The real estate market finishes the year with a roar
December saw a race to the finish in the country’s hottest real estate markets.17 December 2020
31 Vintage Lane, Te Whau, Waiheke Island
News of record breaking home sales figures in the spring selling season were released in December, indicating that Kiwis were acting on low interest rates and on a strong desire to take their first step in the real estate market or looking to upgrade their home.
Buyers were having to contend with rising prices but this did not seem to put them off as sales activity looks to continue right up to Christmas.
The Trade Me Property Price Index published on 17 December found that the national average asking price rose 12.5% year-on-year in November to reach $762,70 – November marking the third record-breaking month in a row.
It’s all down to supply and demand, says Trade Me spokesman Logan Mudge. “When compared with November 2019, national demand was up by 21%, while supply was up by 5%.”
Year-on-year demand was up in all regions, with the biggest changes seen in Taranaki (up 29%), Auckland (up 25%) and Canterbury (up 24%).
Though not on a par with demand, there have been more properties to choose from in December offering buyers good opportunities, say real estate agency heads.
Ray White Chief Operating Officer, Daniel Coulson, says the company’s December listings nationwide were 23.77% higher than the number of listings last year and to keep up with this, the company has auctions running up to 21 and 22 December.
There’s a misconception that there being low inventory in some markets, noted a number of agency leaders.
“What’s happening though is the properties are coming on and then they’re selling. They’re just not sitting around,” says Bryan Thomson, Managing Director of Harcourts.
“It’s been a very tight supply for a number of years, when you get low interest rates and confidence in the market, demand amplifies,” he adds.
Auckland market leading the way
Bayley’s National Director of Residential, Johnny Sinclair, believes that the strong buying and selling activity in Auckland is boosting the rest of the country’s real estate markets.
According to the Trade Me Property Price Index, the Auckland region had a record-breaking month in November, with the average asking price reaching $1,022,300 – up by 10% when compared with November 2019.
“Auckland bucked the supply trend seen around the rest of the country, with the number of properties listed onsite actually increasing (up 10%) when compared with last year,” says Mr Mudge. The region also saw one of the largest increases in demand (up 25%), indicating house prices are still likely to keep heading north.
“From what I’m seeing across Bayleys, Auckland is 100% fuelling the rest of the country,” says Mr Sinclair. “I think Auckland activity is 10% above anywhere else in deal numbers, sales numbers and gross commission,” he says.
Auckland was coming off a slow start, the regions have been buoyant for a number of years but Auckland only started last November, says the Bayleys’ director.
Mr Sinclair asked Trade Me Property to look at the strength of Aucklanders’ interest in listings in the regions and we found that Aucklanders were in the top three searchers across every region.
“Baby boomers are going to the regions,” he says. They’re selling up at very good prices, and taking their cash to provincial towns.
“It has to be a benefit for the economy,” he adds.
And after a very strong November, Mr Sinclair is expecting a similar December.
“Our December numbers are huge. We’ve got a half dozen properties in Auckland being called the week of the 20th. For us that’s unusual,” he says.
19 Kinmont Rise, Dannemora, Manukau City, Auckland
Barfoot & Thompson, which sells around one in three homes in the Auckland region, meanwhile reported five months of sustained month-on-month growth in prices and sales numbers.
In its November housing market update, Managing Director, Peter Thompson said the market was as busy now as it was at the height of the last major buying cycle between 2013 and 2016.
In November, Barfoot’s listed 2,335 new properties, the highest in a month ever. It sold 1,551 homes in November, at an average price of $1,055,971 and a median price of $974,000.
The prices being achieved are bringing more vendors to the market, says Mr Thompson. At the end of November, the company had 4,043 properties on its books, the highest number of listings Barfoot’s has had at month end for 17 months.
Auctions becoming more popular
And in a nationwide market where homes are strongly contested, Harcourts noted a strong uptick in homes going to auction compared with this time in 2019.
“The reason for this is very simple. Vendors are looking to maximise their price and to have really clear set terms when it comes to selling. Buyers know the rules that buying at auction gives them complete transparency,” says Mr Thomson.
Bayleys’ auction numbers have gone up 80%, adds Mr Sinclair. “That’s just the state of the market, to be in a position to purchase a home, you’ve got to be unconditional and this is what the auction process does, it makes the vendor unconditional and the buyer gets the best run,” he says.
Auctions work well in the current market, agrees Mr Coulson, who says scheduled auctions at Ray White are up 104.6% and this is because of the difficulty of pricing property at the moment, he believes. Vendors get a result.
Ray White is seeing 4.1 registered bidders per property and three active bidders which should mean that everyone sees an accurate representation of market value, says Mr Coulson.
“We’ve had active bidding on 91.5% of properties taken to auction, 12.22 % selling prior to auction and, across Ray White, an 82% clearance rate in the last 14 days,” he says.
Why increased listings are still not enough
CoreLogic head of research, Nick Goodall, stresses that when comparing listings this November and December on the previous year, it’s worth remembering that the market was coming off a low base.
“We’ve never made up for the drop on listings that happened in 2016 when there were 110,000 sales in one year. The new listings that have come to market have been at a normal level but the new listings are nowhere near enough for the demand,” he says.
According to CoreLogic data, November 2020’s sales had the greatest volume since 2016 when there were consistently strong sales.
While economists and the Government have been concerned about the rising property prices, people are investing in the real estate market because of the perceived wealth effect, says Mr Goodall.
“There’s nowhere else to spend money so it’s going to come down to spending it on property, on home extensions, buying another home or furnishing your property,” says Mr Goodall. And this spending on home-related purchases has supported the retail sector when many people were expecting the worst earlier in the year.
Wellington is its own busy market
The hot property market in Wellington is what everyone’s talking about at local Christmas parties in the capital, says the CoreLogic head of research.
The Trade Me Property Price Index found house prices in the Wellington region hit an all-time high for the third consecutive month in November with every district in the region also breaking records.
The average asking price in the Wellington region reached $761,300 in November - up 12% year-on-year, says Mr Mudge.
“The number of properties for sale in the Wellington region was down by 10% year-on-year in November while demand was up by 20%, with the gap driving prices up in every district,” he says.
Tommy’s Real Estate senior agent, Nicki Cruickshank, says her office sold 100 houses in November, thanks to a good supply of listings, and that’s not counting townhouses and new homes.
December is looking much the same. “We’ve sold 38 so far this month, everything is selling virtually as soon as you list it, there are multiple offers on it. Demand is still very high and prices feel a bit frenzied,” she adds.
The Tommy’s agent says she’s seeing more first home buyers. “We’ve sold 45 townhouses this week off the plans, all young couples who want something new and warm and don’t want too much land.They have busy jobs,” she says.
Craig Lowe, Managing Director of Lowe & Co, wants to make clear, it’s not that inventory is low, it’s that demand is extreme.
Mr Lowe compares the current boom with the last boom in 2007.
“That really felt like it was driven by second and third home buyers, investors, for instance. This time it’s felt like it’s being driven by people looking for their first home or those upgrading,” he says.
13 Buckle Street, Mt Cook, Wellington
The Lowe & Co managing director understands the upgrading argument given the current low interest rates. If you borrow $500,000, that’s going to cost you $250 a week to service. If this enables you to get a $2 million house and change your life dramatically for $250 a week, why wouldn’t you, he says.
Suburbs like Lyall Bay, Island Bay and Mt Victoria are particularly popular. A well-presented 120 sq m home in Lyall Bay with a buyer inquiry of over $845,000, recently received 34 tender offers and sold for over $1.36 million, says Mr Lowe.
He sees potential for buyers in Wellington’s northern suburbs, places like Whitby, where you can get more value.
“My gut tells me that we’ll be a city of commuters which we haven’t been traditionally. We’re quite spoilt, we’ve gotten so used to inner city living,” he says. More Wellingtonians will be living on the Kapiti Coast but the Government will need to support this with infrastructure, he says.
Mr Lowe feels for first home buyers, his advice to them to be really active and if they like something to have a go, not to let small things put them off. Homes are typically getting six offers per property so it’s worth putting an offer in. Meanwhile be super active, go to five open homes a weekend, and be more open-minded about location, he advises.
For keen buyers, fearful that it will all go quiet in the next couple of weeks, the down time may well not last. “There will still be houses sold over Christmas,” says the Wellington agent. “We have staff on hand.”
It’ll be a short Christmas for keen buyers and sellers
All real estate agency leaders believe people will return to the market sooner after Christmas than usual. Because of the strong momentum, it’s likely the market will be straight back in and with no overseas trips to go on, people will be back sooner. says CoreLogic’s Mr Goodall.
Normally, Wellington doesn’t get going until after Wellington Anniversary weekend, this year due to fall on 22 January, but this year it will kick off closer to 10 or 11 January provided the stock comes onto the market, says Ms Cruickshank.
“People aren’t going to go away for three or four weeks, it will start earlier,” she says.
“Everyone’s going to have a day or two off, but there’ll be a good level of activity right through and the real estate industry will be back on deck early,” agrees Harcourts’ Bryan Thomson.
“When you ask, how is the year ending? It’s not ending,” he says. “There’s every likelihood there will be a slight pause over Christmas but, Christmas, like the election, will have no impact on the real estate market.”