Slow start to spring sales
Spring usually sees a flood of listings coming on to the market as people take advantage of longer days and warmer weather to show their homes in the best light. Along with this usually more buyers come out of winter hibernation. However, with a wet beginning to spring and new Loan to Value Ratio ( LVR) restrictions coming into play, the usual spring surge in activity and listings has not happened. Instead, the Auckland housing market has slowed in comparison to the strong first six months of the year.
An easing in buyer demand meant auction clearance rates dropped and a much higher percentage of properties have either been passed in or received no bids. This slow- down in activity and demand followed the Reserve Bank’s latest round of LVR restrictions announced in late July. While properties that do not sell at auction are still selling by negotiation or with a price afterwards, the average number of days to sell a property has increased.
This is good news for buyers as it means they are more likely to be able to negotiate on price, have time to do due diligence, and gain building and market valuation reports for finance if required. For those who missed out earlier in the year when moving house or buying their ANDREA RUSH QV NATIONAL SPOKESPERSON first home, this could be a better time to buy.
Short term, the new LVRs that officially came into force on October 1 requiring investors buying an existing residential property to have a 40 per cent deposit ( up from 30 per cent for the Super City region and 20 per cent around the rest of New Zealand) have resulted in a noticeable change in Auckland’s housing market.
Early indicators show a slight decrease in the annual rate of growth between the August and September figures in the latest QV house price index for most parts of Auckland.
The exception was the Rodney District where values were up by 17 per cent year on year in September, compared to 15.6 per cent year on year in August. Areas in Rodney North saw the highest rate of annual growth of anywhere in the Super City during September, rising 17.7 per cent year on year and the area now has an average value of $ 913,102. This could be because values have been rising in places such as Warkworth as people look further out for affordable entries to the market.
It remains to be seen what impact the new LVRs have on the rate of growth in the Auckland housing market medium and long term. The 30 per cent LVR imposed on investors in the Auckland market a year ago has slowed the annual growth rate from the 20 percentage range seen during 2015, to the midteens for much of this year, exemplified by the 15.9 per cent we saw in September’s QV figures.
Strong drivers in the Auckland market remain, including an increasing number of sales going to investors, record low interest rates, a relatively lax property tax system and some of the highest annual growth of any property market in the world, free trade agreements allowing foreign investment and freehold purchases of New Zealand property, as well as high net migration.
With the latest CoreLogic Buyer Classification data showing an increasing number of sales going to investors with five or more properties and evidence that many of these investors do not need to borrow money to purchase, it is unlikely the new LVR rules will have much impact on this group of serial investors, who are buying an increasing number of Auckland homes at the expense of those looking for a home to live in.