Gradual stabilisation of residential property market

April 2017

Gradual stabilisation of residential property market

The number of sales has dropped dramatically and this has been happening over the past 15-17 months. The demand is not as great as it has been. There’s an underlying shortage of property for sale across Auckland. The Chinese finance has disappeared, also contributing to the slowdown in the market.

The market has been gradually stabilising. I’m not overly concerned. It’s true vendors can no longer get the prices they were expecting and they’re having to adjust their ideas. Prices have dropped 1-2%. This is a slight correction that occurs every decade when the market has been overheated.

Auction trends
Auctions now account for just 25-30% of residential properties being sold. 65-70% of auctions are failing to meet reserve prices. So why are some real estate firms still pushing vendors into auctions? Who benefits from this? In this market all it does is raise the profiles of individual real estate brands.

We’re very selective about which properties we’ll take to auction. You’ve got to do the right thing by your client. In the current market we’d rather market a house with a fixed price.

Building not keeping up with consents
Last year 13,000 consents were issued but only 8000 new homes built in Auckland. Why? It’s because there aren’t enough builders and subbies. The cost of building is sky rocketing. No one can accurately quote the cost of building today. Budgets prepared two years ago are now completely out of date.

Unqualified labour
There are too many unqualified tradesmen on our building sites in Auckland because of the shortage of skilled labour. Not enough apprentices are being trained. Check out any of the big construction sites in the city. You’ll find a lot of unskilled migrants. There’s plenty of cheap labour out there. You’ve got to wonder what short cuts are being taken, what things aren’t being properly checked.

Shortage of building supplies
Builders are struggling to source sufficient concrete for their projects. There’s a three-month delay for concrete at present. The numbers of very big commercial developments currently taking place in the Auckland CBD are drying up the supply of materials.

Apartment trends
Asian developers pushed up apartment prices too high. And now we’re all living with the consequences. First-home buyers can’t afford them. Rental prices are through the roof. There’s too much property flipping.

I anticipate that a number of planned developments in Takapuna and Milford won’t go ahead. Most of the apartments have been designed to meet the needs of Asian buyers, who have now quit the market. Some will have been intending to purchase investment property as a way of laundering money and so this too has now ground to a halt. The government hasn’t done enough to clamp down on the amount of money laundering through foreign owners or Asian buyers investing in New Zealand property.

A similar situation occurred on the Gold Coast 15-20 years ago when Japanese developers were planning tower blocks galore. Then the yen fell and projects went under. In recent years, Chinese buyers have flocked to the Gold Coast looking to snap up bargains.

Too many real estate salespeople, not enough sales
The North Shore is a tough market right now for real estate salespeople and I can’t help wondering if this is the case across Auckland. There were 400 sales made in February on the North Shore by around 1200 salespeople.

Do the maths. Many must be going hungry.