M arket Research

ISSUE 114 | July 2015
Market Research Everything Property!
New LVR Limits and Rate Increases
This month in our latest Crockers Property Investment Index (CPII) survey in association with IPSOS, we asked
investors their reaction to the recent changes announced by the Reserve Bank, where Auckland Investment
Properties will require a 30% deposit from October 2015. For the majority of investors (81%) this change does not impact on their
future investment plans, although a small number of investors did indicate that they would reduce their Auckland investments in
some way, either through fewer properties or properties of lower value. In terms of the impact on the market, half expect it to have
no impact and that current price increases will continue, and 41% thought the change would hold properties at around their current
value. Either way, very few expected this change to result in a decrease in property prices.
We also asked about how property owners plan to manage the increasing
Council rates planned for next year. The Auckland Council has announced
an average increase of 4.2%, with an additional increase of $114 for the
Interim Transport Levy. Only a quarter indicated that they would not increase
rental prices to cover this increase in rates, while the remainder would
increase prices to cover all (33%), or part of the increase (43%).
Reaction to New LVR limits on Auckland Investment
Properties
By far the majority (81%) of investors claim that this change will not change
their future investment plans, very few plan to reduce their future planned
investments.
Q: The Reserve Bank recently announced new loan-to-value ratio (LVR) limits on
Auckland Investment properties. Investment properties in the Auckland Council
area will require a 30% deposit from October this year. How does this change
your future investment intentions in the Auckland property market? Please
select one only.
This doesn’t change my
future investment plans
The Auckland council announced rates increase for next year, including an
additional levy for the Interim Transport Levy. A third of investors indicated
that they would increase rental prices to fully cover this increase in rates,
while 43% stated they would raise prices to cover just part of the increased
rates cost.
Q: The Auckland Council has announced that average residential rates will
increase by 4.2% next year, and that it will fund its Accelerated Transport
Programme via an additional Interim Transport Levy of $114, which will be added
onto the annual rates bill. How do you plan to manage these rates increases on
your rental property/ies?
I will raise rental prices to cover
part of the increased rates
43%
I will raise rental prices to fully
cover the increased rates
33%
I will not raise rental prices
to cover the increased rates
81%
I plan to invest in fewer
properties in Auckland
24%
Source: CPII June 2015
12%
3%
I plan to invest in properties
of a lower value in Auckland
I plan to increase investment levels
(number or value of properties)
2%
2%
Source: CPII June 2015
Effect of New LVR Limits on Market
Nearly half of those interviewed don’t expect this change in LVR limits to
have any impact on the market, while 41% expect it to hold prices at around
current values. Only 10% expect prices to fall as a result of the change.
Q: What effect do you expect this change to have on average property prices in
Auckland?
No impact, I expect prices
to continue to rise
48%
I expect average prices to
stay around their current value
I expect average prices
to decrease slightly
41%
10%
1%
Source: CPII June 2015
Crockers Property
Investment Index
This month the Auckland Performance Index drops significantly, with much
fewer investors expecting rental performance to improve. This is likely a
reflection of the recent changes announced around LVR limits for investment
properties and the rates increases. The Investment Index sees a slight
increase as those expecting to reduce their investment drop back to more
typical levels.
100
Index Points
I will bring forward some planned
investments to before October 2015
I expect average prices
to decrease significantly
Impact of Auckland Council Rate Increases
80
79
90
84
68
60
40 56
20
46
55
74
65
46
80
65 66
60 64
57
51 45
73 72 68
62
50
57
64
45
66
55
74
67 76
67
65
43
78
63
54
63
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 returns)
How good would $1,000 look in your bank account?
Source: CPII June 2015
Find out more at crockers.co.nz/connect
Housing Affordability
Income levels vs rental and sales prices (Auckland vs NZ)
A simple ratio of weekly rental prices to weekly household income shows how rental affordability has changed over time. The larger the number, the greater the proportion of
weekly income that is spent on rent. Similarly we can look at ratio of median sales prices to annual household income to understand the affordability of purchasing property. The
larger the number, the more unaffordable the properties are.
Across New Zealand the proportion of income spent on rent has been very stable over the last 5 years; this trend is also consistent in Auckland. In terms of affordability for
purchasing properties, we see that across New Zealand it has remained fairly stable, however in Auckland since 2012, affordability has been declining.
It is clear, when we look at how income, rental prices and sales prices have changed over time, what is driving this reduced affordability. Growth in Auckland Sales prices is far
greater than the growth in income, the rate of growth was fairly stable in 2013/14, but has spiked in 2015. Although 2015 income data is not yet available it’s unlikely that
income will see such significant increase, this will further reduce Auckland’s affordability ratio for purchasing property.
Rental Cost and Sales Price Ratios
Index of Growth in Sales, Rent and Income
Average Rental
Bed)and
to Average
Household
Income
Rental(3Cost
Sales Price
Ratios
Average
Rent (3bed)
to Average
Income
Median
Sales Price
to Average
AnnualHousehold
Household
Income
Median Sales Price, Average
Rent
(3 Bed)inand
Average
Weekly
Household Income
Index of
Growth
Sales,
Rent
and Income
Median Sales Price, Average Rent (3-bed) and Average Weekly Household Income
6.4
0.6
6.0
4.8
0.4
0.2
2009
2010
2011
2012
2013
Auckland Rental
Auckland Sales Price
4.0
0.29
0.23
2014
2.0
2015*
Index of growth since 2009
8.0
0.8
180
Ratio Sales to Income
Ratio Rent to Income
Median Sales Price to Average Annual Household Income
New Zealand Rental
New Zealand Sales Price
Based on June Quarter each year (April – June)
Source: Real Estate Institute of New Zealand – City Rental Comparisons 3 Bedroom
Statistics New Zealand - nzdotstat.stats.govt.nz – New Zealand Income Survey - Weekly Household Income by Region.
*NB Data for June 2015 quarter will be available in October 2015
160
140
120
100
2009
2010
2011
2012
Auckland Sales
New Zealand Sales
2013
Auckland Rent
New Zealand Rent
2014
2015*
Auckland Income
New Zealand Income
Based on June Quarter each year (April – June), *2015 includes April-May only
Source: Real Estate Institute of New Zealand – City Rental Comparisons 3 Bedroom
Statistics New Zealand - nzdotstat.stats.govt.nz – New Zealand Income Survey - Weekly Household Income by Region.
*NB Data for June 2015 quarter will be available in October 2015
Auckland Rental Prices
Median Auckland Prices and Sales Figures
Median sales prices continue to rise sharply, in May the median price sits 20% above the same time last year. Sales volumes still remain fairly strong, in line with 2013 levels,
and since March are sitting 20-25% above 2014 volumes. This undermines the Government’s claim that the price rises are due to a supply-demand imbalance.
Auckland Residential Property Sales Median Price
Auckland Residential Property - Sales Number
Auckland Residential Property Sales Number
4,000
Median price 2013
3,500
3,151
3,000
2,500
2,000
Median price 2015
# of sales 2013
# of sales 2014
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
1,500
Dec
Nov
Number of sales
Median price 2014
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
$749k
Feb
$760k
$720k
$680k
$640k
$600k
$560k
$520k
$480k
$440k
Jan
Median price for residential
property sold
Auckland Residential Property - Sales Median Price
# of sales 2015
Source: REINZ
Source: REINZ
Auckland Rental Prices
Auckland rents for 2-bedroom properties flatten out this month after some large increases in recent months. Rents for 3-bedroom properties in Auckland continue to increase while
prices across NZ stabilise just below the high prices seen in February/March.
Auckland
Residential
Property
- Weekly
Rentals
- 3 Bedroom
Auckland
Residential
Property
Weekly
Rentals
- 3 Bedroom
2013
2014
2015
Note: February 2015 - suburbs of Grey Lynn/ Westmere and Remuera had no bonds received for the month
Source: REINZ
$520
2013
2014
Dec
Nov
Oct
Sep
Aug
Jul
Jun
$480
May
$500
Apr
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
$380
Feb
$400
$540
Mar
$420
$571
$560
Feb
$442
$440
$580
Jan
Average weekly rental
$460
Jan
Average weekly rental
Auckland
Residential
Property
Weekly-Rentals
2 Bedroom
Auckland
Residential
Property
Weekly -Rentals
- 2 Bedroom
2015
Note: September 2013 - suburb of Devonport had no bonds received for the month
December 2013 - small numbers of higher value bonds received in City Bays and Devonport
February 2015 - suburb of Devonport had no bonds received for the month
Source: REINZ
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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 from general information only and should not be relied upon for any specific purpose.
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