Auckland property state of play

Ryan Boyd
Auckland property state of play

Property continues to be a hot topic, especially in Auckland.

To get a run down on current trends, Duncan Garner had Westpac’s SME Lead Damian Sharkey on his RadioLive Drive Time show talking about first home buyers, investors, sellers, and whether people are fixing or floating.

Listen to the audio of the interview, or read the transcript below.

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Duncan Garner: I want to continue this discussion around housing. There are investors in the market which might be driving behaviour, also first home buyers in the market as well.

Damian Sharkey crunches the numbers at Westpac, Damian good afternoon to you.

Damian Sharkey: Hi Duncan.

DG: What are the trends you guys are seeing at Westpac?

DS: I think first off it’s important to acknowledge it’s not easy for first home buyers and the data that we’re seeing is that their still a good part of the market. If you look nationally, they’re 20% of the market. In Auckland, they’re 22% of the market.

DG: They went away a bit there, didn’t they? Because of the LVRs (Loan to Value Ratio) came in and home buyers were a bit squeezed weren’t they a couple years ago?

DS: Well I think what happened there is that yeah the LVR did push them out and then really what we’ve seen in recent times is that they have come back. If you think about Auckland and where they are buying, they’re buying in places like Waitakere, North Shore, and South Auckland. We are seeing they are a significant part of the market.

The other bit that we do see in Auckland is we did some research last year and what we saw is that particularly in South Auckland there are people that are selling their homes. They’re selling them for about $770,000.

DG: It’s remarkable, isn’t it?

DS: It is. Now they could have traded up to say $820k at the time, but what we say is they actually predominantly went to Tauranga. If you see that nationally first home buyers are still prominent across New Zealand, but Tauranga it’s not so much.

DG: So people sold out of South Auckland, and Hamilton was another destination too, wasn’t it.

DS: Correct. And so if you think about what they’re doing there, they sell for about $770k, they can buy in the top suburbs of Tauranga, and they’re actually netting about $200,000 in cash.

DG: They’re buying these places in the Bay of Plenty for about $5-600k?

DS: Correct. And I was talking to a colleague of mine before and she was saying a friend of hers was doing exactly the same thing. His employers let him keep his job based in Auckland but he could work out of Tauranga.

DG: Hey what about property investors? Are they knocking people around in the market a bit? Surely they must be.

DS: What we’re seeing is two types of investors. The first type that you’ll see predominantly in Auckland, the common thing is they’re going for capital gain.

Outside of Auckland it’s slightly different, they’re thinking of longer run. They’ll be thinking about yields, so it’s longer term investment.

And to your point earlier is yes, when those changes in regulations came in towards the end of last year is they did dry up a little bit. But the group that has been squeezed out a little bit are what we call ‘movers’. They’re people who are either looking to sell their house and buy a new one, or trade up. They’ve actually dropped a bit in the past 6-9 months.

DG: What are people doing? I get mates who ask me this all the time and I never want to give them too much financial advice because it would go south for them. But are people fixing or floating with the rates around at the moment?

DS: People are taking certainties, so that means predominantly they are fixing, that’s around 70/30. In the long run it’ll be cheaper, so you might fix predominantly for two years.

On the other side with floating it might be slightly more expensive, but there are advantages of doing it because they pay off more.

DG: But you need cash for that. Hey good to see you, thanks for coming in to the studio.

SEE ALSO: India: the next China for NZ businesses?

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