Where's the Real Estate Market Heading?

Auckland property market, Winter 2016

Now that we are in the middle of winter it is pretty much more of the same with demand exceeding supply in the Auckland and New Zealand property markets. Net migration into New Zealand is approximately 70,000 pa. and the double digit capital gains for property in Auckland City is also occurring in places like Hamilton and Tauranga now.

The New Zealand government has only been trying to increase the supply of housing rather than also reducing demand by restricting migration as has been suggested by some opposition parties. We can only assume the reason for this is that migration helps drive the economy.

The build time for a new single home takes approximately 12 months in Auckland when the resource consent and building consent processes are factored in. For apartments it can take two to three times that long as many need to be sold off the plans before financial institutions will fund the start of construction.

Historically low mortgage interest rates have also added fuel to the fire creating a highly speculative property market with a large number of properties changing hands within a 12 month period. There have also been some significant capital gains of over 20% in that short time frame.

The pressure on Auckland's infrastructure have been most noticeable with commute times around the city now being significantly longer than 18 months ago.

We see the only real quick fix to this demand/supply imbalance is to limit migration into New Zealand however we doubt the government would be keen on this measure.

While the imbalance of demand exceeding supply continues the Auckland and New Zealand property markets will continue to be less affordable to more and more New Zealand families.

One of the most interesting reports we have seen for Auckland property which dissects the two components of most property is the land and the buildings. The cost of the value of land has gone up 350% since 1990, while the cost of building has gone up 78% in the same timeframe.

See also: Market Conditions, Winter 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
Mob: 021 985 685
Grad Dip Bus (Real Estate), Post Grad Dip Mgt, PG Cert Com (Property) 

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