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Auckland Property Market Research October 2018

Issue 150 

Residential Rental Property Maintenance & Renovation

This month in our latest CPII survey in association with IPSOS, we asked investors a set of questions about their investment properties.

Maintenance Budget

As shown in previous waves, the majority of investors do not have a set budget for maintenance to their property and just pay for maintenance as required. However, over time there has been an increase in the proportion of property investors who have a set budget for maintenance (up 11 points since Jul ‘14).

Q: Thinking about maintenance for your investment property, do you have a set budget for maintenance each year?


Best Areas to Upgrade Prior to Selling

As in the previous waves, kitchens and bathrooms are the areas most likely to be upgraded prior to sale. This wave there has been an increase in the proportion of property investors who feel kitchens are the best areas to upgrade (up 6 points on Aug ‘16), indicating that property investors feel that the kitchen is an area that buyers look closely into.

Recent Research Report on Methamphetamine

This wave, respondents were asked whether they were aware of a recent research report that highlighted that low levels of methamphetamine that had been previously thought to be unhealthy in a home actually posed no health risks. Overall, 82% of respondents were aware of the report, which highlights the report’s significance and reach on property investors, as well as indicating why there has been a decrease in the number of property investors who would seek a methamphetamine test for their property.

Methamphetamine Test for New Property

This wave there has been a decrease (down 13 points since Aug ‘16) in the proportion of investors who would ask for a methamphetamine test to be done on any new property they were purchasing, perhaps as a result of new evidence which suggests that low levels of meth that were previously thought to be harmful in fact pose minimal health risks.

Q: If you were looking to add to your investment portfolio, would you ask for a methamphetamine test to be done on your property?

Methamphetamine Test for Existing Property

Following a similar pattern as those who look to test for methamphetamine for a new property, this wave there has been an increase in the proportion of investors who would not be prepared to pay for a methamphetamine test on their property (up 8 points).

Q: As a landlord, would you be prepared to pay for a methamphetamine test on your investment property:

Crockers Property Investment Index

The Auckland Rental Property Investment Index has remained relatively stable this month, due to a slight increase in those looking to increase
the size of their investment portfolio. The Auckland Rental Property Performance Index increased substantially this month, as a result of a sharp increase in those who believe the Auckland rental market will get better.

Best Buying: A Review of the Main Centres

As expected, Auckland has seen a sharp increase in the average sales price since 2013, growing 55%. Other centres have also experienced solid appreciation, Dunedin prices growing 49% and Christchurch 25%. Christchurch’s sales prices have been stagnating over the past 3 years (5% increase), which is likely a result of an increase in housing supply as the city continues to rebuild itself. Interestingly, Wellington (38%) and Dunedin (40%) have seen their largest increases in sales prices over the past 3 years, likely due to a combination of factors such as low interest rates and people looking to base themselves in cities outside of Auckland.

Looking back 10 years, Auckland’s housing prices have nearly doubled (91% growth). Dunedin had the second strongest growth at 54%, while Wellington and Christchurch grew 48% and 43% respectively.

From an investment point of view, it is also valuable to look at the rental return. From 2008 to 2012, the average rental return of 3-bedrooms remained relatively stable across New Zealand’s four main centres. In the period between 2013 and 2016, there was a notable decline in the estimated average rental return across the four main centres, as house prices rose faster than rents. Over the past 3 years, Dunedin especially has experienced a large decrease in rental return (-1.1%).

Although Dunedin has experienced the largest decline in rental return in the past year, of the four main centres it remains the city with the best returns (5.1%), closely followed by Wellington (4.8%) and Christchurch (4.7%). Auckland has the worst returns of the four major centres (3.9%). However, the rental returns in the city have started to increase following a large decline between 2013 and 2016.

Auckland Sales & Rental Update

Auckland Median Prices & Sales Numbers

The median sales price for Auckland residential properties increased from $820,000 in July to $836,000 in August, the first increase since May (a seasonal dip experienced most years). Meanwhile, sales volume also increased from 1,868 to 1,980. Both sales price and sales volume are at similar levels to August 2017, when they were $831,250 and 1,916 respectively. However, given the increased housing stock available, this actually indicates a reduced level of activity overall.

Auckland Rental Prices

The average Auckland rent for 2-bedroom residential properties has decreased to $496 this month, while the average 2-bedroom rental across New Zealand has climbed to $420. This has resulted in the Auckland 2-bedroom premium decreasing from 23% to 18%, the lowest we have ever recorded.

The average rent for 3-bedroom properties in Auckland has decreased this month from $641 to $617, whilst average 3-bedroom rents across New Zealand have remained stable at $480. This has resulted in the Auckland 3-bedroom premium also decreasing from 34% to 29% this month, also a very low number.