Beachside house prices ride the downturn wave
Miriam Bell finds out how seaside suburbs are faring in the housing market downturn.
House prices in popular beachside locations are remaining firm as the broader market slows. Some areas have even recorded increases, new figures show.
During the recent boom, many holiday hotspots had price rises that far outpaced those in bigger cities.
Whangamatā , Akaroa, Mt Maunganui, Waihi Beach and Raglan, for example, all had increases of more than 40% by the end of November last year, according to Homes.co.nz figures.
But in the boom before the global financial crisis (GFC) prices in many beachside areas rose to new heights, only to then be hit particularly hard in the aftermath of the GFC.
CoreLogic says prices in half of the country’s suburbs have fallen over the past three months, but recent Quotable Value figures reveal a handful of areas have bucked the downward trend and had price increases.
So is the slowdown having a big impact on beachside property markets? And, if not, could it in the months ahead?
New figures from CoreLogic suggest prices in a selection of popular beachside locations have not had noticeably bigger drops than other areas, and that some are still seeing moderate price increases.
The area with the biggest increase was the coastal South Island town of Kaikō ura, where prices were up 2.7% in the past three months to a median value of $595,300.
Prices in Whangamatā and Waihi in the Coromandel rose by 1.6% and 1.7% to a median of $1.31 million and $672,350 respectively. In Akaroa in Canterbury prices were up 1.7% to $934,600.
But prices stayed flat in Ō maha in Auckland, where the median is $2.97m, and it was down 0.3% to $1.53m in Mt Maunganui in Tauranga.
And in Paraparaumu on Wellington’s Kā piti Coast, prices dropped 0.6%, leaving Paraparaumu’s median at $897,000. Nearby Raumati beach’s median is $1.03m.
Trade Me figures tell a similar story for the beachside areas with enough listings to calculate average asking prices.
In Whangamatā and Mt Maunganui, prices in May were up on April and annually to averages of $1.66m and $1.41m. In
Raglan the average was up to $1.18m from $1.14m last May.
Demand in Whangamatā and Raglan was also up by 22% and 12% in May, compared to the same time last year.
Real Estate Institute Waikato spokesperson Neville Falconer says buyer demand in areas with lots of holiday homes, such as Whangamatā , Waihi and Raglan, is affected by a slower market.
Prices in these areas have softened recently in line with the national trend, but if employment remains strong and people keep their jobs a big sell-off of properties is unlikely, he says.
‘‘Many homeowners have done well on the gains front in recent years, and while it depends on what level of borrowing they have, if they are not too highly geared and can afford to keep their property, even if it is a holiday home, they will.’’
Agents are still getting inquiries from Aucklanders looking to move for lifestyle reasons, but the volume and urgency had dropped off compared to last year, Falconer says.
‘‘But the thing about beachside areas is the lifestyle amenity they offer, and the desire for that never changes. It takes a lot to shake it out of people’s system, and that provides some support for the quieter parts of the cycle.’’
Craig Pashby, from Ray
White Paraparaumu, says sales activity in the area he covers is far from being in the doom and gloom category.
The opening of Transmission Gully is helping to attract some new buyers, and the Kā piti Coast generally has benefited from the rise of remote working. Local cafes and shops are thriving, he says.
‘‘There’s actually about 10% less listings now than there was at the start of the year, and, in contrast to the GFC, forced sales are very rare.
‘‘Prices have declined a bit though, and sales are taking longer because sellers can choose whether to accept the price suited to the market now, or to put the sale on hold. But they have a choice, which was not the case for many back in 2008.’’
Pashby says the changes in the market are widespread, and are not unduly affecting any particular area.
‘‘People have been surprised by how quickly it has turned, but it is a correction after a boom.’’
With a downturn comes increased risk, and some markets are more vulnerable.
But CoreLogic head of research Nick Goodall says it is areas which have been hotspots for investor activity that are at most risk.
‘‘The rising costs of holding properties may lead investors to decide to sell an investment property, but people who have secondary properties as holiday homes are more likely to try to hold on to it.’’
That means beachside areas with lots of holiday homes are less vulnerable to a sudden, big sell-off, but they do face reduced demand, he says.
‘‘With interest rates and the cost of living rising, not many people are looking to buy a holiday home, so if someone does need to sell it may be hard to find a buyer. That limits their options, and they may have to take a lower price.’’
Comparing the current downturn to the GFC is fair, but there are some key differences, and the strong labour market is one of them, Goodall says.
‘‘Would rising costs force someone to try to raise further money by selling off their holiday home? Probably not, if they remain employed, and are not in a desperate situation.’’
But all these factors do impact on the market, and reduced demand can make an area potentially more vulnerable, he says.