Archive | Residential

House sale statistics wander around

The nearest thing to a trend in house sales is that the under-$500,000 price bracket remains a few points below 50%, but even that’s wobbled a couple of times over the last year.

The Real Estate Institute’s statistics showed the median sale price in August up around the country compared to both August last year & July this year, but down in Auckland compared to a year ago.

Sales were down compared to a year ago but up compared to July.

The bottom price bracket used to be under $400,000 and its share of the market was declining rapidly. But the bracket marker was lifted to $500,000 early this year and, although it’s still falling, it’s in the mid-40% region.

The institute view

Real Institute chief executive Bindi Norwell said: “Banks’ lending criteria & loan:value ratios (LVRs) are still impacting first-homebuyers & investors. If you looked at the number of properties sold, without looking at the bigger picture, one might assume that the market was showing significant signs of slowing. However, as prices are holding up, and even increasing, then it suggests that people may be holding off from selling their property unless it’s absolutely necessary.”

Median house price this August compared to July 2017 & August 2016 (in brackets):
National: $530,000 ($518,000, $490,000), up 2.3% in month, 8.2% in year
National excluding Auckland: $428,000 ($417,500, $386,000), up 2.5% in month, 10.9% in year
Auckland: $840,000 ($830,000, $850,000), up 1.2% in month, down 1.2% in year

Sales by auction nationally fell 55% from a year ago to 799, representing 14% of all sales. In Auckland, auction sales fell 61% to 418, representing 23% of all sales.

Sales nationally fell from a year ago in all price brackets, but were up from July in all but the $500-750,000 bracket. The breakdown of sales in price brackets and their share of the market in August 2017 & August 2016:

$1 million-plus: 787 (964), down 18%; 13.3% (13.1%) of all sales
$750-999,999: 790 (941), down 16%; 13.4% (12.8%) of all sales
$500-749,999: 1614 (1717), down 6%; 27.4% (23.3%) of all sales
Under $500,000: 2705 (3746), down 38%; 45.9% (50.8%) of all sales
All sales: 5896 (7368), down 20%.

In last month’s item on the housing figures I managed to present you with an Auckland sales graph twice, omitting the price brackets. Here’s that breakdown of sales in price brackets and their share of the market in July 2017 & July 2016:

$1 million-plus: 708 (1002), 12.9% (13.8%)
$750,000-999,999: 674 (925), 12.3% (12.8%)
$500,000-749,999: 1478 (1741), 27.0% (24.0%)
Under $500,000: 2615 (3583), 47.8% (49.4%)
All properties sold: 5475 (7251).

The institute’s house price index, which measures the changing value of property in the market, showed a 0.5% increase nationally. Excluding Auckland, it rose 7.0%. The Auckland index fell 2.9%.

Housing stock available:
Nationally: 21,555 (21,462), down 0.4%
National excluding Auckland: 15,389 (13,825), down 10.2%
Auckland: 7731 (6073), up 27.3%

The Auckland view

On the Auckland market Ms Norwell said: “The Auckland market is stable but improving, with house prices in Auckland increasing $10,000 from July, with much of this activity being driven by school zones, age of homes & location. LVRs & the banks are still impacting the market & first-homebuyers, leading to a reduction in investors in the market. Similarly, clients are still cautious as the political parties continue to announce their policies, but post-election the market is expected to lift.

“Compared to August 2016, the median price decreased $10,000 (-1%). However, most of the territorial authorities [on the old boundaries] within the region saw increases in their median price over the same time period, with Franklin District leading the way with a 9% increase. It was Manukau City & Waitakere City only that saw decreases in their median price since August 2016, the latter most significant at -5%.

“Compared to July 2017, the overall region median increased 1%. The performance of the territorial authorities was largely positive, with only Manukau City experiencing a decrease (-3%).

“Sales volume in the Auckland region increased 7% compared to July, with large boosts in sales numbers in Manukau & Waitakere (24% & 15% respectively). Compared to August 2016, sales fell 22% with volume decreasing in all territorial authorities, most notably in Rodney (-30%), North Shore (-28%) & Auckland City (-26%).”

Attribution: Institute release.

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National says rent & homebuying subsidies are good, I say they’re pure inflation

Prime Minister & former Finance Minister Bill English said it last Monday and his party came it again yesterday: the Government is propping up the rental market and, yesterday, it would make more money available to first-homebuyers so they can pay a deposit.

The Stuff website took the first story from one side, leaving the further consequences alone.

Image above: Prime Minister Bill English during TV3’s leaders’ debate.

Subsidies flow straight through

Both policies are widely acknowledged ways of feeding landlords & home sellers – though ostensibly supporting impecunious buyers & renters. I wrote in 2009 that Australia’s Housing Industry Association criticised that country’s first-homebuyers’ grant – introduced in 2000 to overcome the impact of GST – because it reduced affordability because it flowed directly through to the property seller’s bottom line.

Mr English said in the second televised leaders’ debate on TV3 that the Government spent up to $6 million/day propping up New Zealand’s private rental market. The $2.3 billion/year in rent subsidies supported 60% of private tenants, and Mr English argued it was helping to keep many Kiwis out of poverty.

Social Housing Minister Amy Adams said the Government supported 320,000 of New Zealand’s 550,000 rental households.

Look at these subsidies another way: What would happen if they weren’t paid? Beyond the initial assumption that all those no-longer-subsidised tenants would be evicted, who would pay the rent? Their places would not be immediately filled.

The argument here is that it is not the tenant being subsidised, it’s the landlord. The consequences of ending the subsidy would, in due course, be that rents would fall so landlords could get tenants. That, in turn, would affect rental yields and, again in due course, would tell both prospective landlords & banks that the prices of houses intended for rental were too high.

All round, in due course, adjustments would be made.

Homebuyer support runs same course

Yesterday, Ms Adams and Building & Construction Minister Nick Smith (now spokespersons in the election campaign period) said National would double the financial support available to first-homebuyers when buying an existing house, and increasing it for new builds.

Ms Adams said of the measure to make it easier for first-homebuyers to get a deposit: “National believes every New Zealander should be able to buy their own house if they want to – so we are building on our existing suite of measures to support first-homebuyers.”

National would raise the Government HomeStart grant for a couple by $10,000 to $20,000 for an existing home, and to $30,000 for a new-build.

“The additional grants mean there is funding to help a further 80,000 people into their first home over the next 4 years, on top of the 31,000 people the scheme has already helped,” Ms Adams said.

Building and Construction spokesperson Dr Nick Smith says HomeStart Grants complement other Government measures to support first home buyers, including:

Welcome Home Loans allow first-homebuyers to access Government-backed mortgages with a 10% deposit, and KiwiSaver FirstHome withdrawals allow them to access all of their KiwiSaver funds to put towards a deposit.

Dr Smith added these available funds together: “Take a couple on the average wage in Auckland who have been in KiwiSaver for 5 years and are looking to buy their first home. Between the $20,000 HomeStart grant and their KiwiSaver withdrawal, they will have around $60,000 for a deposit for an existing home.

“Add in a Government-backed Welcome Home loan, which means they only need a 10% deposit, and they have enough for a house worth up to $600,000 – the Auckland HomeStart cap for existing homes – without needing other savings.

“That’s significant support for those New Zealanders, particularly given 18% of home sales in Auckland in the past year were below $600,000.

“If that couple lived in Palmerston North, they would have enough for a 20% deposit on a $300,000 house, without the need for a Welcome Home loan.”

Ms Adams said National would also simplify the process for borrowers, combining HomeStart grants & Welcome Home loans into one HomeStart product, so first-homebuyers could get all the support available to them from one place.

“We will simplify the application process for Welcome Home loans to allow accredited banks to approve these 10% deposit, Government-backed loans on the spot, rather than going through an often time-consuming process with Housing NZ,” Ms Adams said.

Dr Smith said National’s policies would help 200,000 new houses be built over the next 6 years – the equivalent of 4 extra Dunedins.

“We are increasing our support for first-homebuyers and making it easier to access, to further help young New Zealanders achieve their dream of owning their first home.”

The changes would come into force on 1 January 2018 and have been priced at $74 million/year, to be met from the 2018 Budget allowance. Costs in 2017-18 would be met from the between-budget contingency.

If – as Australia’s housebuilding organisation believes, and I understand numerous NZ Treasury recommendations have agreed (sources to come) – feeding the borrower or prospective tenant actually feeds the seller or the landlord, what is the outcome? Higher prices.

The Government has been feeding inflation via subsidies – and National intends to lift that inflationary input.

Links:
Stuff, 6 September 2017: PM Bill English says Govt spends billions propping up the private rental market

Earlier stories:
12 October 2016: First-homebuyers hit KiwiSaver for over $500 million in deposits
25 August 2014: National promises easier access to first-home money, Pavletich says it’ll fuel housing inflation
1 October 2013: Housing NZ offers first-homebuyers deal to buy empty old provincial stock
22 May 2015: Smith launches fund to build houses on Government land
27 March 2015: Parliament passes KiwiSaver HomeStart Bill
29 July 2013: Shearer says Labour will block overseas speculators; plus some extra statistics
23 October 2009: Australian incentives boost construction, hurt affordability

Attribution: Ministerial/party releases, Stuff.

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Wesley College developer selects build partners & new subdivision name

The Wesley College Trust Board & the developer of its subdivision on the college farm at Paerata, Grafton Downs Ltd, announced 12 build partners & a new name for the project last week.

300ha around the college was approved as a special housing area in 2015, with plans for up to 5000 homes in 10 stages.

Grafton Downs sales & marketing manager Shaun Millar said: “We have chosen the build partners because of the outstanding quality of their workmanship. In the interests of creating equal opportunities for builders in the community, we selected to work with large franchisee companies & small family businesses, all of whom are local.”

The build partners named last week are 4 widely known businesses – GJ Gardner, Jalcon Homes, Jennian Homes Ltd & Signature Homes Ltd – and local builders Capital Homes Ltd, DW Homes Ltd, Emandee Homes Ltd, Mark Price Builders Ltd, Navigation Homes NZ Ltd, Nick Bosanac Builders Ltd, Palladium Homes Ltd & Precision Homes NZ Ltd.

Grafton Downs executive director Chris Johnston said the development would be named Paerata Rise, after initially proposing to call it Wesley. That had upset residents of the isthmus district of Wesley in the Mt Roskill suburb, which doesn’t have a postcode but does have primary & secondary schools and a community centre bearing the Wesley name.

Grafton Downs applied to the NZ Geographic Board to disestablish use of the Wesley name in Mt Roskill so it could be used for the new town being built on the college farm, but withdrew the application in May last year.

Mr Johnston said of the new name last week: “As well as acknowledging the existing Paerata community, the name is a nod to the meaning of Paerata in te reo, that is, ‘horizon of the rata’. It was important to those involved in the development that the name was in keeping with, as well as inclusive of, the area’s heritage.”

The new development is 20km south of the Auckland cbd and 4km from Pukekohe, the main centre in Auckland’s Franklin ward. The development company is owned by the college board & 2 Methodist Church trusts, the Pact 2086 Trust and Te Taha Maori Property Trust.

Mr Johnston said: “We will be working closely with approved build partners to create, as prescribed under the Paerata Rise design guide, a new unique place to live where homestead architecture is envisaged. Homes will be carefully placed on their sites to maximise the natural landscape settings, creating comfortable living environments & quality streetscapes.”

Plans for the development site were designed by San Francisco-based Surfacedesign Inc, co-founded by Kiwi urban designer & sustainable landscape architect James Lord. The company is responsible for the abstract landscaping at Auckland Airport.

“Surfacedesign Inc are a great firm to work with. James Lord & his team grasped our vision to create a development that embraces the environment and creates a good relationship between sections, houses & green space.”

Stage 1 earthworks are complete, waste & water pipes are being laid and the onsite civil work is underway. The 12 build partners will have access to roads in mid-December and the first residents are expected to move in by mid-2018.

Earlier story:
15 July 2015: 300ha Wesley special housing area approved

Attribution: Company release.

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3 Kings quarry plan change almost in place

Fletcher Residential Ltd’s proposed private plan change for the Three Kings quarry precinct ran into a minor timing hiccup yesterday on its way to being adopted by Auckland Council as if it were a council plan change.

Council plans & places general manager John Duguid told the council’s planning committee that, because of Housing NZ’s application for court costs against the 2 local societies which had opposed the quarry subdivision, as of yesterday the council couldn’t adopt the plan change.

That position was expected to change within days after Housing NZ withdrew its costs claim. The societies withdrew their appeal against the subdivision in May and, with the costs issue out of the way, the court could finalise the hearing.

The council committee unanimously approved a course to completion of the agreed plan change process.

Puketapapa Local Board chair Harry Doig said the challenge had cost the community “something like $200,000”, but it had achieved a better outcome and the local board now supported the council taking over the plan change.

The committee chair & deputy chair have delegated authority, along with an Independent Maori Statutory Board member, to approve adoption of the plan change once the precinct provisions have been made operative.

Fletcher Residential owned 15.2ha of former quarry, and the council owned about 6ha of former quarry, some of it used as sportsfields. In a change from some of the proposed land swaps, Fletcher wants to acquire council depot land instead of the sportsfields and intends to build up to 1500 new homes, plus a whare manaaki (a community educational & cultural facility).

Much of the development will be apartments, up to 5 storeys, with a minimum average apartment size of 55m² in buildings of 20 or more units. 30 garage lofts known as “Fonzie flats” are also planned, with a minimum size of 30m².

The development will also have cascading apartments built above the quarry rock faces and cascading over them.

Link:
Agenda item:12, Auckland unitary plan (operative in part) – private plan change request by Fletcher Residential Ltd – Three Kings 

Earlier stories:
6 September 2017: Council starts public process for city centre & waterfront planning refresh, plus 3 subdivision plan changes
2 February 2016: Minister takes Fletcher side on 3 Kings, and local politicians cry foul
25 November 2015: Three Kings development protest continues
Propbd on Q Th11Jun15 – Auction result, 3 Kings land exchange, decisions on plan changes, council model for elderly housing
14 November 2014: Three Kings debate goes to & fro, council to continue negotiating just with Fletcher
22 September 2014: Fletcher adds detail to 3 Kings plan change proposals
12 September 2014: 3 Kings plan changes approved for notification
4 May 2009: Winstone applies to cleanfill 3 Kings quarry

Attribution: Council committee agenda & meeting.

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Barfoots chief says most home buyers & sellers being realistic about changed market

Barfoot & Thompson managing director Peter Thompson reckons most home buyers & sellers have been realistic over the last few months, when sales have dropped away.

He said yesterday sales by the agency were down by two-thirds compared to a year ago, but buyers & sellers who accepted that change were still doing deals.

“For the past 6 months there have been only minor variations in the pattern of lower sales numbers & prices remaining firm. Both average & median sale prices were up from July but down from the average of the previous 3 months.

“Those who are looking to get a bargain, or selling at way above market, are missing out.

“The current market is having only a modest impact on the top & lower ends of the market. In spite of claims that there are few homes for sale in Auckland at under $500,000, in August we sold 90 properties in this price category, representing 11.6% of all sales for the month. High-end properties continued to sell well with 276 sales, or 35.5% of all sales, being for in excess of $1 million.

“There was no shortage of new property reaching the market, with 1260 new listings in August. While down 15.5% on the average number for the previous 3 months, this is not unexpected one month out from a general election.

“At month end we had 3993 properties on our books, the lowest number for the past 6 months but still more than a quarter higher than at this time last year. It means we enter the general election month with the highest number of properties at the start of a September for 6 years.

“It provides a good platform for the market to operate from once the election is behind us. With a well performing economy, relatively low mortgage interest rates & strong population growth, there is every reason to anticipate over the medium term the housing market will retain people’s confidence.

Rural activity

“Prices for rural property in Warkworth & Wellsford to the north of Auckland and in Drury & Pukekohe to the south remain stable, with limited listings holding back sales numbers. The normal spring demand for rural properties is anticipated to return once the election is over. Demand remains from active, well financed investors for rural development land.”

The figures, with the percentage change to August in brackets:

Average price: August $918,926, July $908, 319 (1.2%), average over 3 months May-July $921,547 (-0.3%), August 2016 $906,560 (1.4%)
Median price: August $820,000, July $810,000 (1.2%), average over 3 months May-July $832,000 (-1.4%), August 2016 $850,000 (-3.5%)
Sales: August 777, July 747 (4%), average over 3 months May-July 829 (-6.3%), August 2016 1003 (-22.5%)
New listings: August 1260, July 1173 (7.4%), average over 3 months May-July 1492 (-15.5%), August 2016 1706 (-26.1%)
Month-end available stock: August 3993, July 4088 (-2.3%), average over 3 months May-July 4227 (-5.5%), August 2016 3151 (26.7%)

Attribution: Agency release.

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Ardern follows well researched overseas thinking on rentals, some responses over-edgy, and 5-year-old Ahuri research is helpful clarification

Jacinda Ardern in her policy broadcast yesterday.

Labour leader Jacinda Ardern announced a set of new terms for residential tenancies yesterday, and was immediately – and predictably – told this would badly affect landlords and would have the opposite effect on New Zealand’s housing crisis to that she intended.

The Labour policy is along the lines of what is the norm in Germany, where tenants enjoy long-term occupancy, and also follows the thinking of AHURI – the Australian Housing & Urban Research Institute – in a paper written 5 years ago, How can secure occupancy in rental housing be improved in Australia?

Below: First the Labour policy, then some adverse comments, followed by the AHURI view.

A quick note: I’d thought of paying more attention than I usually do to election policy announcements, then thought better of it. For starters, I have more than enough to write about already. Second, a high proportion of wishlist & splurge electioneering has been vote-buying which can mostly be dismissed – or, if it does eventuate, watched extra-critically. This one, though, is a policy which will affect a large investor sector. If it follows the AHURI line of thinking it ought to be beneficial all round.

A family constantly on the move

To deliver her policy, Ms Ardern said down with a family who’d moved 4 times in 3 years, whose children had to move schools, and whose attempts to save to buy their own home had been set back.

“About 50% of Kiwis now rent their home, but too often their living situation is precarious,” Ms Ardern said.

Her promise: “A Labour Government will strengthen renters’ rights so everyone can have more stability. Not only will Labour increase the notice period for ending a tenancy, we’ll also end letting fees, limit rent increases to one/year, make all homes warm, dry & safe to live in, and much more.

“And for landlords who need to move on tenants who are breaching their agreement, we’ll make sure the tenancy tribunal is properly resourced, and that issues like anti-social behaviour are much clearer in the law.

“It’s about making renting fairer & more stable for both tenants & landlords – and is part of our comprehensive plan to fix the housing crisis.”

Policy: Making life better for renters

“For most people, renting used to be a short stage of their life before they bought a house and started a family. Now, it is becoming the norm. 3 out of 4 people under 40 years old rent, compared to one in 2 in 1991. Among older New Zealanders, the home ownership rate has fallen from over 90% in 1991 to 75% today. All up, half of New Zealanders now live in rental properties.”

Ms Ardern said renters’ rights were still designed around the assumption renting is a short-term arrangement for people without children and that renters will move frequently, rather than set down roots in their community.

The policy:

  • Increase 42-day notice periods for landlords to 90 days to give tenants more time to find somewhere else to live
  • Abolish “no-cause” terminations of tenancies
  • Retain the ability of landlords to get rid of tenants who are in breach of the tenancy agreement with 90 days’ notice, or more quickly by order of the Tenancy Tribunal
  • Limit rent increases to once/year (the law currently limits it to once every 6 months) and require the formula for rental increases to be specified in the rental agreement
  • Give tenants & landlords the ability to agree tenants on a fixed-term lease of 12 months or more can make minor alterations, like putting up shelves, if they pay double bond and on the basis the property is returned to the state it was in at the start of the tenancy
  • Ban letting fees
  • Require all rentals to be warm, dry & healthy for families to live in by passing the Healthy Homes Bill, introduced as a members’ bill by Ms Ardern’s predecessor as Labour leader, Andrew Little, and in the committee stage when the parliamentary term ended in August, and
  • Give landlords access to grants of up to $2000 for upgrading insulation & heating.

Notice periods

Ms Ardern said notice periods would be used where a landlord required the home to live in or had sold the property, the tenant had breached the agreement such as anti-social behaviour, failure to pay rent or causing damage to the property; or the landlord didn’t want to continue a fixed-term tenancy past its expiry: “This will mean landlords are still able to give notice to evict bad tenants. Landlords will still be able to go to the Tenancy Tribunal to ask for evictions or other remedies in the event of breaches of tenancy agreements.

“Most landlords operate with integrity and seek to provide decent accommodation at a fair price. These reforms will not affect them. What they will do is stop exploitative behaviour by a minority that is blemishing the reputation of landlords as a whole.”

Property Institute: It will worsen housing crisis

Ashley Church.

Property Institute chief executive Ashley Church said: “Labour’s new housing rental policies will scare existing landlords out of the rental market and will make the current housing crisis even worse – particularly in Auckland.

“The timing of these proposals couldn’t be worse. Auckland is currently in the grip of a serious housing shortage which affects both buyers & renters – and anything which deters investors from providing housing can only succeed in compounding that problem.

“If you’re an existing landlord, the deck is already stacked against you. The market has flattened, loan:value ratio (LVR) restrictions mean your equity position is worse, and bank credit rationing means that it’s now much harder for you to borrow money to do renovations & improve your position.

“Now Labour is telling you that, if elected, they’ll take away your right to terminate a tenancy and they’ll regulate the circumstances under which you can increase rents to make them comply with some as-yet-undefined Big Brother formula.”

Mr Church said these moves would come on top of a capital gains tax, pending a report from a yet-to-be-formed tax working group: “It doesn’t take a rocket scientist to recognise that Labour are already committed to a capital gains tax and that their tax working party will be made up of others who share that worldview. So, if you’re a property investor, the very clear message is ‘We’re going to get you’.

“That might make for good politics – but it risks doing long-term damage to the property market by scaring off mum & dad investors who are currently putting a roof over people’s heads.”

Mr Church said private investment was the key to solving the housing crisis and providing incentives to get people building new homes was the way to overcome the supply issue: “But no one is going to do that if they’re worried that they’re going to be regulated & taxed to death. Existing landlords will abandon the market and people who might otherwise have invested will stay away. Which means the State – which is just you & I as taxpayers – will be left holding the bag.”

First National chief also makes lopsided call

Bob Brereton.

First National Real Estate chief executive Bob Brereton said Labour’s proposals to change tenants’ rights “will severely, and negatively, impact on a landlord’s ability to protect their investment and will result in increased rents for tenants.

“The pledge to outlaw letting fees is a good example of a poorly thought-out policy with an unintended consequence: Letting fees are charged by professional property management companies to cover the costs associated with securing the right tenant. They then act as advocates for both the landlord & tenant to ensure comfort, safety & protection of the investment. If you remove letting fees, many management companies will be forced to increase management fees to compensate. This will simply force up rents.”

He was also concerned about the proposal to remove the right to end a tenancy, with 90 days’ notice, without cause: “This is simply ludicrous. There are many reasons why landlords might want vacant possession of a property, and infringing on these is a direct challenge to private property rights.

“A similar proposal to increase the provision to end a tenancy after 42 days, in certain circumstances, to 90 days will have a significant impact on property values. The 42-day provision is used, particularly, when a landlord sells a property and the buyer requires vacant possession or where the landlord needs to move back into it urgently, so this provision could impact on a landlord’s ability to sell.”

Brereton says regulating rent rises a no-no

Mr Brereton said one of the biggest challenge of Labour’s policy was the proposal to regulate market rentals by passing legislation to cap the amount by which rent can be increased. His example:

“A landlord buys a house, putting up say $200,000 of their own cash or equity, to provide a home for someone without one. They borrow $450,000 for the purchase at 5% interest and, paying only interest, it costs them $22,500 in interest, another $2000 for rates and $1500 for insurance ($26,000/year). This means they have to rent the property for $500/week, just to cover costs. Add in a 5% return on their equity and its $692. Anything less than that and you are just providing social housing.”

Overall, he said: “This risks being ‘the straw that breaks the camel’s back’. Landlords are facing negative returns, flat prices & the threat of a capital gains tax. If interest rates go up, as predicted, it would only take a small move in a flat market to convince many landlords to get out of the market.”

Australian research indicates similar issues left to fester

AHURI – the Australian Housing & Urban Research Institute – introduced a paper published in May 2012 this way: “More Australians are renting for longer periods, yet do not enjoy the benefits of secure occupancy. Changes to improve the security of occupancy in the Australian private rental system can be informed by international experiences.”

The paper was based on research conducted by Professor Kath Hulse at the AHURI Swinburne-Monash Research Centre, and Associate Professor Vivienne Milligan & Dr Hazel Easthope at the AHURI UNSW-UWS Research Centre. They examined the provisions for secure occupancy across rental systems in Australia & other similarly developed countries, and considered the potential to adapt these provisions to Australia.

Key points:

  • Secure occupancy is important in creating a home, regardless of tenure, and is a foundation for many aspects of wellbeing
  • The Australian private rental sector is characterised by relatively insecure occupancy compared to either social rental or home ownership
  • International experience demonstrates that it is possible to have a large private rental sector with smallscale investors & higher levels of secure occupancy for tenants. Changes to the regulatory framework and policy settings are required to achieve this.

This study argued that secure occupancy is linked to whether households are able to:

  • participate effectively in rental markets
  • access & remain in adequate, affordable & appropriate housing with protection of their rights as consumers & citizens
  • receive support from governments or other social service agencies if & when necessary to obtain &/or sustain a tenancy
  • exercise a degree of control over their housing circumstances and make a home, to the extent that they wish to do so.

European examples

Provisions for secure occupancy are stronger where rental systems are large, such as in Germany, the Netherlands & Austria, where, respectively, 60%, 43% & 30% of households rent. All of these might be categorised as integrated systems, with more uniform policy & regulatory approaches to rental housing.

While the latter 2 prioritise the social rental sector, the German system relies mainly on a private rental system. In these countries, secure occupancy in rental housing has been supported by supply subsidies. By contrast, other jurisdictions (Scotland, Flanders, Ontario, New Jersey & Australia) tend to have highly differentiated systems with strong security in social housing and relatively insecure occupancy in the private rental sector.

Largescale investment & professional management

Countries with large social renting sectors (the Netherlands, Austria, Scotland & Ireland) or higher corporate/institutional investment (Austria, the Netherlands, New Jersey, Ontario & Germany) also have a stronger tradition of professionalised management than in Australia.

This enables investor risks to be pooled and decisions about occupancy for individual households to be made at arm’s-length from decisions about investment.

Germany provides an interesting example, where, although there is larger-scale investment, most landlords are smallscale but are investing for the longer term, enabling more secure occupancy for tenants.

Legal provisions for secure tenure

There is a range of lease types across the countries studied. The typical practice in Australia of offering short-term fixed leases followed by month-to-month arrangements was only found elsewhere in Scotland & Ontario. New Jersey also has month-to-month arrangements, though these renew automatically unless a notice to terminate is given by either party. Other countries have the practice of longer-term or unlimited lease terms.

Of the jurisdictions studied, only Scotland compares with Australia in terms of having short-term tenancies that can be terminated readily without grounds. Even jurisdictions like Ontario & New Jersey have specified grounds for ending a private sector tenancy.

Supporting lease terms that meet the long-term needs of householders

Some jurisdictions have also been better at assisting people to personalise their dwelling and use the property according to their wishes, and so improve their autonomy. In the German private rental market, the standard lease provides capacity to personalise or even renovate the house and facilitates access to people with disabilities. These are only found in other jurisdictions on a lease-by-lease basis.

Links: Labour policy: renters
Ahuri, 14 May 2012: How can secure occupancy in rental housing be improved in Australia?

Attribution: Labour policy & release, Property Institute & First National releases, AHURI research paper.

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Auckland housing off boil but still rising, QV national index up slightly

Quotable Value Ltd’s monthly house price index shows Auckland has come off the boil, but the national index is still rising slightly.

The Auckland index was 2.8% up in August compared to a year ago, the region’s slowest annual growth rate since October 2011, but the index slipped by 0.2% over the last 3 months.

The average Auckland value was $1,041,957 in July, 90.7% above the level when the market previously peaked 10 years ago, but up 59.1% adjusted for inflation. The rise over the last year was 1% when adjusted for inflation.

Nationally, the QV index rose 4.8% over the year, the slowest annual rise since August 2012, and 1.2% over the last 3 months. QV put the national average price at $641,648, up 54.9% on 10 years ago. Adjusted for inflation, the national one-year rise was 3%, the 10-year rise 29.3%.

QV national spokesperson Andrea Rush said today: “In Auckland new subdivisions previously popular with speculators – including those from China – have recently seen lower demand & discounted sales prices….

“It’s likely the annual spring upturn in the market may be slower to arrive, given the pending election, but with the underlying drivers of a lack of supply & high net migration particularly in Auckland still remaining, it’s possible that values may begin to rise again more steadily in the new year.”

Auckland region, $1,041,957, -0.2%, 2.8%, 90.7%
Rodney, $945,934, -1.5%, 8.8%, 61.3%
North, $962,249, -3.2%, 9.1%, 60.2%
Hibiscus Coast, $931,381, 0.1%, 8.5%, 58.6%
North Shore, $1,200,914, 0.2%, 1.5%, 86.1%
Coastal, $1,374,159, 0.3%, 2.1%, 82.4%
Onewa, $956,868, 0.3%, -0.2%, 92.9%
North Harbour, $1,179,806, -0.4%, 2.3%, 94.2%
Waitakere, $816,503, -1.1%, 1.2%, 92.6%
Auckland City, $1,232,779, 0.9%, 4.5%, 98.0%
Central, $1,084,025, 0.8%, 7.1%, 90.3%
East, $1,542,465, 1.2%, 5.2%, 93.6%
South, $1,101,122, 0.5%, 1.4%, 104.6%
Islands (low volume), $1,116,415, 3.9%, 9.3%, 74.6%
Manukau, $899,432, -0.3%, 2.0%, 96.5%
East, $1,167,107, -0.1%, 3.0%, 95.8%
Central, $682,709, -0.2%, 0.5%, 81.6%
North-west, $773,033, -0.2%, 2.0%, 109.2%
Papakura, $666,387, -2.5%, 1.3%, 85.2%
Franklin, $656,665, -2.2%, 5.7%, 66.0%

Northern border, down country & national:
Whangarei, $497,489, 3.0%, 15.7%, 25.5%
Kaipara (low volume), $513,954, -0.1%, 20.3%, 29.6%
Wellington region, $605,435, -0.4%, 12.9%, 32.9%
Christchurch, $493,069, -0.4%, 0.1%, 30.0%
Queenstown-Lakes, $1,098,037, 4.4%, 18.0%, 59.7%
Invercargill, $240,725, -1.0%, 5.3%, 9.1%
Total NZ, $641,648, 1.2%, 4.8%, 54.9%

Link:
Full QV house price index for August 2017

Attribution: Quotable Value.

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Fall in house sales prompts call to review LVR restrictions

As the number of house sales fell in Auckland by 30.6% from a year ago, and nationally by 24.5%, the Real Estate Institute called on Friday for the Reserve Bank’s loan:value ratio (LVR) restrictions to be reviewed.

Institute chief executive Bindi Norwell said: “The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake, which is why the institute is calling for LVRs to be reviewed for first-time buyers.”

However, Ms Norwell also offered a number of other reasons for the slowdown in sales: “When you throw in an election, winter, school holidays and one of the wettest Julys on record, it’s little wonder the number of properties sold last month fell so significantly.”

What the constraints haven’t done is bring about a substantial cut in price.

Ms Norwell: “While the median house price for Auckland has fallen slightly, the housing shortage coupled with the increased population growth means the City of Sails is likely to be protected from significant price decreases in the short term.”

House sales nationally were well down in July compared to July last year: “A key reason for this is that the 2 biggest hurdles to purchasing a house right now are access to finance as the banks continue to tighten their lending criteria, and LVR restrictions. This creates an intimidating barrier to entry to the real estate market, particularly for those saving for their first home. No matter where we are in the country, agents tell us that there are a good number of buyers out there, but that these 2 issues are impacting both investors & first-time buyers alike.”

The institute’s house price index rose nationally by 1.2% in July, and by 7.5% excluding Auckland. In Auckland, the index fell 2.1%.

The median price rose nationally by 3.4%, to $518,000 ($501,000 in July 2016), and by 6.1% excluding Auckland to $415,838. In Auckland, the median fell 1.2% to $830,000 ($840,000). Meanwhile, in 4 regions, the median hit new records – Northland up 23% to $455,000, Hawke’s Bay up 25.8% to $400,000, Nelson up 20.2% to $493,000 and Otago up 15.3% to $400,000.

The number of properties sold by auction continued to decline, the 767 sales nationally in July representing 14% of all sales, down from 23% a year ago.

Sales for over $1 million fell 29% from a year ago to 1002 (708 in July 2016), representing 13% of all sales last month. Sales for under $500,000 fell 27% to 3583 (2615), representing 48% of all home sales last month.

The number of properties available for sale nationally rose by 1441 (7%), and rose in Auckland by 2648 (49%). Excluding Auckland, the number of properties for sale fell by 1207 (8%).

The breakdown of sales in price brackets and their share of the market in July 2017 & July 2016:

$1 million-plus: 708 (1002), 12.9% (13.8%)
$750,000-999,999: 674 (925), 12.3% (12.8%)
$500,000-749,999: 1478 (1741), 27.0% (24.0%)
Under $500,000: 2615 (3583), 47.8% (49.4%)
All properties sold: 5475 (7251).

Attribution: Real Estate Institute release.

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Residential yield rises after 3-year decline

Auckland’s average residential rental yield has risen after a 3-year decline, real estate agency & rental manager Barfoot & Thompson said yesterday.

Average rent for the second quarter of 2017 was up by 4.9% on a year ago.

The Barfoots research showed gross rental yields for 3-bedroom homes were up in over half the city’s suburbs, to an average return of 3.04%. Director Kiri Barfoot said: “On the whole, this is good news for rental property owners. A change in direction of rental yields is exactly what you would expect to happen at some point in response to moderate, but consistent increases in rent, and slowing of house sales prices.”

Gross rental yield is typically calculated by dividing annual rent by sale price. A hypothetical home bought for $100,000 & renting for $3000/year thus has a 3% yield.

Barfoot data showed the average rent for a 3-bedroom home in Auckland was $537/week at 1 July, or $27,924/year, while the average 3-bedroom sale price was $917,415, giving a gross yield of 3.04%.

“While that’s only slightly up on 2016 for the same period, which had a gross yield of 3.00%, it does arrest the fall in yield seen since 2015, when the citywide average was 3.25%, and 2014, when it was 3.7%.

“The upward trend in rental yield was most obvious in the central suburbs – which include most of the old Auckland City suburbs west of the Southern Motorway – as well as on the North Shore.”

In the central suburbs, the average gross yield rose from 3.94% to 4.28% as yields increased from 2016 in 13 of the 19 suburbs surveyed. Top performers were Ponsonby, up from 2.27% to 3.19%; Grey Lynn, up from 2.58 to 3.05%; and Onehunga, up from 3.03% to 3.15%.

Suburbs continuing to trend downwards included Westmere, down from 2.87% to 1.80%, and Mt Eden from 2.66% to 2.22%.

On the North Shore, yields rose in 12 of the 15 suburbs surveyed. Rothesay Bay had the biggest rise, up from 2.94% to 3.79%, while Albany climbed from 3.11% to 3.38%.

Ms Barfoot said it was more of a mixed bag in Auckland’s south & west, where about half the suburbs rose, but yields for most still remained better than the citywide average.

In West Auckland, yields climbed or stayed the same in 9 of the 16 suburbs surveyed, and all but 2 were above the city average. Royal Heights was the top earner,up from 3.61% to 3.88%, while Te Atatu Peninsula had the biggest proportionate rise, from 2.78% to 3.06%. In 7 suburbs, the downward trend seen since 2014 continued. The biggest fall was in Swanson, down from 4.23% to 2.74%.

In South Auckland, yields improved in just 5 of the 14 suburbs surveyed, but were above the regional average in all but one. Yields picked up in Manurewa (from 3.84% to 4.12%) and in Mangere (from 3.23% to 3.89%). The 2 top earners were suburbs which had kept trending downwards since 2014, Otara & Clendon Park, both with 4.38% gross yields this year.

3 of the 13 eastern suburbs recorded increases in gross yield, the best being Ellerslie, which climbed from 3.03% to 3.08% and was the only one with a yield over the average.

In Rodney, the yield rose in only one of the 6 suburbs surveyed, Red Beach (from 3.32% to 3.41%).

Rents continue steady upward trend

Across Auckland, average rent increased by 4.9% in the June quarter, compared to a year earlier. Average rent across all property types & locations was $531/week, up from $506/week.

Average rent rose more than average in Rodney (6.9%), the central suburbs (6.4%), South Auckland (5.8%) & the eastern suburbs (5.6%), but less in West Auckland (2.4%), central Auckland (3.1%), Pakuranga/Howick (3.1%), North Shore (4.1%) & Franklin/rural Manukau (4.3%).

For new tenancies, average rents rose more than the total city average in just Franklin/rural Manukau (9%) & Rodney (8%). Rents for new tenancies rose 3% in South Auckland and 1% in West Auckland.

“The citywide average of 4.9% this quarter is slightly down on the 5.2% increase recorded the year before, between the same quarters in 2015 to 2016.

“Rent isn’t as closely tied to property sales prices as people might expect. It is more closely aligned to people’s income and the landlord’s overheads for the property. Rent increases remain fairly consistent at or around 5%.”

Attribution: Agency release.

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Wilshire celebrates first home completions at Richmond development

Wilshire Group Ltd celebrated completion of the first homes in its 600-700-home masterplanned Richmond subdivision this morning with a ceremony onsite at 33 Panama Rd, Mt Wellington.

Wilshire is 66% owned by Vincent Wan of Hong Kong through another local company, Vincent Group Ltd. Local directors & shareholders are Huang Sishuo & Li Quan.

Wilshire bought Springpark stages 2 & 3, on a 10.5ha former quarry site in Panama Rd, from Tony Gapes in August 2014 and the balance from the original development’s receivers in April 2016, then started afresh.

An overview of Richmond stage 1.

Isthmus Group Ltd has done the Richmond masterplan and Brewer Davidson Ltd are the architects for stage 1. The construction contractors are KN Building Ltd (Lee Keun Hong) for the 33 homes in stage 1A and Capri Construction & Residential Services Ltd (Bryan Symes) for the 66 in stage 1B. Other designers have been appointed for later stages.

Wilshire sales manager Christie Wrightson said Richmond was a contemporary terraced home subdivision which would be developed in 7 stages. It’s expected to house about 2000 residents on completion.

Prices for stage 1 started at $680,000 for a 2-bedroom home (which have since been sold), 3-bedroom homes at $770,000, and ranging up to a 5-bedroom home at $975,000. Only 5 homes will be over $1 million.

The first of the 99 terrace homes in stage 1 are complete and the rest will be finished by the end of the year.

Miss Wrightson said: “At Richmond, we’re wanting to create housing that delivers on all fronts: location, quality, community, lifestyle & design. Homes are customisable and lend themselves to modern home styling & self-expression.”

“Most importantly, though, Richmond provides a great opportunity to live in a new masterplanned community and enjoy a superb lifestyle for below the Auckland median house price and at a time when more & more people are being priced out of the central suburbs.”

Richmond is near the Sylvia Park mall, transport hubs and parks & sportsfields at Mt Richmond.

Maungakiekie-Tamaki ward councillor Denise Lee said there was a real need for more housing developments in central areas that are well connected to the rest of Auckland: “With Auckland’s congestion challenges, it’s wise we don’t just focus on the outskirts of the city to accommodate growth. Richmond is the sort of centrally located quality living option we need and, in the process, will create vitality & an important economic stimulus within the local community.”

Consent has been granted for stage 2 and designs are well underway for further stages. A showhome & display suite will open daily on site.

Link: Richmond

Earlier stories:
9 September 2016: Wilshire launches Richmond on Gapes’ Springpark site

1 July 2016: Whillans records 2 land sales in Mt Wellington & Tamaki
24 March 2016: Wilshire takes full control of Gapes’ Springpark development
27 June 2014: Gapes secures Singapore funding to regain Springpark control
23 May 2014: Springpark receivers seek new developer after settling stage 1 land purchase
18 October 2013: Redwood’s Springpark gets consent

Attribution: Company release. Images are by Brewer Davidson.

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