There has been a lot of talk in news outlets about the possible fall of the property market, especially in Auckland, but if you take a closer look at various factors, it may not be as bad as it seems – and could in fact be on a significant rise.
Looking a Auckland specifically, it still looks as though property sales are still in a slight decline where only 1608 properties were sold in April, down 16.3% from April last year, and an 11 year low for the month of April – this all sounds grim, but is it just a natural part of the market?
Experts suggest that this is to be expected and not as dire straits as it may seem, as median prices in the region have remained largely flat for the last three years, remaining within a fairly tight band around $850,000 since August 2016 and the latest figures suggest they show no sign of spiking up again anytime soon.
The next factor to take in is the resent cut to the OCR which is now at a record low, and what effect this could have on the property market. Westpac economists are going predicting that the government’s recent move to rule out Capital Gains Tax, coupled with an expected house price boost from the OCR cut, will strengthen the economy – and bring growth to the property market.
Westpac economists, led by Dominick Stephens, stated that “The RBNZ itself is 50/50 on whether another OCR cut will be required, meaning some form of downside surprise would be required to actually prompt a cut.” And with the recent developments from the government and banks cutting mortgage rates to all time lows that “there is no longer any reason to think the housing market is going to slow in 2020. Far from it. We now expect house price inflation to accelerate to 7% by mid-2020, due to the recent sharp drop in mortgage rates.”
Westpac, along with other major banks, have cut one year special mortgage rates down to as low as 3.89% – which many are hoping will entice new buyers back into the market.
Another factor to consider is the market share changes in the recent months, which has seen first time buyers taking up and equal share with investors for the first time in seven years.A recent report form QV has shown that thanks to first time buyers, variance in outlining suburbs have emerged, causing those suburbs to flourish.
QV used the example of Mangere which had a 5.0% growth in values over 12 months from March last year – a decent figure when values are drifting backwards by 1.5% measured across the whole city. Clearly there are still active people willing and able to buy in a flat-to-dropping market, and at the moment Mangere is dominated by first home buyers with 48% of all sales in 2019 going to this group. The majority of the best performing suburbs in this same bracket are all almost located in either Manukau or Rodney, including Army Bay (4.7%), Orere Point (4.4%) and Wellsford (4.2%). This shows that although the market in more expensive Auckland suburbs are struggling, buyers aren’t necessarily leaving, but opening up to moving further out.