Prices of homes and apartments in Wellington are going through the roof, with a one-bedroom apartments with no parking recently selling for more than $700,000 and townhouse developments being snapped up the minute they are listed.
Tommys Real Estate principal Nicki Cruickshank says prices in the capital are “ridiculous” and that two weeks ago the agency sold a one-bedroom north-facing apartment in the newly opened Pinnacle apartment building in the city centre for $760,000.
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The price is all the startling as the apartment does not come with a dedicated parking space. The sale isn’t a one-off either. The agency sold another one-bedroom apartment in the same building for $700,000-plus a couple of days ago.
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The vendors had bought the apartments off the plan several years ago and had decided to on sell them, though Cruickshank was unsure of the original price paid.
Grant Henderson, Bayleys Wellington residential regional general manager, says off the plan stock is demand.
He has been surprised at some of the prices being paid, with 12 townhouses in a planned development on Main Road in Wainuiomata selling off plan for between $690,000 and $750,000.
“We advertised [the townhouses] off a render of what a property could look like and they were all sold within 12 days – investors, first home buyers and new immigrants were purchasing them mainly.”
The developer had paid $1.6m for the land, on two neighbouring sections, in the last 10 weeks and is removing the two almost uninhabitable houses that sit on them to make for the new townhouses. Before the sale was even settled the plans for the townhouses were drawn up, Henderson says.
Buyers have snapped up planned townhouses on Main Road, in Wainuiomata. Photo / Supplied
He points to another development, the Florian in Paraparaumu, where 64 town houses were released off the plan earlier this month. Every single one is under offer, with prices ranging from the high $700,000s to over $1m.
“The world’s gone mad”, he says, but money is cheap at the moment. Even so, Henderson says it’s hard to give first home buyers competing in such a tough market the bad news their tender fell short, and with prices the way they are, some of these newbies are questioning if they can get into the market at all.
Andre Hutley, owner of mortgage and finance company Vantage NZ, says first home buyers are missing out on property after property in the tender process, which is the favoured selling method in Wellington. His last clients had to take a break because of the emotional roller coaster, he says.
Around 90 per cent of his work is with investors and he says there has been a marked switch by investors from old to new stock since new builds were made exempt from the Government’s new tax changes.
That means investors are now competing with first home buyers for new stock. “It’s going to take a little while to filter through but that market for buying second-hand investment stock has pretty much dried up - every investor is now looking to buy new, not existing,” he says.
Wellington is becoming a very tough market to break into generally.
OneRoof’s latest house price figures show Wellington median property value has jumped 27% - or $215,000 – in the last 12 months.
Cruickshank says you just can’t buy a three-bedroom, one bathroom house in Wellington for under $1m so people are pushing further out and that has pushed prices up in the likes of Porirua, the Kapiti Coast and Upper and Lower Hutt.
Wellington real estate has been undervalued for some time, say agents. Photo / Getty Images
“The last person I heard that couldn’t afford to buy in the Wellington region’s gone to Dannevirke so it is pushing out a little bit further – Otaki, Levin,” she says.
“It’s just a natural progression, you have to go out further if you can’t afford to be in the city.”
A big problem is the lack of stock – in her 17 years in real estate stock is at its lowest, she says.
Covid initially impacted with returning expats buying up homes – Wellington has jobs and high salaries – but the main issue is supply and demand, she says.
Many people are opting for apartments in the centre with five apartment blocks going up in Victoria Street alone in the last three years, including the Pinnacle, but apartments are now proving not that affordable either.
Wellington prices are like Auckland prices, she says. “We get people coming down from Auckland who are then horrified when they can’t buy a mansion for their money. They’re getting pretty much what they got in Auckland for the same sort of money.”
The market needs to calm down for everyone’s sake, she says. “I think it will taper off but it won’t go down. I think it will remain steady for at least a year.”
Henderson says a number of factors are at play – including cheap money, low stock and high demand. There has also been a surge in the number of homes selling for more than $2m, while an increase in new build sales has put upward pressure on land values.
“To put that into context, a single house in Wainuiomata on 800sqm of land that we used to sell for $580,000 to $620,000, developers have worked out they can put five to six town houses on those and that they can get between $9500 and $10,500 per square metre for what they build on there.
“What that means is the average house at 74sq m two-bedroom town house is now selling in the $700,000s.
“You used to get a whole house on a big bit of land for $650,000 but now you’re paying $720,000 for one town house on a fifth of that land.”
Henderson says Wellington has been undervalued for a long time, and that the capital has fantastic public transport links which set it apart. “Although we can complain about them, they’re way better than Auckland.”
Trains connect places like Johnsonville and Lower Hutt to the city centre in minutes and there are regular trains now from the Wairarapa and Waikanae, and the Kapiti Coast Transmission Gully project, which has finally happened, is pushing people north, he says.
“The Kapiti Coast in some cases is almost as dear as Wellington suburbs.”
