CPII Survey April 2018
Crockers Property management has announced the latest results of the monthly survey of Auckland property investors it conducts in partnership with independent market research firm Ipsos.
- Although the main role of investment properties for investors’ personal finances remains to ‘provide supplementary income’ (65%), since tracking began in 2014 there has been a gradual increase in those who have investment properties to ‘get more of the good things in life’. This has increased from 9% in 2014 to 25% in 2018.
- Analysis shows that increasing the number of residential properties available in Auckland has little immediate impact on sales prices, especially compared to the effects of interest rates.
- The Auckland Rental Property Investment Index has increased. This is due to a decrease in the number of investors looking to divest and an increase in those looking to increase their investment portfolio.
Reasons for Investing in Residential Property
In our latest Crockers Property Investment (CPII) survey in association with IPSOS shows there has been a decrease in the proportion of property investors who regard their investment portfolios to be ‘part of their retirement savings’ (down 9 points). However, this is still the main reason to own investment property. Interestingly, since tracking began in September 2014 there has been a gradual increase in those who have investment properties to ‘get more of the good things in life’. This wave there has also been a decrease in those ‘saving for their children’ (down 7 points).
There has been a substantial decrease in the proportion of investors who chose property over other investments for its ‘tangibility’ (down 13 points to 55%), while ‘safer returns’ has had an increase (up 6 points to 42%).
Some 65% of investors stated that their residential property investments ‘provide them with a supplementary income’ (down 2 points from Jul ’17). The proportion of those for whom investment property is the ‘main source of income’ has increased after a drop in Jul ’17 (from 13% to 17% this year). The proportion of investors who own one property has risen 11 points to 41%. There has also been an increase in those who own three properties (up 8 points).
Note: All Questions Excludes “Does Not Apply” Responses.
Building Consents & Median Sales Prices
This month we compare the Auckland 2017 median sales data with Auckland building consent data (the number of new dwellings consented). In 2017 there were a total of 10,355 building consents issued between February and December. The most building consents were issued in November (1,450), and the least in April (726). The three major spikes in consents are also highlighted by small increases in the median sales price. For example, from February to March the median sales price increased from $800,000 to $890,000 and building consents increased from 800 to 942.
A similar increase is also seen from October to November, when the median sales price increased from $840,000 to $865,000 and building consents increased from 944 to 1,450. It is also worth noting that these results are to be interpreted carefully, as there is usually a delay between a house being consented and it being put on the market.
This month we also compare annual average interest rates with median sales prices in Auckland. In 2017 there was a slight increase in floating interest rates. However, a greater shift is seen since 2008. We can see that since 2008, as the interest rate has moved down the sales price has increased. Floating interest rates were as high as 10.10% in 2008, when the median sales price was $433,000. This has increased to $839,000 in 2017, with the interest rate at 5.7%.
Source: Real Estate Institute of New Zealand – Reserve Bank of New Zealand
Crockers Property Investment Index
This month the Auckland Rental Property Investment Index increased. This is largely due to a substantial decrease in the proportion of people looking to divest, coupled with an increase in the proportion of investors planning to increase the size of their portfolio. A similar growth occurred last May, indicating a seasonal pattern perhaps delayed slightly due to post-election uncertainty.
The Auckland Rental Property Performance Index has increased slightly this month. This is due to an increase in the proportion of investors expecting ‘same’ returns, coupled with a decrease in those investors who are expecting ‘worse’ and ‘better’ returns.