of urgency for buyers, as they know that they need to act quickly to secure their desired property.

Overall, the surge in active bidders at Auctions is a positive sign for the real estate market, as it indicates that buyers and sellers are willing to engage with each other in a competitive environment. As the market continues to evolve, Auctions are likely to remain a popular choice for those looking to buy or sell the property.

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.

Kelvin Davidson: House price falls: Who

1. First-home buyers getting more for their money.

First-home buyers’ share of the market in the first three months of 2023 was a record high 25%. Not only that, but first-home buyers secured more standalone houses than before – 75% of their purchases in Q1 2023 versus 71% a year ago – and are paying lower prices. According to the latest CoreLogic First Home Buyer Report, the median price paid by first-home buyers nationwide in Q1 2023 was $680,000, down from $730,000 in 2022. In other words, first-home buyers are getting more for their money (although the actual number of deals done in Q1 2023 was small).

Hamilton has been the strongest first-home buyer market, with first-home buyer share of purchases in the first three months of the year hitting 33%, about nine percentage

points higher than its average. First-home buyers’ share of the market also topped 30% in Wellington (versus average of 29%), while in Christchurch, Auckland and Dunedin the share of first-home buyer purchases was in line with the long-term average. The market share in Tauranga was 17%, but even this was slightly above the long-term average of 16%.

Across the main centres, standalone houses accounted for the highest share of firsthome buyers’ purchases in Hamilton, at 92% in Q1 2023 (up from the long-term average of 86%). Dunedin and Tauranga also have figures of at least 90% for that property type.

Auckland had the highest median purchase price by first-home buyers in Q1 2023, at $885,000 (versus $1m a year ago), with Wellington, Tauranga, and Hamilton

scored the best bargains in the worst market since the GFC?

Houses in Hamilton. First home buyers’ share of the market in the first three months of this year reached 33%.

Photo / Fiona Goodall

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

all ranging from $775,000 to $730,000, and Christchurch and Dunedin both sub$600,000 ($580,000 and $531,000 respectively).

If I’m right and house prices do stop falling shortly, some would-be first-home buyers may be wondering if they’ve missed the boat. However, I wouldn’t necessarily be too concerned, given the longer-term restraints such as caps on debt to income ratios (from March/April 2024). In other words, an extended flat patch looks more likely than a sudden recovery.

2. Slow and steady for rents … for now.

Stats NZ’s rent price data last week showed an increase of 2.8% in the year to April – the fourth month in a row in the range of 2-3%, which is also roughly the longterm average. So the message here is that, after a period of strong increases, rental growth has recently slowed back to normal. However, there are already anecdotes of shortages of available rentals, and given that a typical new arrival to NZ probably rents a property at least for a start, the recent surge in net migration suggests that this ‘normality’ for rental growth could soon give way to stronger increases again.

3. Migration surges even higher.

On that note, last week’s migration figures from Stats NZ were more of the same. With new arrivals to NZ rising at an incredibly fast pace (and far outweighing departures), the overall net migration balance for the year to March was around 65,400 – roughly double the long-term average. Clearly, that will be adding to property demand.

4. The

‘no frills’

Budget.

The key event on the economic calendar this week is Thursday’s Budget 2023. The government has already said it’ll be “no frills”, with any increased spending in certain areas of the economy (e.g. flood recovery) needing to be taken from elsewhere. If so,

it may not mean too much for things like monetary policy, while I’ve also seen no indications of any potential housing-related measures either – although of course, surprises do happen!

5. High debt to income ratio lending has probably remained low.

Aside from the Budget, the only other scheduled release of note this week is the debt to income ratio (DTI) data for Q1 from the Reserve Bank on Thursday 3pm. Given the steps they’re taking towards imposing caps on high DTI mortgage lending from March/April next year, these figures will certainly be interesting. Lately, though, high DTI lending has fallen naturally, as prices have dropped (meaning less debt is required), incomes have risen, risk attitudes have changed on the part of both borrowers and lenders, and also simply because higher mortgage rates mean that less debt can actually be serviced from a given income anyway.

I suspect we’ll see more of the same in Q1’s data, and it’s likely to support the idea that DTIs aren’t about this cycle – they’ll be more about limiting the size of the “next upturn”, tying house price growth more closely to wages, and restraining the number of properties that somebody can own.

- Kelvin Davidson is chief economist at property insights firm CoreLogic

Market Comment. Property Management.

Property Management Comment:

April/May

Trade Me Property Sales Director Gavin Lloyd said the March 2023 figures show rents for apartments and small houses (1-2 bedroom) were soaring. Nationwide the median weekly rent for an apartment was up 8% year-on-year to $540 per week.

“Demand for rentals continued to rise by 27 percent across the country. Otago (+46%) and Auckland (+44%) both streaked ahead as the most popular regions for tenants to be looking for a place to live,” Mr Lloyd said.

“The ongoing cost of living means people are looking for cheaper places, allowing their

paycheck to go further. Also the way people are living their life is changing - staying single for longer, or choosing to not have children, so they don’t need the extra space.”This was leading to a growing demand for apartments and small houses with demand up 55 per cent on the previous year.

Rent/Number of Listings Comparison.

GET READY! Two Game-Changing developments you need to know if you’re looking to buy a home.

Have you been finding it hard to get a home loan due to the bank over scrutinising your “discretionary” expenses?

Things like your daily coffee fix, streaming subscriptions or Uber Eats, are all classed as “discretionary” and up until now have been included in the bank’s assessment of whether you can afford a home loan or not.

This has affected a lot of people who would normally just cut these expenses out once they took on a mortgage.

Instead you had to cut them out “before” making an application to the bank and provide evidence in the form of 3 months worth of bank statements to back it up.

In the scheme of things this isn’t actually such a bad idea as it helps to get your budgeting in order before taking on a mortgage, but for most people having to do it for 3 months before applying for a home loan can really hold things up and cause a lot of uncertainty.

But soon this will no longer be the case.

Due to a law change under the Credit Contracts and Consumer Finance Act (CCCFA), those looking to buy a house may now have an improved chance of success as the banks will no longer take into account ‘discretionary spending’ when assessing your affordability for a loan.

The revision to this rule reflects the reality that borrowers usually cut back on discretionary costs, such as coffee or entertainment subscriptions if they struggle to meet their mortgage repayments.

So if you have previously failed to secure a home loan due to your discretionary spending then this is fantastic news for you!

What if your expenses are all in check but you just don’t have enough deposit?

Well, you might be in luck. The other exciting news this week is that the Reserve Bank of New Zealand has proposed a plan to ease Loan-to-Value (LVR) restrictions, which will be effective from June 1, 2023. LVR restrictions act as a “speed limit” for banks to restrict how much low deposit lending they can do.

Currently, banks are operating under the following speed limits:

• 10% limit for owner occupier loans with a LVR above 80%

• 5% limit for investor loans with a LVR above 60%

If the banks agree with this proposal, the new speed limits will be:

• 15% limit for owner occupier loans with a LVR above 80%

• 5% limit for investor loans with a LVR above 65%

So if you’ve been unsuccessful with your mortgage application in the past couple of years, or you have been struggling to get together the traditional deposit then now is the time to get in touch so I can get you approved to buy that property!

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 -

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

AUCKLAND CENTRAL OFFICE

Chris Guilford Casey Chen

Chris Cairns

Grant Elliott

Holly Cassidy

Cheryl Whiting

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

Judi Yurak Keisha Gutierrez Krister Samuel Leo Zhu

Lisa Zhang 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

Victor Liu

Gabriela Galateanu

LoanMarket Mortgage Adviser LoanMarket Mortgage Adviser

Craig Pettit Laurie Warren

Max Beliak

Jeong Lee

Nicholas Dallyn

Ross Tierney