Auckland Property Market Insight

From the Coalface to Your Place, 24 January 2013

What's driving the Auckland Property Market

I work at the coalface regarding real estate sales. I also have a number of colleagues that work different areas from me so at our weekly meetings we are able to get a good feel for what the market is doing in the greater Auckland area.

The market is currently a vendors market and has been that way for several years now. To put it simply it's just a case of demand exceeding supply and with property it's not easy to increase supply quickly. There appears to be nothing on the economic horizon that is likely to change this situation in the near future other than rising mortgage interest rates.

I do recall a similar market to this in 1987 before the share market crash and more recently before the global financial crisis. Post the global financial crisis it took several years for property values in Auckland to drop roughly 15%. In some other parts of the world like Las Vegas they were reported to have fallen by up to 50%. Traditionally the property market usually follows the share market however it's slower to react and takes longer to fall or rise as real estate is less liquid than shares.

I think we can all agree generally we have a bull share market globally and a bull property market in Auckland, most of New Zealand and also other parts of the world like most of Australia and London to give just a few examples.

As mentioned earlier the primary driver for the property market is demand exceeding supply. Low interest rates have allowed people to take out large mortgages to purchase property. These people are often DINKS, (double income no kids) and could be in trouble when interest rates rise and or they decide to have children.

Because we have such a liberal property ownership policy in New Zealand there are also a lot of non-residents who have plenty of money to purchase property here, which is adding to the demand side of the ledger. Migration is also another factor with less people now leaving New Zealand we have a positive migration flow with the majority of people settling in Auckland. What suggests Auckland has a housing bubble is the fact that rents are not rising in parallel with property values as they are in Christchurch and other parts of the world like London, so prices are probably also being driven by speculation rather than just demand for accommodation.

There have been moves by the government to increase the supply of property in the Auckland area sooner rather than later, however even when things are fast tracked it will still take at least a year or more to increase the supply of homes significantly.

Believe it or not we actually do have a form of capital gains tax here in New Zealand. It's dependent on your intent at the time you purchase a property. If your intent was to later sell the property at a profit you are obliged to pay tax on the profit. The IRD are looking at making this more robust however at present it's usually only builders and developers who are admitting to buying property to resell at a profit later.

Certainly in the near future we can expect more of the same unless there is some sort of significant event to change the status quo.


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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