Auckland Property: 44% of apartments sell for a loss. (source) 

Corelogic has reported that the proportion of all properties being sold for more than they were bought for has dropped by 93.3% in the first quarter of this year and 92.1% in the second quarter – the lowest figure since 2015. 35% of apartments sold for less than they were bought for, the highest since 2012, with 44% of Auckland’s apartment sales being at a loss.  

A few factors make apartment ownership different to single dwelling ownership 

• Apartments don’t tend to rise in value as fast as single dwellings, even if held for a long period there is no guarantee they will be sold for a higher price than they were purchased for
• Unlike standalone properties, with apartments there is less emphasis on land to drive growth, reducing the likelihood of capital gains
• A large portion of apartment owners are investors seeking the rental income so aware that the capital gains may not be there even over time.  

So, is the drop in return for apartments concerning? Not really, it’s what we would expect in this part of the cycle. That said, in our almost 18 years as a buyers agent we haven’t bought a single apartment for a client. Not that we wouldn’t….it’s just that 99% of residential property investors are primarily looking for capital growth and so if they can afford it, we take them to high growth areas first and foremost, and then as much land as possible.  

Private rental sector unlikely to keep up with pensioner demand - Retirement Commission (source) 

With our aging population, the Retirement Commission has raised concerns about the lack of rental housing for retirees in coming years, stating that the number of over 65s who are renting could double by 2048 to more than 600,000 superannuatants.  

The private sector is predicted to not be able to keep up with demand, especially with rentals where accessibility factors are incorporated.  

The Auckland Property Investors Association is urging landlords to consider elderly requirements when renovating properties as many in the over 65 age bracket prefer to live in their own homes instead of retirement facilities and making modifications can allow them to do so.  

Director Lisa Phillips has been saying for years that with home ownership rates decreasing we are going to end up with a lot more elderly having to rent in their retirement.  

Grants, cashback and subsidies on offer to get buyers into new builds (source) 

Prospective buyers are being lured by developers offering cashback incentives. With the current market there are less buyers and so developers are offering incentives to get new builds sold. A cash incentive works best as lowering the price of properties then can reduce the value of the subdivision. The cashback also acts as a lure to get new buyers interested.  

At the peak of construction there were circa 51,000 new dwelling consents annually. The current number is under 35,000, meaning there has been quite a decline in construction.  

Even with less construction activity, buyers currently still have options. Instead of securing a new build, they can look to purchase existing properties. The current market is a buyer’s market, so buyers can get cheeky offers accepted on existing properties where, in a strong market, they would potentially not have been able to.  
Are things about to change for the housing market, possibly? The RBNZ has an opportunity to reduce the OCR next week, so watch this space! 

262 bidders, $22m in house sales - South Auckland mega auction 'chocka all day'. (source) 

South Auckland real estate agents have shared how positive people were at their recent auction. With a room full of bidders’ sentiment was high and the clearance rate was up as sellers met the market. Most properties had around 6 bidders per property with buyers turning up in droves due to the vendors being motivated to sell.  

Buyers are taking advantage of the opportunities in the market at the moment, which in turn leads to increased competition, and eventually higher prices.  

Our comment – is this real or just anecdotal? Well enough anecdotal stories and you get a statistic. We have just been involved in a property sale in Hamilton – there was a contract on it before it hit the internet for very close to asking. And…our buyer agency service has experienced a considerable lift in business with people clients believing we are at the bottom of the cycle.  

Tony Alexander: Why interest rate cuts won't solve NZ's economic mess (source)

Economist Tony Alexander acknowledges the economy is heading into clearer waters with interest rate cuts arriving sooner than expected. However, he is trying to taper people’s expectations stating the interest rate cuts will come quickly but they potentially won’t be as deep as some may think. He attributes the slower-than-expected growth to the poor NZ dollar and impacts from offshore markets, particularly China and the USA. He has also said that house-building activity is falling both this year and next, which as we know, can cause existing property prices to increase (great for those already holding a significant asset).  

Councils have talked about increasing rates for some time. However, aren’t they always? Alexander considers these rate rises and the country’s low productivity as hobbling the benefits of the interest rate cuts. Yes, some might hurt as a result of where interest rates have been, but the overall sentiment is that things are turning, and with some positivity in the market from here the only way is up.  

Du Val receivership 'tip of the iceberg', investors 'concerned' (source) This was certainly a dominant story over the past week. There are plenty of ‘mum and dad’ investors who placed savings with Du Val, and it appears Du Val failed in its duty of care of their funds. It is highly important that, for certain financial investments, the investors are wholesale investors, so they have a sound understanding of where they are placing their hard-earned money. Based on this article, it appears that some of Du Val's investors were not. We take great care in ensuring our wholesale investors meet the necessary criteria. 

We hope you enjoyed reading this issue of the Weekly Property Roundup. If you missed reading previous editions or if you are new here, we have created this link to previous editions. We hope you have a great weekend and look forward to seeing you back here this time next week. 

From the team at Erskine Owen.