Where's the Real Estate Market Heading?

Auckland property market Winter 2015

Supply and demand is still the primary driver of the Auckland property market

The growth in capital values for the Auckland market are not expected to change from the growth that has occurred over the last few years. We simply expect more of the same with no significant changes in the primary driver of demand exceeding supply.

What is noticeably diiferent from previous growth cycles is that speculators are now focusing more on land banking than they are on cash flow from the buildings on the land. Probably because the capital gains are still tax free here in New Zealand.

The best example of a land value capital gain is demonstrated by the sale of two very similar properties in Waterview. 7 Alverston St sold in November 2012 for $801,000.00. The land area of this property was 1011m2 and the house had a floor area of 90m2 which was in a tired condition.

A few months ago 11 Alverston St. sold for $1,511,000 with a land area of 1012m2 and the house also had a floor area of 90m2 and was also in a tired condition.

That indicates a capital gain of almost 90% in just 2.5 years.

In the recent budget announcement a tax on properties that were bought and sold within a two year time frame with a few exceptions like family homes. This announcement really just makes it easier for the IRD to identify people who are carrying on a taxable activity of trading or speculating in the Auckland property market.

There will still be a huge number of local and non-residents who are only trading one property at a time that will not have to pay tax on the capital gain / profit.

There will also be those who decide to hold for more than two years adding to the shortage of supply and will not be picked up by the IRD while also making tax free profits from the capital gain.

We think the government is not going to change the demand side of the equation with this budget announcement.

The supply side of the equation is also unlikely to change. The Minister of Housing Dr. Nick Smith recently stated at a public meeting that he does not expect five Special Housing Area sites that the government is going to sell off to have habitable homes on them until at least the end of 2016.

See also: Market Conditions, Summer 2015


If you would like an up to date market appraisal on your property feel free to contact me in strict confidence.

Grant Tucker
Property Consultant Licensed Agent REAA 2008
Mob: 021 985 685
Grad Dip Bus (Real Estate), Post Grad Dip Mgt, PG Cert Com (Property) 

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