Luxury real estate hit hard in market downturn

Monday, 10 February 2025

A $5 million-plus home overlooking the water in Auckland’s Mahurangi East is currently on the market.

Auckland’s high-end property market is losing sales share to other regions, as the sector starts to recover from the downturn, a luxury agent says.

Paterson Luxury Real Estate analysed six years of Real Estate Institute data, and found that the ultra-premium ($5 million-plus) section of the market had seen a steeper decline in sales than the rest of the market.

There were 152, $5m plus sales in 2024, a 55% decline on the 2021 market peak when there were 335.

In contrast, there was a total of 72,484 sales across all price points in 2024, which was a 19% decline on 89,234 in 2021.

Paterson Luxury director Caleb Paterson said while the national market had seen a decline in total sales, the high-end property sector had been significantly more impacted.

The luxury home markets in Queenstown and Bay of Plenty are proving more resilient than Auckland’s, Paterson Luxury’s Caleb Paterson says.

But the analysis also found that Auckland’s share of the high-net-worth home buyer market was shrinking, he said.

“In 2019 82% of all New Zealand sales over $5m occurred in Auckland, but by 2024 this figure had dropped to 73%, and over the past year the region’s $5m-plus sales fell by 14%.

“Queenstown and Bay of Plenty have shown more resilience in this market segment, and both have seen a significant lift in $5m plus sales over the past year.”

In the Queenstown Lakes district, sales of properties over $5m were up 21% between 2021 and 2024, and there was a 91% increase in $5m-plus sales between 2023 and 2024, the analysis showed.

In Bay of Plenty sales in the $5m-plus price bracket were up 6% over the same period, and they increased by 20% between 2023 and 2024.

Paterson said it indicated a shift in regional demand with Queenstown and Bay of Plenty picking up a share of the very top end of the market, potentially at the expense of Auckland.

While the $5m-plus market made up only around 3% of the total market, it could represent a noticeable migration of wealth out of the country’s commercial centre, he said.

A luxury home in Auckland’s Riverhead is another $5 million-plus properties up for sale in the region.

“At least $415m worth of homes valued at $5m-plus have been sold in Queenstown over the past six years, and 28% of these were in the last year alone. And at least another $180m has been sold in Bay of Plenty over the same period.”

If it was a sign of an exodus of high net worth families from Auckland to those regions, the wealth transfer involved could have repercussions for businesses in all three regions, he said.

International property consultancy Knight Frank’s Prime Global Cities Index tracks the performance of 44 of the world’s luxury housing markets, including those of New Zealand’s three biggest cities.

The latest instalment of the index also suggested Auckland’s high-end real estate sector struggled last year.

Auckland was ranked at 39 of 44, with its prices down 1.7% over the year ending December and down 0.3% in the last quarter of 2024.

Wellington was ranked lower at 43, with its prices down 3.5% annually, but its prices rose 3.1% in the last quarter, while Christchurch was at 20, with its prices up 3.2% annually and 1.9% over the quarter.

Knight Frank global head of research Liam Bailey said growth in luxury real estate markets was slowly improving, with 3.2% average annual growth across the 44 cities over last year’s final quarter.

A Paritai Drive property in Auckland’s Ōrakei, which sold for $21.84 million, was the most expensive house sale of 2024.

That was an improvement on the previous quarter, but was below the 20-year long run average rate of 5.3% growth, he said.

“The path to lower rates has become more complex over recent months as developed economy inflation refuses to fall as policy makers would like.

“However, with most commentators expecting further cuts in 2025 this will be the factor that will unlock higher house price growth this year.”

Paterson said in New Zealand the lowest sales of last year were in the last quarter, but there were early indications the ultra-premium segment had bottomed out and there would be a resurgence over the coming year.

A return to growth would be welcome after a “nightmarish” period where more than 40% of multimillion-dollar homes were withdrawn from sale due to a lack of buyer interest, he said.

“Across the country, we had an influx of luxury homes brought on and then withdrawn a few months later as the market stalled.

“Many of these homes have re-entered the market over the summer and we have seen steady levels of buyer interest.”

Every single one of his agency’s current listings had an increase in engagement and viewing over the past month, and OCR adjustments were having a positive impact, he said.

“Buyers of multimillion-dollar homes are less dependent on accessing lending, but they see the drop in interest rates as an economic confidence signal and that’s manifesting as an increase in enquiry.”

While the National Party’s pre-election policy to lift the foreign buyer ban for property sales of over $2m did not make it through coalition negotiations, recently there has been speculation the policy could re-emerge.

Paterson said that if there was a change in policy, it would play a critical role in revitalising the luxury property sector, particularly given the wealth outflow to Australia over the past 12 months.