The Auckland Real Estate market left investors and buyers spoilt for choices 2020, begins on a high note in 2021.
The real estate market in Auckland witnessed booming business in March 2020. This came as a welcome decision on the heels of the New Zealand’s effort to uphold financial fair play. A further promise of a cash infusion of $4 billion, by the Government to bolster housing market, seems to have worked wonders on real estate consumers. As a result of these decisions, the end of the previous fiscal year saw trading numbers in the Auckland real estate market reach an all-time high. Buyers and investors alike looked to make the most of the inventory. The market was generous in-kind towards investors; with an impressive number of listings being made available due to popular demand.
A tale of broken records and profitable numbers
Auckland’s biggest real estate firm reported a sale of 1844 properties in March alone, with a total of 2138 new properties (a new record in 15 years!) in their listings for the month. The March sales number for them is an astounding 68.2% spike up from the sales number of 1096 in March, last year. It is also a 64.1% step up from the 1124 properties sold in February, this year; which allowed the agency in question to sell a whopping 4054 units of property in the final quarter of the FY 2020-21/ calendar year 2021- breaking their record numbers from the same quarter in 2015, by a third!
It must be noted, that the profits are not limited to the inspiring sales numbers alone. The aforementioned agency reported that the average sale value of each unit was calculated at a cool $1,107,869, which was a 3% and 11% jump from the average property sale value in February 2021, and March 2020, respectively. They further reported a promising median price of $1,048,000- an increment of 3.8% and 13.3% over the median value in February 2021, and March 2020, respectively.
Factors motivating a profitable Auckland Real Estate Market
The Auckland property market has quite the reputation for commendable feats. But, March was an unexpectedly profitable month for Auckland’s real estate agencies, due to several factors.
Firstly, the NZ Government recently announced that they are doubling the Brightline Test duration. As per expert claims, this along with the Government’s other policy reforms that focused on real estate trading fanned the Fear of Missing Out (FOMO) among buyers. This drove actual sales statistics from the Auckland real estate market, well beyond the projections.
Secondly, easygoing financing policies are enabling investors to go after prime properties in their cross-hair, regardless of how competitive demand is driving up the price. This has been an immediate effect of the Prime Minister enforcing lenient taxing rules. For example, a three-bedroom bungalow in Greenlane, Auckland, was auctioned at $5.98 million, about $2.6 million above the local council valuation. With low borrowing interests in the works, investors are racing each other for the best listings. This has been a major contributor to the jump in the median value of home property in Auckland.
Thirdly, quality residential housing at a good location and easy financing terms allowed a lot of first-time buyers to take the crucial step and cash in their nest egg. Buyer demand has therefore steadily contributed to the growth in property prices, as well as new listings on the market. Buyer demand is producing strong numbers with the pandemic situation well under control in New Zealand. Agencies have reported decent investor turnouts at open homes, well into late February. Interest from offshore customers in the Auckland real estate market has also been solemn.
Fourthly, the cumulative positive factors have got the investors and first-time buyers splurging on all kinds of property assets. FOMO has investors and buyers focusing on ‘dungers’ and lifestyle blocks that would otherwise escape the attention of the speculators. Thanks to the speculative demand, agencies are offloading these property types which would not sell as fast in the past, at higher prices.
As demonstrated by the aforementioned figures, major urban centers are depicting strong gains in asset value thanks to buyer interest; and also due to investors competing with each other for entry-level assets. Rural and semi-rural locations have also exhibited a steady addition of new listings, as well as purchase and investment activity.
How does the market look for the next quarter?
The policies introduced by the Government may impact a section of the buyer investors, but it will be sometime later in the next financial quarter of the calendar year when the full ramifications take effect. The policies are meant to make the market fairer towards first-time buyers than investment agencies who are known to easily outbid the former. The immediate effect of the policy reforms is, however, positive- as owner-occupier’s interest in typical housing categories, such as apartments is at an all-time high. A definitely positive outcome of the governmental reforms.
It is interesting to note that the reinforcement of loan-to-value ratios and limits on interest-only lending, has not been able to dampen the real estate market activity in the city. The Auckland real estate market still depicts sufficient investor activity as of now, even though the investors may no longer claim mortgage interests as tax-deductible, and taxing periods for profits from the sale of investment property are doubled.
It can also be safely concluded that Auckland will need to increase its construction supply, to meet the demands of this hungry buyer’s and investor’s market. It seems the policy reforms will it will only slow the hike in housing prices by a little, rather than causing any actual decrement in the price or investor activity.
