Auckland. What’s going on?
May 27th, 2015 by Steve McNamara
Property InDepth’s city-wide network of professional, registered valuers carry out thousands of residential property valuations throughout the city each year. This puts them in a prime position to comment on what they believe is happening in Auckland’s dynamic property market.
We put five leading questions to two key members of our team and this was the internal reply we received back. We’re releasing their comments as one way of fostering a better informed discussion of this lively, topical issue.
Aren’t Auckland’s property price rises simply a question of basic supply and demand economics?
“Yes, in Auckland this is a classic supply and demand issue. You cannot have large inflows of people into the region without the supply of new housing keeping pace otherwise a supply shortage will be the driver. It interesting to see this happening in a mini-time scale in the Canterbury region – where, after the earthquake, there was a rapid increase in property values until the rebuild got underway, now we are seeing values flattening out as supply is catching up with demand. We have even heard from a building company here in Auckland that they are now seeing some tradies returning to Auckland for work.”
– Property InDepth.
Is this a boom time to sell in Auckland?
“It depends. If you are staying put, probably not, because you are buying in the same market. If you are cashing up, trading down or moving out of the region, then yes. Our Tauranga valuer will tell you that Tauranga is experiencing a huge growth from Auckland ‘Baby Boomers’ cashing up and setting up for their retirement in the Bay of Plenty.”
– Property InDepth.
Should Auckland investors now be looking to the provinces?
“Again, it depends. Auckland also has a huge demand for rental property, so it can command big rents (albeit on expensive properties so the yield is still not all that great). Alternatively, while property is cheaper in the provinces, so yields are generally higher to compensate for the lesser capital gain expectation. However, fringe areas around Auckland are gaining in popularity. As the Auckland market heats up, so first home buyers and renters are pushed further out from central Auckland – we are seeing increased activity in Helensville to the north west, and Warkworth and Wellsford in the north, and Pokeno to the south.”
– Property InDepth.
Is there a bubble?
“That’s tough to call, but at the moment, probably not. As long as the demand is there, and supply is short, values will keep increasing. Interestingly, Westpac released a report earlier this month saying that a major driver in Auckland is the current council’s moves to free up land supply (the new Unitary Plan) creating investors and developers intent on land banking. We are certainly seeing this around future urban zones, where despite what we are being told by Central Government, there is an awful lot of foreign money coming in so the new LVR’s will have no impact whatsoever on these investors.”
– Property InDepth.
So, will this keep Property InDepth’s Auckland property valuers extremely busy between now and the October deadline?
“Yes, it will mean we are busier than we have been. This is assisted by very quick moving sectors of the market, and because the values have drifted far from the Rating Values (which were released last year) meaning banks are less happy using these Rating Values as a meaningful measure of the value.”
– Property InDepth.
And, further commentary
Harcourts chief executive, Hayden Duncan, shared a similar assessment of the situation in Saturday’s Dominion Post. This is what he was reported as saying:
“…Ultimately, Auckland is suffering from a lack of supply of housing. The demand and supply imbalance is so great that even if some property investors are removed from the equation, or choose to purchase outside Auckland, there will be plenty of buyers to fill their place. We have a growing population in Auckland that needs both rental accommodation and property to buy. Penalising property investors who are providing the rental accommodation that’s needed by first home buyers and new arrivals to the city, will not solve Auckland’s supply shortage….”
Source: The Dom, May 23, 2015.