Affordable housing a growing feature of Auckland market

Peter Thompson, Managing Director, Barfoot & Thompson
Affordable housing a growing feature of Auckland market

A feature of the current Auckland housing market that to date has managed to stay under the radar of most commentators is the significant growth in the number of properties being sold for under $500,000.

It was not that long ago that property in this price sector was considered a dying species in Auckland.

The sector’s demise created a good deal of consternation with commentators as it is this price category that is regarded as the natural start point for first time home buyers and those on modest incomes.

It led to many saying that it was now ‘impossible’ for the young to get on to the first rung of the property ladder.

In 2018 11.4% of all the homes we sold in Auckland were priced at under $500,000.  In 2017 it hit an all-time low of 8.9%.

2018’s result arrested a two year decline in the percentage of under $500,000 homes sold.

What has caused this turnaround is the changing attitudes to housing.

No longer is a three-bedroom, stand-alone property surrounded by a garden the only ideal.

Now town houses, terraced housing and apartments are representing a greater percentage of the mix of homes hitting the market. Acceptance of these as desirable homes is helping to overcome the biggest hurdle to affordable housing – the cost of land.

Often these developments are clustered around shopping precincts or along transport corridors, contributing to a reduction in the need for independent transport journeys.

It’s all part of Auckland gradually evolving into a genuine international city with a mix of accommodation options.  

Appeal of this type of property is not restricted to first time buyers and those on limited incomes. Smaller homes, limited gardens, close locations to amenities and smaller mortgages are proving popular across all age and economic sectors.  

Inevitably at the start of the new year, the question is asked: what is the outlook for prices?

With prices at the end of 2018 edging towards their first decline in a decade, this question may be of more relevance this year than in the past.

Those that are looking for the release of January’s house sales data in a few weeks to give them a sense of where the Auckland housing market will be heading are likely to be disappointed.

There are two reasons for this.

The first is that traditionally sales are always so light across the summer holiday season that it is unwise to try to look too hard for trends. It’s likely to be early March before any real trend emerges.

The second is the monthly data statements Barfoot & Thompson and the Real Estate Institute release are for actual sales that have gone unconditional and where the sales commission has been paid. Again, given the holiday season, many of the sales reported for January will have been negotiated in December (some even in November) but do not show up as a ‘sale’ until the sales process is finalised.

Our agents were commenting in early December that there had been a definite shift to it becoming a buyers’ market and it was those vendors who were prepared to meet the reality of the market that were achieving a sale.

That is not to say that the prices paid for property fell significantly. In fact, the prices paid for property that did sell in December were close to all-time highs.

My feel for the market is that the uncertainty that overtook the market in early December is still there, and it is likely to prevail throughout the first quarter of the year.

Those vendors that want to ensure they achieve a sale will need to factor this into their thinking about the price they are prepared to accept.

There are buyers out there, but there is also a healthy number of homes on the market and a lot of indecision.

Vendors who bring their homes to market in 2019 will find that there is a whole new procedure they now have to follow to list their property. It’s a flow on from the introduction of the Government’s money laundering legislation which came into force in relation to property sales from January 1.

Before any real estate agent can now list a property for sale they need to obtain information that identifies the owner of the property.

For most the new legislation will be inconsequential. Vendors need to understand, however, that agents in seeking this information are not being inquisitive, they are just doing what is now required of them by law.

 

Peter Thompson

Managing Director, Barfoot & Thompson

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