House prices in Auckland have fallen by more than 10% this year and more drops are expected, but experts believe the region’s market is likely to remain $1m.
The region’s median home price peaked in November last year at $1.3 million, according to the Real Estate Institute.
Since then, it has fallen back $255,000 to $1.04 million in September. from high school The latest house price index has the region’s annual price drop at 11.2%.
Different real estate companies have different figures for Auckland’s median price, CoreLogic puts it at $1.19 million in September, while real estate agency Barfoot & Thompson has it at $1.06 million.. Average prices are different (and higher) again.
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But the fall in prices is clear in the figures from all companies, and with interest rates still on the rise and global economic pessimism prevailing, they are expected to fall further.
So will Auckland continue to be a million dollar real estate market, or will its prices fall back to a much lower level?
CoreLogic’s head of research, Nick Goodall, says it might be time to rethink the $1 million benchmark because the size of the region, the different areas, and the variety of property types mean the figure is quite arbitrary.
The region’s average price breakdown by district illustrates this, he says. While the median price for the region was $1.38 million in September, the median price for the districts ranged from $1.6 million in Auckland City to $994,054 in Franklin.
The city of Auckland is home to 24 suburbs with an average price of more than $2 million, including Herne Bay, the most expensive suburb in the country, which has an average price of $3.68 million.
In contrast, there are 35 suburbs across the region that have medians below $1 million. Auckland CBD’s median is $572,050, while Ranui’s is $965,500 and Papatoetoe’s is $879,200, for example.
Increased densification also means that apartments and townhouses, which tend to be more affordable, now make up a sizable proportion of the housing stock, Goodall says.
The regions the median price of a townhome is $835,000, while the median price of an apartment is $668,000and in the districts there is, again, a range of medians for each type of property.
This shows that Auckland’s market is more complex and varied than the $1 million city’s moniker suggests, he says. “It also suggests that the overall average for the region will be around $1 million in the long term and potentially forever.”
But the market downturn has yet to go further, and as long as interest rates continue to rise, house prices are unlikely to stop falling, though the rate at which they are falling is slowing downhe says.
“That could see the region’s median settle closer to $1 million than it is now, and the lower prices are, the better and more affordable they are for first-time homebuyers.”
Anyone trying to make definitive predictions about how far prices might fall is playing a fool’s game, and a look at how far off base price forecasts have been in recent years shows that, says Harcourts managing director Bryan Thompson.
Sales volumes are lower this year compared to last year, and prices have been reduced to varying degrees across the country, including Auckland, but that change needs to be put into context, he says.
“There was always going to be a decline because the 2020 and 2021 market was overstimulated by the Government’s efforts to protect the economy during Covid.
“Going into Covid, no one knew what to expect, and there were some dire predictions made at the time, so everyone made the best decisions they could based on the information they had at the time.”
But drivers such as historically low interest rates led to the artificial inflation of asset prices across the board, including house prices, and, in real estate, that situation is now being corrected, he says. .
That means that to get a more accurate view of the market, you need to look back to 2019, to the days before Covid.
“Sales volumes are now a little lower than then, but not by much, and the drop in prices this year pales in comparison to the inflated highs reached last year.”
Prices across the country are estimated to have risen about 43% from March 2020 to the market’s peak last year.
Thompson says an equivalent drop is unlikely, and prices, including Auckland, will likely end up well above where they were before covid hit.
The median price for the Auckland region was $890,000 at the end of 2019, according to the Real Estate Institute.
“Some reduction in prices provides more opportunity for those looking to enter the market, and there are now more listings to choose from, so many buyers will now have better options than they did last year,” says Thompson.
Auckland’s regional average has been above the $1 million mark for some time, with Listable value first placing it at $1 million in September 2016Y Auckland Council Recreational Vehicles reflect this in 2017.
Realestate.co.nz spokeswoman Vanessa Williams says the region’s median sales price rose to $1 million on the website for the first time in August 2020, but the city district’s sales price Auckland hit $1 million in early 2016.
It’s gone up and down a bit in the six years since, as house prices do because they’re never static, but it’s been above $1 million since 2019, he says.
“With the regional average it has dropped this year, from $1.27m in January to $1.15m in September. That’s a drop of about $117,000 and about 10%.
“It compares with a national price drop of around 7%. Auckland’s decline is greater, but prices at higher heights have more to fall for.”
She says the odds of another $117,000 drop in the near future are slim, given the level of activity in the job market, the number of people searching for a property, and the fact that buyers will be attracted by prices that are $100,000 cheaper.
Property markets change, and there’s no way Auckland prices have continued to rise at double-digit rates for any length of time, says Williams.
“That was not sustainable or useful for anyone. Last year’s market was abnormal and although prices are cooling down, we now have a more normal and stable market which is easier for buyers. Vendors just need to be realistic in their expectations.”
There are other factors at play that are likely to prevent Auckland’s median from falling below $1 million, says property investor David Whitburn, former president of the Auckland Property Investors Association.
Migration is a big driver of housing demand and price increases, and while immigration environments remain too restrictive, there is clearly a need for more immigrants to fill gaps in the labor market, he says.
“As migration picks up, over the next year, that will help put a floor on prices, and another supportive factor will be new construction prices.
“That’s because incentives like lower deposits and breaks from investors’ tax policies mean there’s still a market for them, but because of rising construction costs, their prices can’t go back much.”
But prices move in cycles, and in the near future those in Auckland, which have been through a period of strong growth, are they are more likely to fall a little more than they are to riseWhitburn says.
“However, it is not like the global financial crisis, as the strong labor market and a more robust economy are preventing the despair and forced sales seen then.
“Even if the economic situation deteriorates, the banks have learned from the GFC period and take a mature approach as they don’t want to foreclose on homes.”
These factors make a difference, and Auckland will not go through a housing market Armageddon, he says.