What's it Worth?

There are a number of ways to understand the value of your property ranging from free to a few hundred dollars. You can go it alone and compare properties with similar rating valuations and features in the area that have sold recently, you can get in touch with your local real estate agent for an appraisal, purchase an E-valuer or a Full Market Valuation or both. A combination of a few of these options can give you a good indication of what your property will likely sell for.

Any Renovations or Additions?

Two houses in the same location, of similar size and with the same reserve price, can sell for a big difference in value. It begs the question, how do you add the most value to a home, and what value do high specifications add in today’s property market?

It may be worth spending more on “high spec” features for homes at the high end of the market, but for more modest priced homes you have to be careful not to over-capitalise, or overspend on improvements that won’t increase the value of your home.

Whether or not “high specification” adds value differs between suburbs and value ranges because of the demographics of an area. Different buyers value different things.

Spending money on kitchens and bathrooms will usually add value to a home. But if you want to know whether to spend $10,000 or $30,000 on your bathroom makeover you need to consider the overall value and location of your home. On a higher priced property you are likely to add at least the value of a ‘high spec’ bathroom but at the lower end then you might be better to spend $10,000 instead. A modern kitchen that doesn’t break the bank will still add value to a home. But if you spend $40,000 on a kitchen in a modest home, you may not get the same value back.

Relaying carpet or replacing the roof won’t add value to your property, carpets are a chattel and roofs fall under repairs and maintenance. A roof is expected to be functional and do its job. You will lose money if leaks otherwise it is just a cost. You wouldn’t replace a roof unless it’s needed. As long as the roof of the dwelling is well maintained, functional and in reasonable condition the value will not be impacted by the roof.

Landscaping can add a significant amount of value a property. However it may not be a direct relationship between value spent and value added. The added value of well-presented landscaping is generally on the overall saleability of a home through increased street appeal/utility. It is a great way to get potential purchasers through your home on open homes.

In regards to how much should be spent on landscaping, again it depends on the overall value level and type of property. The market expectation of the level of landscaping in a high value suburb is significantly greater than that of a lower value suburb.

The nature of the property can also dictate the nature of the landscaping and site development utilised. For example if you own a high end character villa you ideally want to keep that timber picket fence out front rather than replace it with something more modern.

Property owners should consider the nature of their property and the wider neighbourhood before commencing any major landscaping works.

Another example of this could be replacing timber joinery in a villa/character bungalow with modern aluminium joinery as this does not enhance the character and detracts from the value.

Garaging is another element that is also very dependent on the locality of the property. In areas which have larger land sites and generally more space, a new garage may not add much in value. However, in inner city suburbs where land is at a premium and the lots are much smaller and off street parking is scarce, a garage could add a significant amount of value to your property.

If you have done significant work it might be worth investing in a Full Market Valuation to get an understanding of the worth of your property.

Valuation Options

Rating Valuation

  • only updated every three years for the purpose of your local council
  • established using a mass appraisal process
  • often used when buying and selling as an indicative price.

E-valuer

  • an instant, online estimate of the current market value for a property
  • based on recent, nearby comparable sales
  • often used for establishing the current value when making an offer or wanting to sell your property.

A Full Market Valuation is:

  • completed by a Registered Valuer
  • based upon a full inspection of your property as well as related sales in the area being analysed
  • typically used for a variety of reasons, including securing finance when buying

For more information visit Valuations and Reports

Understanding the Market

Deciding the right time to buy or sell doesn’t have to be a guessing game.  By getting to know the market as it stands, as well as the general trends that have long been established, your end goal, be it buying or selling, can hopefully be achieved within your required timeframe. 

Buyers’ vs sellers’ market

One thing to look at when you decide to enter into the property market is whether your area is currently a buyers’ market or a sellers’ market.

In simple terms a buyers’ market benefits the people looking to buy a property. Generally, there are more properties on the market than buyers. Sellers are essentially vying for their attention as sales are harder to come by in this environment. Buyers can benefit through increased negotiations over price as well having more choice and less competition regarding the properties they are looking at.

A seller’s market on the other hand is essentially the opposite. There are multiple buyers looking and fewer properties for sale. This generally forces more competition and can increase sale prices as a result.

If you are selling and buying at the same time, it can be a bit of a balancing act depending on the current market environment. For example, if house prices are generally on the rise this can be great for when you sell. But it also means you may be forced to pay extra, or over the odds, for a property when you buy. Reversely, if house prices are low you may get a good deal buying but when you come to sell you own, it may not reach your full expectations.

You can get an idea of how the market is playing out by keeping an eye on our latest monthly value statistics and market commentary. You can also register with us to receive them as part of our email newsletter.

The seasonal impact

Across the seasons, you will generally encounter different times for when it is most affective to buy and sell.

Although each year can differ depending on the economic climate, generally speaking the autumn and spring seasons are when most of the property sales occur. Even what seem like the smallest things, like extra sunlight and warmth, can affect how a house is viewed. As a result these seasons are more conducive to properties changing hands. Summer would seem like a good time also; however, a lot of people in the market can buy or sell before or after, avoiding the busy Christmas and New Year period.

Other factors to consider

There are many other factors you need to consider when you decide to buy or sell a property. Regardless of market conditions and current trends, you need to look at your personal circumstances. If you need to sell by a certain time for example, you don’t have a choice. However, perhaps trying to sell earlier and having a later settlement date, instead of starting to sell close to any deadline date would be a better option.

Some other important factors that you need to consider include:

Economic climate – is the current climate meaning people are holding onto their money?

Interest rates – are they low and making buying an easier prospect for you?

Neighbourhood developments – is a nearby eyesore going to affect whether you buy a property, or how does it impact you when selling? Or is something like a motorway extension or an airport expansion going to affect your home?

Defining features of your property – is there something that sets your property apart from ones nearby? Or, is a characteristic of your property highly sought after at the moment?


Latest News & Articles

NZ Super Invests in Christchurch

Friday, 27 September 2019

 

Christchurch's commercial property market continues to tick over. The latest research from Christchurch Cityscope indicates CBD sales over the past three months had a total value of $64.2 million  and $178 million for the previous twelve months.

Included in these latest sales is the BreakFree on Cashel in Christchurch Central, a seven-storey hotel which was converted from an office building in to a hotel in September 2007; further refurbishment work was undertaken in 2015 after sustaining damage in the February 2011 earthquake. Its facilities include a restaurant, onsite bar, cafe, gym and office and conference rooms.

Recently, NZ Super Fund has invested $300 million into a hotel investment venture which includes an investment in the Christchurch BreakFree. The super fund, partnering with Russell Group of companies and Lockwood Group, is to form a partnership to own three hotels, the others being Four Points by Sheraton and Adina Britomart, both in Auckland. The New Zealand Superannuation Fund is a sovereign wealth fund in New Zealand, created in 2001 to help prefund the future cost of the New Zealand Superannuation pension. The Russell Group is a family owned and operated group of companies originally established by the late Alf Russell back in 1965. It now employs over 900 people and focuses on construction and property ownership and management. Lockwood is also a private investment group.

Colliers International’s specialist hotel adviser, Dean Humphries, who played a key role in the negotiations said that the ‘$300m was the indicative value of the current portfolio’.

OCR on hold; mortgage lending stable too

Wednesday, 25 September 2019

Earlier today the Reserve Bank decided to keep the official cash rate unchanged at 1.0%, which in truth isn’t much of a surprise. Meanwhile, mortgage lending activity in August was pretty stable too, with owner-occupiers driving the market but investors more subdued. The LVR speed limits are seemingly having quite a strong effect on investors. However, there may be respite on the horizon, with a potential loosening of the rules in November.

CoreLogic Senior Property Economist Kelvin Davidson writes:

Official cash rate on hold at 1.0%, but watch for cut on November 13th…

The first key piece of news from the Reserve Bank (RBNZ) today was the decision to hold the official cash rate (OCR) unchanged at 1.0%, having surprised the markets by cutting it from 1.5% back on 7th August. Although you can never say never with this Governor and Committee, a cut was always unlikely today. However, with signs that general (CPI) price pressures are still pretty subdued and that the economy has perhaps lost a little momentum, there’s a decent chance that we’ll see a 0.75% OCR at the next meeting on 13th November.

Mortgage lending activity stable…

Hot on the heels of the OCR decision, the RBNZ has also just published the latest mortgage lending figures for August. The figures showed $5.4bn of lending last month, unchanged from a year earlier. That seems to have been a bit of ‘payback’ for a stronger month in July. Owner-occupiers are still driving activity, with investors more subdued (see the first chart).

Annual change in lending, $m (Source: RBNZ)

First home buyers are still recording the fastest growth in lending flows amongst owner-occupiers, but all others within that group are also just starting to show a tentative pick-up in the pace of growth (see the second chart). Generally speaking, the number of loans is still pretty flat, so the increases in the value of lending are being driven by larger average loans.

Annual change in lending, % in past 12 months compared to previous 12 months (Source: RBNZ)

In terms of the LVR speed limits, owner-occupier lending at <20% deposit is still running at 12-13% of activity, comfortably below the 20% speed limit (and even the self-imposed 15% that banks reportedly choose to adhere to). Yet with overall lending to owner-occupiers still growing, this suggests that most borrowers are able to find a sufficient deposit and the speed limit isn’t really a restraint at present. The story seems to be different for investors, however. Their overall borrowing activity is still pretty soft, and only about 1% of lending to investors is at less than a 30% deposit (see the third chart). This hints at a restraint from the speed limit, and hence could be a key group that would benefit from a potential loosening of the LVR rules in November (perhaps by raising their speed limit from 5% to 10%).

Proportion of lending at high LVRs (Source: RBNZ)

Overall, then, given that mortgage rates remain very low (and have even edged a bit lower over the past month or so), stable lending activity would be in line with expectations. Meanwhile, over the final week or two of August, the banks began to loosen their internal 7-8% serviceability tests, which will have given a little more impetus to borrowers – and there surely has to be a good chance that this will have continued in September (lending figures for this month due 24th October).

The key factor to keep in mind for 2020 is the looming, extra bank capital requirements and what that might mean for mortgage rates – potentially they may start to rise. As the fourth chart shows, the bulk of mortgages in NZ are on fixed rates, which will shelter borrowers for a period of time. But that clearly won’t be forever, and so market activity could well face some stronger headwinds later next year and into 2021.

Share of mortgages fixed and floating (Source: RBNZ)

Plenty of stats and numbers to cover this month as well as changes in bank serviceability criteria. And of course, what to make of the KiwiBuild reset.

The share of property purchases made by mortgaged investors has recently risen back to 26% nationally, the highest since just prior to the introduction of a 40% deposit for this group (LVR III in October 2016). Auckland has been a key part of the upturn from investors, even though this is where rental yields are lowest. Of course, when you consider that property values have fallen recently across Auckland (e.g. by about $36,500 from the peak in Auckland City central area), some investors are clearly sensing bargains.

CoreLogic Senior Property Economist Kelvin Davidson writes:

The key highlight from the latest CoreLogic Buyer Classification figures is the continued resurgence in market share for mortgaged multiple property owners (MPOs, or ‘investors’). Over July and August, they have accounted for 26% of residential property purchases across NZ, as shown in the first chart. This is the highest share since the third quarter of 2016 (28%), which was the zenith for investors before the Reserve Bank introduced the third round of LVRs and required a 40% deposit.

NZ % share of purchases (Source: CoreLogic)

The recent bounce-back for investors is evident around most of the main centres, including Hamilton, Tauranga, Christchurch and Dunedin (although first home buyers are still the big story in Wellington). But given that property prices are highest and gross rental yields are lowest in Auckland, the renaissance here is perhaps of most interest. As the second chart shows, mortgaged MPOs have increased their market share from 25% in the first six months of the year up to 28% now – and have again overtaken first home buyers (26%). It’s also still the MPO 2’s that are driving the upturn in Auckland, commonly known as ‘mum and dad’ investors (note that the third chart does not break down the data by mortgaged or cash).

Auckland % share of purchases (Source: CoreLogic)

 

Auckland % of purchases by multiple property owners by number of properties owned (Source: CoreLogic)

In addition, most parts of Auckland have contributed, including Manukau and Papakura (although Waitakere for example is still currently a pretty hot market for first home buyers). However, the biggest influence has come from the large Auckland City market, where the share for mortgaged investors has actually been rising since early last year (see the fourth chart), and has now hit 30%.

Auckland City (old territorial authority) % share of purchases (Source: CoreLogic)

At first glance, the rise in investor activity in Auckland may look surprising, given that gross rental yields across the super-city as a whole are pretty low (2.7% versus 3.3% nationally), and even lower in the Auckland City central area (2.2%). However, as we noted last month*, investor activity everywhere across the country will have received a boost from the scrapping of the capital gains tax proposals, and the low returns on offer from other assets (e.g. term deposits) may also be seeing some money re-diverted back towards property.

And then on top of that, an additional factor in Auckland specifically is that falling property values will also of course have grabbed the attention of some investors, looking to bag a potential bargain in a buyer’s market. In the Auckland City area, for example, average property values have dropped by 2.9% from their peak in June last year, equating to about $36,500. That’s likely to have been enough of a fall in price to make the economics stack up for some investors. Certainly, as we highlighted in our latest ‘Pain & Gain’ report**, apartments owned for less than three years in Auckland have recently been struggling when it comes to achieving resale profits, so this segment could be where some investors buying into the market in recent months have been sensing opportunities.

Bottom line, first home buyers have generally been the key group of interest for the past year or two. But this now seems to be changing slightly, and investors may well be the hot topic for 2020.

https://www.corelogic.co.nz/news/are-investors-starting-reassert-themselves-property-market
** https://www.corelogic.co.nz/news/pain-creeping-aucklands-property-resale-market

Although property sales volumes across Auckland as a whole have been low in recent years, some suburbs have been faster moving – these are mostly development areas (e.g. Hobsonville, Silverdale), and while the extra supply is raising turnover rates, it’s also dampening prices. Other parts of Auckland (e.g. Parnell, Orakei) have been much quieter, or in other words slow-movers. Generally, slow-moving areas have subdued price growth, but outside Auckland, Ngongotaha (Rotorua) and Wairoa break that rule of thumb. 


CoreLogic Senior Property Economist Kelvin Davidson writes:

An article that featured as part of last week’s Property Week on Oneroof covered the latest CoreLogic data on fast- and slow-moving suburbs across the country, highlighting areas that have had very short (and long) median selling periods over the past year: https://www.oneroof.co.nz/news/revealed-the-suburbs-where-homes-are-selling-the-fastest-36671

An additional measure that we regularly look at to judge the strength or weakness of a particular area is the turnover rate – i.e. total sales over the past year as a % of the total number of houses. So what’s this measure currently showing us*? Focusing in on the top 20 suburbs for turnover rate – i.e. the fast movers – four of the top five are in Auckland (see the first chart), with the other one being Pokeno (Waikato District). This is no surprise – given that these areas are seeing a lot of new development, you’d expect strong turnover rates as the new-builds are sold off.

Top 20 suburbs for turnover rate – sales past year as % of dwelling stock (Source: CoreLogic)

Similarly, there aren’t any real surprises amongst the rest of the top 20 either. For example, suburbs in Taupo, Tararua, Dunedin, and Invercargill all feature, and these are parts of the country that have been more buoyant in terms of demand and market activity lately, and especially for prices. Indeed, Pahiatua (Tararua), Strathern (Invercargill), South Dunedin, Mangakino (Taupo), and Georgetown (Inver.) have all seen double-digit growth in property values over the past year – see the second chart.

Annual % change in median value for top 20 fast-moving suburbs (Source: CoreLogic)

The second chart also highlights how a fast moving suburb doesn’t always have strong price growth. True, that does tend to be the rule of thumb. But in development areas in Kumeu, Hobsonville, Pokeno, Whenuapai, and Silverdale, the extra supply (which is boosting turnover rates) is actually weighing on property values.

Turning to the other end of the spectrum, Auckland features again, but this time for slow-moving suburbs. Sixteen of the 20 slowest moving suburbs over the past year are in Auckland, and include some of the pricier areas of the city, such as Parnell and Orakei (see the third chart). Given plenty of listings and choice for buyers, as well as affordability problems across many parts of Auckland, it stands to reason that sales activity and turnover rates have generally been low. Elsewhere, a couple of Rotorua suburbs have also been quiet, alongside Bromley (Christchurch) and Wairoa.

Bottom 20 suburbs for turnover rate – sales past year as % of dwelling stock (Source: CoreLogic)

However, just as a high turnover rate doesn’t necessarily mean strong price rises (e.g. Hobsonville, Silverdale), a low turnover rate is not always consistent with weak price growth. As the fourth chart shows, Ngongotaha (Rotorua) and Wairoa have had relatively low sales activity over the past year, but solid gains in median property values, especially in Wairoa (17.8%). In these cases, the lack of sales is reflecting restricted listings volumes and limited choice for buyers – in that environment, it’s not surprising that values are growing strongly.

Annual % change in median value for bottom 20 slow-moving suburbs (Source: CoreLogic)

* All suburbs shown here have at least 500 properties and at least 20 sales over the past year.