Crockers Market Research Issue 92 • July 2013
Crockers Property PO Box 74054, Greenlane, Auckland 1546525 Manukau Road, Epsom, Auckland 1023 T 09 630 8890Crockers Property Management Ltd and Crockers Realty Ltd, Licensed (REAA 2008)
© Copyright Crockers Property 2013
Topics this month • Renting vs Owning - Interest Rates and Return on Investment • CPII Survey Results – Investors Views on Mortgages and Interest Rates • Suburb Review: South Auckland • Auckland Rental and Sales Review
Respondents to the recent Crockers Property Investment Index (CPII) Survey in partnership with Ipsos were asked about their refinancing of mortgages in the past three months. 60% indicated that the question was not applicable to them, with the majority of the remainder indicating that they have stayed on a variable rate.
Your Views – Mortgages & Interest RatesFew refinancing as variable rates remain steady
Outlook for residential property market positive
Recent refinancing of variable mortgages
Source: CPII Survey June 2013
No, I have kept my variable mortgage(s) on a variable rate
Yes, I have moved some of at least one mortgage onto a fixed rate
Yes, I have moved at least one entire mortgage onto a fixed rate
Not applicable
When will interest rates rise?
Source: CPII Survey June 2013
continued over >
Divided opinions over banks’ attitudes to lendingDespite bank lending practices recently receiving attention from the Government in the recent Budget with indications that lending will be harder to secure, there is currently an even split between those feeling that banks are being more generous and those that feel that there has been no change in requirements for lending (26% each). Fewer (17%) feel that banks are making it harder to secure finance.
Interest rate rises expected to be 6 -17 months awayAround a third of respondents (32%) feel interest rates will begin rising in 12 – 17 months as indicated by the Reserve Bank. With 29% believing it will be around 6 months earlier, a total of around 6 in 10 are betting on sometime during 2014. 2 in 10 believe that they will rise sooner.
Bank’s attitudes to lending
Crockers Property Investment Index
T here has been a decrease in pessimism around expectations from the Auckland residential property market for the next 12 months, as tracked by the Crockers Property Investment Performance Index. Performance expectations rose again from May to June; 81 index points to 84 index points.T he Crockers Property Investment Index, which tracks whether people are planning to increase or decrease their Auckland residential portfolios, also shows positive movement, with fewer people planning to reduce the size of their Auckland property investment.
Sour
ce :
CPII
Surv
ey J
une
2013
100%
60%
Ind
ex P
oin
ts
80%
40%
20%
67
44
6165
58
48
56 5667
60
8387
8185
91 88
74
8781 81 84
68
77
0%
May 13 Jun 13Jun 12 Jul 12 Aug 12 Sept 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13
Investment Index: Auckland Rental Property Investment Changes - next 12 months (increase/decrease residential portfolio)
Performance Index: Auckland Rental Property Performance - next 12 months (better/worse)
Planned Rental Property Investment Changes – Next 12 Months T he reduction in expectation of worsening performance is reflected in a reduction of those planning to decrease the size of their Auckland rental property portfolio, down to 6% a twelve month low. One in five investors are expecting to grow the size of their investment portfolios.
Comparing return on investment, interest rates and sales volume
Var
iab
le in
tere
st r
ates
an
d R
OI
Nu
mb
er o
f re
sid
enti
al p
rop
erty
sal
es in
Au
ckla
nd
0
1000
2000
3000
4000
5000
0.00%
2.00%
4.00%
6.00%
8.00%
Jan-
11
Feb-
11
Mar
-11
Apr
-11
May
-11
Jun-
11
Jul-1
1
Aug
-11
Sep-
11
Oct
-11
Nov
-11
Dec
-11
Jan-
12
Feb-
12
Mar
-12
Apr
-12
May
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
12
Jul-1
2
Aug
-12
Sep-
12
Oct
-12
Nov
-12
Dec
-12
Average variableinterest rate
Average rental returnon median sales price
Number of salesin Auckland
Interest rates and Return on investmentAverage rental return on median sales price in Auckland was relatively steady throughout 2011, decreasing slowly during 2012 before a small jump at the beginning of January 2013 that has since trended downwards. Over the past twelve months, our estimated average return for Auckland properties has been 4.38%, down from 4.70% in May 2012. Variable interest rates for first home buyers have held steady since decreasing early in 2011 which coincided with the beginning of on-going increasing activity in the Auckland residential property market. T he Reserve Bank has recently announced that the official cash rate will remain at 2.5%, which is in part due to the high NZ dollar. Increasing the exchange rate can cause the dollar to soar further, hurting exporters and the wider economy. No alteration has been made to the previous indications that rates will begin to rise in the September quarter of 2014. We look at your expectations of variable mortgage rate rises in our recent CPII survey.
23%
8%
9%60%
Within 6 mths
18%
29%33%
5%15%
6-11 mths 12-17 mths 18-23 mths 24 mths or more
They are being moregenerous & easier
to deal with
No change inrequirement
They are makingit harder to
secure finance
Don’t know
26% 26% 31%17%
Source: CPII Survey June 2013
Estimated return on investment based on 52 x average of 2 and 3 bedroom rentals / median sales priceSource: Real Estate Institute of New Zealand (rental and sales figures)Source: Reserve Bank of New Zealand (interest rates)
Crockers Property Group uses market data from a variety of sources which we believe to be accurate and reliable. This enables Crockers to provide analysis and interpretation on the property market. Opinions, statements and analysis are for general information only and should not be relied upon for any specific purpose. Crockers takes no responsibility for decisions you make based on data provided through Crockers Market Research.
© Copyright Crockers Property 2013
Suburb Review: SouthRentals Average rents across South Auckland remain well below the average for the greater Auckland region (Pukekohe to Rodney). Over the past 12 months, South Auckland 3-bedroom rentals had an average rental price of $403 per week, 20% lower than the greater Auckland 3-bedroom average rental price of $503 per week. 2-bedroom rentals in South Auckland were 15% lower with an average rental price of $331 per week, compared to $387 per week for greater Auckland.Looking at the individual suburbs, rental prices for both 2-bedroom and 3-bedroom properties have seen similar growth of around 5% give or take a little, with Papakura and Mangere 2-bedroom properties seeing the strongest growth of 7%.
Pukekohe Papakura Howick Pakuranga Mangere Papatoetoe ManukauAv. 3-bed rent $355 $362 $497 $449 $381 $401 $377
% changeMay12 to May 13 +6% +4% +4% +5% +3% +4% +4%
Av. 2-bed rent $279 $310 $394 $366 $314 $333 $320% change
May12 to May 13 +6% +7% +3% +6% +7% +5% +3%
Sales Both Eastern Beaches and Papatoetoe saw an increase in sales prices of 11% compared to 2012. Eastern Beaches sit well above the other suburbs in South Auckland in terms of both sales price and sales numbers; the average sales price here being $642k compared to the second highest, Papatoetoe at $401k.Sales volumes have risen strongly, between 21% and 46% across the lower priced suburbs with Eastern Beaches seeing a rise of 7%. However, volumes have not returned to the highs seen between 2004 and 2007 (which would have partially reflected a spike in greenfields developments over this period).
Figures shown are 12 month rolling averages Source:REINZ
Residential Property Weekly Rentals - South vs. Auckland12-month rolling average
Sour
ce :
Real
Est
ate
Inst
itute
of N
ew Z
eala
ndFigures shown are 12 month rolling averages
Ave
rage
Wee
kly
Rent
al L
evel
s
$300
$350
$400
$450
$500
$550
$403
$503
$331
$387
$250Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17
2-Bed: South3-Bed: South
2-Bed: Auckland Average3-Bed: Auckland Average
Residential Property Weekly Rentals by Suburb for South
Sour
ce :
Real
Est
ate
Inst
itute
of N
ew Z
eala
nd
Figures shown are 12 month rolling averages
Med
ian
Sal
es P
rice
s ($
1000
s)
$280
$380
$480
$580
$680$642k
$401k$383k$369k$350k
$180May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13
Eastern Beaches Papatoetoe Manurewa Papakura Franklin
Average Number of Sales - South12-month rolling average
Median Sales Price - South12-month rolling average
Sour
ce :
Real
Est
ate
Inst
itute
of N
ew Z
eala
nd
Figures shown are 12 month rolling averages
Num
ber o
f Sal
es
100
150
200
250
300
350
50
0
83
10986
154
197
Eastern Beaches Papatoetoe Manurewa Papakura Franklin
May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13
W hilst three-bedroom rental prices have increased in Auckland to $521per week, they have continued to hold at $380 per week nationally, resulting in the premium for Auckland to rise to 37%. Two-bedroom rental prices have also increased in Auckland to $401per week , but have held steady nationally at $330 per week, thus increasing the premium paid in Auckland to 22%.
Auckland Sales & Rental Update
Nationally Steady, Auckland Increases
Auckland residential property sales median prices
Auckland residential property sales numbers
$400K
$420K
$440K
$480K
$500K
$520K
$460K
$540K
$560K
$580K
$565K
Janu
ary
Med
ian
pric
e fo
r re
side
ntia
l pro
pert
y so
ld
Dec
embe
r
Nov
embe
r
Oct
ober
Sept
embe
r
Aug
ust
July
June
May
Apr
il
Mar
ch
Febr
uary
Median price 2009Median price 2011
Median price 2010Median price 2012
Median price 2013
1,000
1,500
2,000
2,500
3,000
3,500
Janu
ary
Num
ber
of s
ales
Dec
embe
r
Nov
embe
r
Oct
ober
Sept
embe
r
Aug
ust
July
June
May
Apr
il
Mar
ch
Febr
uary
# of sales 2009# of sales 2011
# of sales 2010# of sales 2012
# of sales 2013
3,061
Source: Real Estate Institute of New Zealand
Following the trend from 2012, the median sales price recovered from the small dip in April to a new high of $565k. T he increase on the same period last year remains at 13%. T he number of sales also bounced back, from 2,805 in April to 3,061 in May, although this May bounce back was not to the same extent as the same period in 2012.
Median Auckland Prices and Sales Figures Strong
Auckland Residential Property Weekly Rentals - 2 bedrooms
$300
$310
$320
$330
$340
$350
$360
$370
$380
$390
$400 $401
Janu
ary
Ave
rage
Wee
kly
Rent
al L
evle
ls
Dec
embe
r
Nov
embe
r
Oct
ober
Sept
embe
r
Aug
ust
July
June
May
Apr
il
Mar
ch
Febr
uary
2009 20112010
2012 2013
Auckland Residential Property Weekly Rentals - 3 bedrooms
$400
$380
$420
$440
$460
$520
$500
$480
Janu
ary
Ave
rage
Wee
kly
Rent
al L
evle
ls
Dec
embe
r
Nov
embe
r
Oct
ober
Sept
embe
r
Aug
ust
July
June
May
Apr
il
Mar
ch
Febr
uary
2009 20112010
2012 2013
$521
Source: Real Estate Institute of New Zealand
Intention to Invest in Residential Property RecoversT here has been a reversal of the change seen last month, with intention to invest in non-apartment residential properties returning to around half of respondents. T he main change of note, is the intention to invest in non-CBD apartments which has increased to a 12 month high of 17%. T his may well reflect the increasing prices of Auckland real estate, making it harder for investors to pay off mortgages solely through rental income. A shift towards cheaper apartment investing would be a natural reaction to the current price rises.
Planned Rental Property Investment Locations - Next 12 Months
70%80%
60%50%40%
10%20%30%
59%
20%
14%
52%
28%
17%24%
0%May13 Jun13Jun12 Jul12 Aug12 Sept12 Oct12 Nov12 Jan13 Feb13 Mar13 Apr13
Central CBD apartment Apartment elsewhereOther residential Commercial
Excludes ‘don’t know’ and ‘does not apply’ answers
14%
Sour
ce :
CPII
Surv
ey J
une
2013