The Auckland housing market appears to be slowly easing from the top.
The Auckland market is softening and it appears to be the more expensive homes and suburbs in the upper end of the market that are leading the decline, in both price and volume.
The decline appears to have started late last year and continued into this year.
Sales figures from Auckland’s largest real estate agency Barfoot & Thompson, show that the agency sold 1631 residential properties over the three month period from December last year to February this year, down 15.6% compared to the same three month period a year earlier.
But the decline was much greater at the top end of the market, with the agency selling just 51 homes for more than $2 million from December last year to February this year, a 40.7% reduction in the number of $2 million-plus homes it sold in the same period 12 months earlier.
Over the same periods, sales over $1 million were down 23.7%, sales over $750,000 were down 15.9% and sales over $500,000 were down 12.9%.
Those figures all suggest that the decline in sales was greatest at the top end of the market.
The latest figures from Quotable Value paint a similar picture.
They show that the average value of residential properties in Auckland over the three month period to the end of February this year was $1,044,576, which was down 0.9% compared to the same three month period a year earlier.
But the decline in average values was greatest in the Gulf Islands, which is dominated by the millionaire’s playground of Waiheke, where average values were down 3.9%, and on the North Shore, where average values were down 2.0%.
And within the North Shore, the biggest decline was in the exclusive coastal suburbs where average values were down 3.1% on a year earlier, while in the more affordable Onewa district they were down just 0.5%.
Around the rest of Auckland, value falls were relatively modest, but in Franklin on the city’s southern rump, which has the lowest average property value in Auckland at $673,782, the average was unchanged from a year earlier.
Those figures also suggest property values are declining more at the top end of the market than they are at the bottom.
That trend could intensify over the next few months.
A decline in property prices and values is usually preceded by a drop in sales volumes, and because the QV figures are a lagging indicator of market activity, the decline in sales volumes suggested by the Barfoot figures are probably only just starting to show up in QV’s numbers, which could decline further over the next few months.
But why would the top end of the market be declining while the bottom end remains relatively stable?
The answer is probably due to human nature.
Many of the people buying or selling at the top of the market will be discretionary buyers/sellers.
They are more likely to already have a comfortable, if not luxurious home, but may have been planning to upgrade to the home of their dreams.
If they see uncertainty in the market, or think they won’t get as much for their existing home as they thought they would, many will just decide to put their plans on hold for a while and see what happens.
It’s a different story at the lower end of the market where first home buyers are much more active.
If they have been saving for a home for a while and find one that suits them and the bank is prepared to provide a mortgage, they are much more likely to buy it regardless of the market outlook.
The emotional pressure on them to buy is usually just too strong to resist.
This constant demand side pressure from first home buyers coupled with a significant undersupply of affordable homes in Auckland means prices for lower value homes are likely to fall more slowly than prices for homes at the top of the market.
So it could be an interesting time for the Auckland property market this autumn/winter, particularly for people thinking of buying or selling an upmarket property.