KEY POINTS:
- Auctions down, negotiated sales up
- 503 Auckland agents leave since 2017
- Prices flat to falling since 2016
- 5 Shore suburbs lead NZ value drops
- Sales volumes at 11-year low
What's going on in the confusing Auckland housing market? Is now the right time to buy or sell? Are plateauing prices helping first-time buyers? If you must sell now, how to ensure success? One for-sale property shows how the city's multi-billion-dollar market has changed lately.
A ragged banana palm flaps in the overgrown Ponsonby back yard, a leaning clothesline spins alongside the down-on-its-luck little villa for sale - "price by negotiation".
It's a phrase often heard in Auckland these days, and New Zealand's largest homeowner never considered auctioning the atypical state house in desirable O'Neill St.
The market has been so static for the past three years that the vendor didn't even consider an auction.
"Within the current market, very few houses in Auckland are selling at auction so the sales method should produce a good result," a Housing NZ spokesperson says of the negotiated sale, which was due to close on Wednesday.
Like all realistic vendors in this static to falling market, the state is pragmatic about the price on the unrenovated place with a $1.3 million CV.
"We will be selling at market value. We tend to sell by tender, by negotiation or at a fixed price rather than at auction."
The home had become vacant, the cost of bringing it up to standard was too high, "and it can't be redeveloped because there are a number of overland flow paths that traverse the site". So Housing NZ decided to quit via a negotiated price, giving it wriggle room to go below the CV.
Just three to four years ago it was a very different story. Auctions were popular and the auction rooms were packed. Auckland places sold for well above their CVs, which were outdated just a few months after they were issued, sometimes in just weeks. Auckland prices were rising and the city's housing market was hot.
Now, none of that is true.
At Barfoot & Thompson Pukekohe on King St this month, most auction or tender notices were replaced in the window by "price by negotiation".
Staff say few rows are filled with potential buyers at the agency's Shortland St auction room headquarters. Numbers are well down on the highs when Chinese buyers rushed in during 2015 and Auckland prices rose by as much as 24 per cent a year.
Managing director Peter Thompson says although auction numbers have fallen from two years ago, the business had expected that, "considering all the legislative changes and Government trying to slow down the market".
"Also it can be attributed to changes in banks' policies," he said, citing tighter lending restrictions. But he still considers auctions important and says while places don't necessarily sell at the fall of the hammer, about half sell immediately afterwards.
Auction deadlines give focus and Thompson says that in the year to March 31, the company listed 5700 auctions, about a third of all its listings.
OneRoof editor Owen Vaughan says: "At the start of 2019, the big unknown for the property market was capital gains tax. Uncertainty around what the Tax Working Group was exactly recommending and whether or not the Government would act on those recommendations contributed to certain amount of hesitancy in the market. Now that capital gains tax is off the table will the market pick up speed in Auckland?
"Vendors are adjusting their expectations when going to market - and for those who've built up equity in their home selling below CV can be a smart move. Selling quickly can also free up buyers to stretch into homes and suburbs they might have previously thought were beyond their reach.
"While the cost of buying a home in Auckland can be a challenge, low interest rates will help first home buyers in the city and there are more affordable options out there - especially in the apartment market."
Long-time real estate executive and agent Alistair Helm says: "The Auckland market is bedded into its third year of going nowhere, which is exceptional."
Bayleys' Helm, who writes on Properazzi, says: "It's usually either up or down."
In his area of Devonport, 83 places were advertised for sale in March but now that's just 59, a sign of a flat market, he says.
"Priced under CV is the most conspicuous trend or symptom of struggling to sell and there are not many auctions," Helm says.
Three years of flat to falling Auckland house prices have also seen 503 licensed salespeople or real estate agents leave the sector, many for other careers. The Real Estate Authority (REA) says that active licensees in Auckland peaked at 6628 in October 2017, but by the start of this month the number was 6125. One real estate specialist says his ex-agent Asian migrant friends have ditched selling houses to become "part-time Uber drivers".
The REA says: "comparing May this year to last year we have seen a reduction of 4.6 per cent in active licensees in Auckland with 293 less active, compared to a 1.6 per cent decline in the rest of New Zealand. The preceding year saw a 2.6 per cent reduction in Auckland, compared to a 0.5 per cent increase in the rest of New Zealand. The last two years' trend in Auckland differs to the preceding four years where active licensees increased by over 5 per cent in each year."
Real Estate Institute April data showed Auckland sales volumes at an 11-year low. "In Auckland, the number of properties sold in April fell by 16.3 per cent year-on-year from 1921 to 1608, the lowest for the month of April in 11 years," says the institute. "For New Zealand excluding Auckland, the number of properties sold fell by 9.5 per cent when compared to the same time last year, from 4634 to 4192."
Property data, information and analytics company CoreLogic says that in the year to March 2019, house values in Rotorua's Fordlands - supposedly the suburb that inspired Once Were Warriors - rose 23 per cent, topping the list of suburbs where prices rose in the year. Meanwhile, values in the $1m-plus Belmont on Auckland's North Shore fell the most, down 6.8 per cent.
The North Shore was the area where values fell the most: Sunnynook was down 6.3 per cent, Murrays Bay down 6.2 per cent, Waiake down 6 per cent and Hauraki down 6 per cent.
Why? Helm says these areas rose fast during the boom times so it's hardly surprising they're leading the falls.
One Grey Lynn vendor whose family is moving overseas sold for below CV. "We knew what the market was doing. We were realistic, we didn't want to muck around," he says. As well, he remembers how little he paid for the place, so losing a few tens of thousands didn't deter him when it came to the price.
One financial commentator reckons bargain hunters should now "wait till it's a wet mid-winter slow weekend afternoon and offer a low-ball price." Motivated buyers will be far more likely to lower their price expectations in such circumstances, he predicts.
One east Auckland agent says births, deaths, marriages and divorce force people to either buy or sell, and accept market conditions. Places going for $1.3m only three years ago now go for $1.17m "and two-bedroom places with CVs of $800,000, you're lucky to get a 7 in the sale price, more like $690,000 now." Her area was previously popular with China-based buyers, "but they stopped, cold turkey, in November 2016 when the Chinese cracked down on the outflow of foreign money."
Many Aucklanders are now nearing the point where they will have negative equity - with loans exceeding property values - she says of highly-geared recent buyers, indicating that we could be moving back towards more mortgagee sales.
"It all depends on how long ago you bought. Banks tell me we're not at that point quite yet," she says. And this falling market has been great for first-home buyers, who are paying about $100,000 less for two-bedroom places than just a short time ago.
Vendors must seek feedback from open-home viewers, she says, so they become completely aware of market reaction as early as possible. That forces them to be realistic about the pros and cons of their place. If they can, they might then be able to change aspects of the property, but most of all, they will become acutely aware of where the market prices their place, the agent says.
One example: the vendor of a large, fully renovated character Grey Lynn villa advertised since February cut the price by $50,000, below the Auckland Council valuation. Bayleys' Andre Bodde advertised 53 Williamson Ave, which got 70 viewers. When it failed to sell at auction it was listed at $1.77m, and then the price was dropped to $1.725m.
"Motivated vendor wants action," he said in his advertisement, adding that the place was just minutes to Ponsonby Rd, had the potential to add value in the future and was "gorgeous".
"It's not unusual these days," Bodde says. "We've seen some properties where there's a gap between the vendor expectations and the market."
Yet the America's Cup defence in 2021, historically low interest rates, pent-up demand and the axing of a potential capital gains tax are all factors cited as having the potential to drive Auckland once again.
"It's the trouble getting finance," says Helm, particularly for places in the $1m to $1.5m category. "Banks are getting tighter and tighter to ensure that people can service loans and there's the possibility of new capital adequacy requirements coming in as well. It's a conundrum: it's never been cheaper to borrow - if you can afford it."
Westpac's Home Truths bulletin was bullish, particularly citing the Reserve Bank's cut in the official cash rate to 1.5 per cent. "Fast forward a few months and momentum in the housing market is set to be significantly stronger, given the sheer magnitude of the mortgage rate reduction seen recently," it said on May 13.
The Real Estate Institute reminds Aucklanders to have somewhat longer memories: it researched 150 suburbs in the city and documented a 92 per cent price rise in the decade to March, 2018.
This latest "cooling" had not obliterated those massive gains, it says. And the slowdown had helped first home-buyers.
It cited the example of Mt Albert, where prices had declined 31 per cent in the last year but said that in the decade, prices in that suburb rose 156.3 per cent, from a median $456,500 for the six months ending March 2008 to $1,170,000 to the six months ending March 2018.
"Once you factor the change in median price over the past year, house prices in Mt Albert had still grown 76.4 per cent over the past 11 years. No doubt, a bit of cooling in price and an increase in the number of apartments available over the last 12 months is a relief for first home buyers or those looking to buy in zone for Mt Albert Grammar School," REINZ said.
And as for the run-down 72 O'Neill St in Ponsonby, Housing NZ says after getting multiple offers, it is now in an unconditional agreement with a buyer.
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