Nearly half of Auckland is million-dollar town

Almost half of Auckland's housing market now carries a price tag of at least $1 million, new research suggests.

Analysis of Auckland property values by CoreLogic NZ and OneRoof.co.nz has found that the percentage of suburbs with a median value of $1million or more has grown from a mere 10 percent in 2013 to 49 percent now.

And in a blow to first-time buyers, the number of suburbs with a median value of $500,000 or less has shrunk from just under 20 percent to zero.

“Despite values in Auckland plateauing for the last two years, the figures paint a grim picture for potential first-home buyers trying to get into the market,” says CoreLogic NZ head of research Nick Goodall.

There has also been a large decrease in the number of suburbs with median values of between $500,000 and $1 million, the price bracket in which the majority of property transactions in the city are taking place.

In 2013, over two thirds (68 percent) of Auckland suburbs had a median value of between $500,000 and $1 million. By 2018, that share has shrunk to 51 percent, or half.

Significantly, the data also show the largest drop in the percentage of suburbs at the lower end of that bracket, confirming the story of a shrinking pool of affordable properties for first-home buyers in the city.

Five years ago just over a third of Auckland suburbs had a median value of between $500,000 and $700,000. In 2018m that has dropped to a mere 13 percent. Even for those who can afford to stretch to $800,000, the opportunities are shrinking, with the share of suburbs with a $700,000-$800,000 median value dropping from 17 to only 10 percent.

The only brackets to grow in the sub-$1million band are those at the upper end. The share of $800,000-$900,000 and $900,000-$999,999 suburbs has gone up from eight percent to 14 percent.

The challenges faced first-home buyers in Auckland are also reflected in sales figures for the year. Just eight percent of properties sold (1,429) came in below $500,000. The bulk of transactions (57 percent) were in the $500,000 to $1m bracket, with a further 34 percent going for $1m-plus.

CoreLogic’s Goodall said: “The constantly changing dynamics of New Zealand’s property market means that many would-be homeowners find it challenging to understand which suburbs currently match their home-buying budgets.

“The data shown in our Mapping the Market tool illustrate the exceptional growth witnessed in the market over the last five years.

“It also helps explain the necessity for a programme like KiwiBuild in changing the type, size and value of new builds to cater for a section of the market who may otherwise struggle”

“A suburb’s median value is a good indication of what you could expect to pay for a typical home there, even though there will be stock above and below that value,” says OneRoof editor Owen Vaughan.

“Looking at the figures you can see that Auckland has essentially been turned on its head. Five years the bulk of suburbs in the city sat below the $800,000 mark, and no suburb sat above $2m. Now, the bulk of the market sits between $800,000 and $1.1m and the percentage of suburbs with median values above $1.5m and $2m is growing.

“While the growth in million-dollar and $2m suburbs will be good news to those who already own property in the city, the fact that no Auckland suburb has a median value of less than $500,000 means there are fewer opportunities to buy at that level.”

Figures released in CoreLogic’s Pain and Gain report suggest that those who have managed to buy in Auckland, especially in the last five years, may find it difficult to make the next move up the property ladder.

The report found almost 96 percent of all properties sold between July 1 and September 30 in New Zealand enjoyed a resale gross profit, with the median gain per property for the entire country sitting at $180,000. The median loss was just $20,000.

“For Auckland, the median loss this quarter was $27,000, a bit smaller than $31,000 in the third quarter of 2017 – but not enough to say that things have really changed materially,” says Goodall.

“There has been a slight lift in the percentage of Auckland sellers who have made a loss, from 3.4 percent in the third quarter of last year to 4.6 percent now, but it’s still a long way off the pain levels seen post-GFC, when almost a quarter of Auckland sellers sold at a loss.

“However, the data get a bit more convincing when you look at the levels of gain in Auckland. The median in the third quarter of 2017 was $365,000. Now that’s down to $340,000,” he says. “It’s still clearly a large number, but it is the lowest since the first quarter of 2016, when it was $334,000. And it is well down on the peak of $408,000 in the fourth quarter of that year.”

Vaughan adds: “The slowdown in the Auckland market has started to eat into the profits house-sellers could expect for a given holding period. Those thinking of selling now will clearly not enjoy the same gains as someone who sold a year or two years ago.

“Recent measures taken by the Reserve Bank to loosen lending rules and the fact that Auckland still has a housing supply problem suggest that sellers are unlikely to suffer the big losses worn by those selling just after the Global Financial Crisis. However, the decrease in profits may make it harder for home-owners to make that next move up the property ladder.”