City Sales Apartment Report. JUNE 2017 Confusing messages hit the apartment market, prices hold for now. Prices hold for now, but the lights have gone out. Average sale price of Auckland apartments hits $10,000m2 for the first time but open home attendance and buyer enquiry is down. We have hit $10,000m2 for the first time and our New Supply Chart tells it all. The anomaly is there are fewer bidders in the auction room but they hold competitiveness and determined vendors are meeting the market. For the faint of heart these quiet periods are troubling but we’ve seen this all before. If there is ever a window where the buyer rules, it’s now. Negative sentiment fades quickly and will be forgotten by spring, but world events like terrorism threat, hung parliaments, Wild Trumpism and our own election pending have unnerved buyers. For First Home Buyers our Apartment Market is now the only choice but... 30,000 new dwellings are needed immediately in Auckland plus a constant supply of 14,000 are needed annually to keep pace with growth. If you’re a First Home Buyer you should indeed be checking the Supply Graph and asking what effect supply will have. We predicted Beachaven would boom with the ferries. Mt Wellington with Sylvia Park. Te Atatu with the Maioro Rd Tunnels. Mangere with the second runway starting. Now Newton is going to be our Paddington. Wynyard Quarter our Point Piper. And Karangahape our Greenwich Village Agent largesse? Don’t think so. And Autumn is beautiful, as always. MARTIN. Yes the figures are excruciatingly accurate with our visiting every site and sorting the pipe dreams from “likely” to happen. No, you can’t do this analysis unless you actually know the different entities trying. We know them all. Add to an explosive cocktail the excitement of Baby Boomers buying $1m suites in the City like hotcakes, the prospect of a Sydney style Harbour Bridge lit up at night, The Viaduct being bathed in neon reflections and the general vivacity of a City normalised in Apartment Living and you’ll see why we’re excited. Auckland Central is the next suburb. PLEASE NOTE: This report is created exclusively by City Sales Ltd and remains the property of City Sales Ltd. No part of this report or its findings may be reproduced or copied without express permission and appropriate acknowledgment of its source. For more information or to request permission please email sales@citysales.co.nz or call Scott Dunn on (09) 3030 601. sales@citysales.co.nz www.citysales.co.nz (09) 3030 601 Market Trends. This quarterly report covers City Sales’ own transactions dating back to 2005. Please read our explanatory notes at the rear of this report. Average Sale Price We have experienced concerted “pushback” on the Auction Floor but... $400,000 reached and we say still headed north. This is also reflecting the Baby Boomers swarming over $1m + suites and lifting the average. The bottom line for investors is very little comes through the floor under $300,000 now. You can see where very little OVER $300,000 was the norm not long ago. Average $ per Square Metre $10,000m2 reached and near parity with the offplan market. And look opposite to our New Supply bar charts. This is telling a serious story as to where your money should be going. Let us interpret the opportunity here for you. Sales to Investors Back in the game but the very healthy Renaissance of Auckland Central by owner-occupiers should start levelling this graph. Be slightly surprised when you cross-reference to the opposite RETURN graph still plummeting. For how long? Average Rent At last the investors are getting a little relief with some growth. We have maintained that the modest rental growth (compared to everything else) is due solely to capacity to pay. The long-awaited reviewing of static salaries has begun this year facilitated by constant GDP growth and confidence. This will climb again. Average Gross Return How low can this go? We are a little stunned that returns could continue to drop if unsupported by rapidly rising rents or plummeting interest rates. Neither of these are happening, and when markets defy gravity the outcome is always eventually the same. We’re all watching this space. New Supply. NOT A GOOD LOOK 3000 The actual supply we predicted has maintained but pushed out a little as construction overload has slowed production. Given we need 30,000 new dwellings immediately plus 14,000 annually to keep pace with growth puts this into alarming context. 2500 2000 And yes, our figures are extremely accurate with proposed developments and sites always viewed before being reported on. This is not a good look if you’re aspiring to get on our property ladder. You need to see us. 1500 1000 500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 The City Sales Apartment Report comprises Auckland CBD suites, rentals, values and returns. For the purposes of this report the Auckland CBD is defined as Stanley Street to Howe Street and Quay Street to Virginia Avenue. Car parks are deducted at $40 per week for rentals and $40,000 for sales up to March 2015 after which they are deducted at $50 for rentals and $50,000 for sales. The following conditions are also observed: Freehold apartments only, no off-plan sales, sales prices are GST inclusive, balcony areas are excluded from $m2 calculations. For bespoke advice, please contact City Sales on (09) 3030 601 or sales@citysales.co.nz. OUR MACRO VIEW In 2017 Auckland contains 400,000 dwellings. Auckland Council states we’ll require 400,000 more inside 30 years. That is 14,000 new dwellings needed per year. The green belts of Coatesville, Brookby and Clevedon are not going to be sacrificed to housing. The City will not be allowed to extend up to Warkworth and down to Huntly. Intensification through the Unitary Plan will promote Apartment living as the new norm. City Sales predicts that transport congestion will precipitate a culture change of inner-City living not seen since the gentrification of the Ponsonby and Freemans Bay workers cottages in the 1970s. City Sales believes that there are not enough skilled tradespeople to cope with a nascent demand that will prove historically unprecedented. sales@citysales.co.nz www.citysales.co.nz (09) 3030 601