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Auckland Property Market Research February 2018

ISSUE 142  

2017 Review: Sales & Rentals in Main Metros

In 2017 median sales prices saw a steady increase at the start of the year, but then stabilised as the year went on. Auckland posted a slight increase in median sale price, while Wellington posted the highest proportional growth in 2017, with median sales prices increasing from $460k in January to $565 in December. The growth in Wellington was experienced by large fluctuations between most months. Dunedin’s median sale price also increased by $80k. In contrast, Christchurch experienced a steady decline in median sales price, perhaps due to additional stock coming onto the market.

Rental prices had mixed movements in 2017. Two-bedroom rental prices in Auckland rose 15 points between January and December 2017, while the 3-bedroom rental price had a more substantial increase of 21 points. Rental prices in Wellington rose 43 points for 2-bedroom properties over 2017 – the largest increase last year, perhaps due to the increasing trend of people moving out of Auckland and into other parts of New Zealand. Dunedin 2-bedroom rental prices increased slightly over 2017 (2 points), while 3-bedroom property prices have remained the same ($375). Christchurch has experienced decreases over the past year. Both 2-bedroom and 3-bedroom rentals dropping by 8 points. 

In 2017 the average selling price in New Zealand increased 33% ($132k) since 2013. These increases were driven by shifts in Auckland, Wellington and Dunedin. Wellington also saw a large growth in sales price, up 32% (128k) on 2013. Dunedin has experienced growth of 35% ($94k) since 2013, steadily increasing since 2014. Christchurch sales price growth remained stable in 2017 at 1% ($3k) since last year, stabilising after strong growth prior to 2015 during the earthquake rebuild. Since 2013 the city has seen a 21% (82k) rise in selling prices.

Rental prices have followed a similar pattern since 2013 – this is shown by the Christchurch curves, which have shown relatively similar trends in response to the rebuild. Auckland rental prices have increased by 22% ($86) for 2-bedroom and 20% ($101) for 3-bedroom dwellings since 2013; this follows a period of strong growth in prices in 2015 and 2016.

Wellington rental prices have increased substantially over the past four years. Since 2013, 2-bedroom dwellings have shown an increase of 23% ($73) and 3-bedroom dwellings have shown an increase of 17% ($72). Dunedin has also experienced small increases in the past four years – 14% for 2-bedroom dwellings and 12.5% for 3-bedroom dwellings.

Since 2013, Christchurch rental prices have experienced fluctuations– 2-bedroom dwellings decreased by 4% ($14) and 3-bedroom dwellings were down 7% ($29). 

An estimation of the rental return (yearly rental income divided by house price) indicates that returns across Wellington, Christchurch and Dunedin have weakened slightly in the past year. Auckland’s estimated average rental return has stabilised – likely due to the fact that median sale prices in Auckland have started to stabilise – as rental prices continue to increase.

For example, if someone bought in Auckland at the median price of $839k and rented it out for all 52 weeks of the year at $548 per week (we have averaged the median 3-bed and 2-bed rents to get $548), they would bring in 3.4% of their original investment (before expenses). In 2013, they would have enjoyed a 4.2% return.

The drop in other parts of New Zealand indicates that median house prices are rising, whilst rents are not keeping up with this increase.

Coastal Flooding Property Impact

This month in our latest CPII survey in association with IPSOS, some questions were asked about the impact to coastal flooding in early January and what impact this had on respondents’ residential properties. As well as this, a question was asked on respondents’ overall attitudes to investing in low-lying coastal properties, given the recent flooding and the influence of global warming on rising tidal levels.

Overall, 55% of the respondents were not impacted by the recent floods, 44% did not own any coastal properties and 1% of respondents were affected by the floods.

Coastal Flooding Impact on Future Buyers

Overall weather changes and climate change have had an impact on those who are interested in buying coastal properties. Just under a half of respondents (41%) remain uninterested in coastal properties and therefore unlikely to invest in coastal properties. Some 32% claim that climate change has reduced their interest in buying coastal properties, whilst just over a quarter of respondents (27%) are still interested in investing coastal properties despite recent flooding and global warming.

Large investors were more likely to have never been interested in coastal properties than small investors, whilst small investors were more likely to have a reduced interest in coastal properties following the flooding.

Note: Excludes 'does not apply' answers.


Crockers Property Investment Index

This month the Auckland Rental Property Investment Index has increased further. This reflects an increase in the proportion of investors planning to increase the size of their property portfolio, coupled with a slight decline in the proportion looking to divest. Reports of being a ‘buyers’ market’ are supported by this.

The Auckland Rental Property Performance Index has recovered, due to a decrease in the proportion of investors expecting ‘worse’ returns together with an increase in the proportion of investors expecting ‘same’ returns. The proportion expecting performance to get ‘better’ has decreased. Therefore we see a situation where investors are being encouraged by flattening prices.

Auckland Median Prices & Sales Numbers

The median sales price for Auckland residential properties dipped slightly to $855,000 after an increase in November. Meanwhile, sales volume decreased from 2,052 to 1,782 in December, repeating the volume drop seen in previous December periods. Also, worth noting is that in December 2016 sales volume was 1,873, while in December 2017 this was down to 1,782. Given the increase in housing stock over this period, this decline in numbers is even greater on a proportional basis.

Source: Real Estate Institute of New Zealand

Auckland Rental Prices

The average Auckland rent for 2-bedroom residential properties has decreased slightly this month from $493 to $489, while the average 2-bedroom rental across New Zealand has decreased from $400 to $395. This resulted in the Auckland 2-bedroom premium to remain relatively stable at 24%.

The average rent for 3-bedroom properties in Auckland increased slightly from $616 to $620, while average rents across New Zealand increased from $465 to $470 – resulting in the Auckland 3-bedroom premium remaining stable at 32%.

Source: Real Estate Institute of New Zealand