As values struggle in the super city, variance in suburbs emerge.
When a property market moves sideways (or slightly falls) I’m often asked to review the more granular meaning behind its performance.
CoreLogic Head of Research Nick Goodall writes:
Recent analysis on the performance of markets across the diverse value ranges revealed that the differences were more about geography rather than value. In this week’s CoreLogic Property Pulse we’ve taken a look at the data at a suburb level to deliver the whole story on what’s really going on..
Firstly, we must acknowledge that some results vary from other recently released market analysis. Particularly, REINZ data stating 30% growth or falls in some suburbs of Auckland. (It’s important to note that the data used was based on median sales price and only represented what happened to sell over two separate periods). Today, I’m focusing on the actual change in value of all properties in each suburb.
Why is that important? A quick comparison of a real life example in Takapuna shows it quite clearly. There are a total of 2,905 residential properties in Takapuna. The median value of these 2,905 properties was $1,781,450 at the end of March 2018.
In the 6 months to the end of March 2018 there were 83 residential sales in Takapuna where an agent was involved. This represents 2.9% of all properties. The median sales price of these 83 properties was $1,000,000. Clearly, these 83 properties don’t represent the whole suburb – there were a lot more lower-value (for Takapuna) property sales over that 6 month period than higher-value.
Fast forward a year (to the end of March 2019) and the median value of all those 2,905 properties is now $1,713,400 – a drop of 3.8%. This is relatively indicative of a weakening market, as is the case across the city with fewer buyers and more properties for sale.
However, the median sales price for the 6 months to the end of March 2019 was $1,300,000; a whopping 30% increase. This is from just 67 residential property sales (by agents), or 2.3% of all properties. So while there are fewer sales overall, a greater share of them are in higher value bands this year than last. Why? It could be anything – from certain agents or agencies dominating one year to the next, to buyers’ confidence shifting in a changing market. We don’t really know.
One thing is for sure, the change in a median sales price tells you nothing about the performance of the overall property market in that area.
So then, where has the best and worst growth been in Auckland over the last 12 months? The numbers aren’t as stark, but they’re still well worth analysing.
Sticking to the same time period (12 month change to the end of March 2019) we can see from the first table (see above) that Mangere wins out with 5.0% growth. Not bad at a time when values are drifting backwards by 1.5% measured across the whole city. Clearly there are still active people willing and able to buy in a flat-to-dropping market. At the moment Mangere is dominated by first home buyers with 48% of all sales in 2019 going to this group.
At the other end of the Auckland ‘leaderboard’ we see the North Shore dominates. In Belmont, property values have dropped 6.8% over the 12 month period analysed. This is nothing to panic about given most owners should have had equity of at least 20% when they bought, thanks to the RBNZ’s loan-to-value ratio (LVR) restrictions, but of course a noticeable drop for anyone hoping for or relying on capital growth for their investment to stack up. And investors have noticeably reduced their activity in this market.
To get a quick snapshot across the city we can visualise this on a map. Here, the weakness across most of the North Shore is plain to see and pockets of growth, though sparse, are visible in South Auckland.
Looking outside Auckland, we get further confirmation of the strength of the regions as a whole with suburbs in Rotorua, South Waikato, Taupō, Hastings and Tararua District all experiencing growth of more than 20% over the year. The lower value of property in these places is no doubt a factor in this growth, with low interest rates keeping mortgage payments low.
And while Auckland dominates the list of worst performing suburbs nationwide, if we exclude Auckland suburbs we see Takapuwahia in Porirua has also seen significant value erosion (-5.4% p.a.). And while no suburbs in Christchurch are in the top 5, they fill out the top 10. So while we report a minor lift in value across the city (1.3% according to the CoreLogic house price index), similar to Auckland there are pockets of both strength and weakness (mostly out west).
For a list of the top and bottom 50 suburbs across the country click here and/or enquire for rankings by city.