Auckland house prices hit tipping point as buyer options increase

Wednesday, 10 April 2019

While overall Auckland values are down 1.5 per cent year-on-year, there are differences within the region.

Auckland house prices have hit a psychological tipping point, one analyst says.

CoreLogic has released new data showing the fall in prices across the city.

While overall values are down 1.5 per cent year-on-year, there are differences within the region.

Coastal parts of the North Shore have seen prices fall 4.1 per cent, while the North Harbour region is down 3.2 per cent.

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The Hibiscus Coast area, meanwhile, is still growing at a rate of 0.9 per cent a year.

CoreLogic senior property economist Kelvin Davidson said the areas that started with the highest prices had had the most softness in values.

Falls in prices were driven more by location than the type of house, he said.

He said some cheaper areas still had room to increase in price.

'The ratio of high to low values in places like Waitakere and Franklin is still much lower than Auckland City for example. In other words, there may be some room here for lower-value property to continue to outperform higher-value segments across much of Auckland over the coming years, even if that takes the form of only small price rises while top-end properties flat-line or tick lower.'

He said there was not a 'full-on downturn' but some vendors were having to reduce their expectations to get a sale.

'I get the sense that there's been a bit of a tipping point for the psychology of house prices in Auckland. With affordability low, listings high, no rush from buyers because they have plenty of choice, and sales low, some vendors are having to edge prices down to get a sale over the line. It's a far cry from the Sydney/Melbourne situation, but something we'll still be watching pretty closely.'

Further price falls would not be a surprise, he said.

'But I'd suspect any further falls will be modest and certainly less than Australia – where, for example, the oversupply of apartments has been a key driver. We also had a much more proactive central bank in controlling the riskiest lending during the upswing, so therefore less need to be really tight after the boom.

'The other factors are low interest rates, low unemployment, and in Auckland specifically the shortfall of houses. This will limit any price falls that may come through.'

Andrew Duncan, of real estate firm Relatable, said there was a similar trend in Wellington, although values there are up 8.4 per cent year-on-year.

He said many owners' expectations were built on rateable values that were too high to start with.

'It's a hard situation for many owners because once you have a piece of paper with a figure on it, from a reputable source you naturally feel hard done by if you sell for anything less. So in many cases, it's not so much that the market value has dropped, but the perceived value was heightened so much when new valuations came out that it now feels like a drop for some owners. [But] it is worth noting that we have had a few properties recently sell for $100,000 or more above their new rateable values. Every property is different.'

He said owners should consider the life cycle of their investments.

'If the market does change and you start to feel like you are taking less than you could have got three months ago, then just remember that the sale price you are achieving now is still far more than you would have sold for 12 months ago, or 24 months ago, which is still a truckload more than it would have been worth five years ago or 10 years ago. If you sell any asset just past the peak, then chances are you are still timing the market pretty darn well. I spent all of 2017 working in Auckland and saw many owners horrified at the idea of 'under-selling' their asset compared to what they could have achieved the year before. Ignoring the incredible growth they had achieved in the years leading up to that change in the market.'