by The Landlord
Even during the Depression of the 1930s, Wellington real estate prices did not shift substantially downwards. And that was a time when the government of the day cut civil servants’ salaries.
Being the capital city, there is usually enough activity from the government sector to keep prices reasonably stable. So, with the recent downturn in the national real estate market, the Wellington region’s nudge downward has been only slight.
The most recent Real Estate Institute figures show a slight easing of prices over the month of September – down from a median of $381,050 to $380,000.
The breakdown of figures around the region was:
As in most regions, Wellington market has slowed over the winter but the slowdown has been in volume of sales primarily, rather than in price or time on the market. “We’ve had our pain,” says John Ross, of Professionals Real Estate in Hutt City. “The volume has been down 35% for the entire period last year,” he says. That’s the lowest it’s been in about 10 years.”
He does not, however, characterise this as particularly tough. “It has been a significant change but that is compared to the sort of market we’ve had over the past few years. If you want a tough market, you go back to the early 1990s. It was nothing for the houses to be on the market for six months. Some came around to their second anniversary. Over this last winter it slipped a bit from what we’ve been used to but at its worst it reached about 31 days to sell on average. Well, that’s nothing.”
There are signs of a spring thaw, however. But Ross says it is too early to be sure if there’s a trend or not … “last week we got 26 new listed properties. That’s a pick up.”
The drop in volume over winter – commented on by all those spoken to for this feature – has been attributed to a number of causes, some national and some regional.
Nationally, the fact that on most days people could pick up the newspaper and see another senior politician, bank economist or the Reserve Bank saying the property market has to slow, seems to have had an impact on people’s behaviour.
“I think what people have been reading in the media has scared some of them from the market a bit,” says Paul Coltart of First National Real Estate. “The mid-winter months are usually a bit quiet but this has been a bit more pronounced. Things do seem to be picking up again but it’s unrealistic to think prices will keep up with the growth we’ve seen over the past few years. There will be a levelling but I don’t think there will be any great drama to it.”
Other reasons suggested for the drop are the impact of the Rugby World Cup, a particularly cold early winter and a mini baby boom in Wellington since the autumn.
The anecdotal evidence of lower volumes but not a huge dip in price is borne out by the official Real Estate Institute figures. The slight drop in median price mentioned has been matched by a drop in volume: 652 sold in September compared with 935 at the same time the previous year and 764 the previous month.
Tommy Heptinstall, of Tommy’s Real Estate, is another who points to the comments from policy-makers and economists talking down the property market as a factor in the drop in volume. “I’ve seen a lot of people who have made a lot of money out of the property market over the years and they’re now very financially secure,” he says. “But for some reason we don’t seem to want a strong property market in this country. I’ve been in this industry 20 years and I just … it’s beyond my brain, this attitude. I just do not get it.”
The volume drop has not significantly affected prices. Areas of Wellington that have been popular with buyers remain so, with some new contenders joining the pack.
“Places like Mt Victoria and Kelburn remain strong – I’ve never had anyone say they would not want to live in Kelburn.”
Suburbs that have seen a surge in popularity over recent years include Ngaio and, more recently, Wilton. “I’ve always thought Wilton had a lot of potential and a lot of people seem to have discovered it now. What seems to be drawing people is fewer old, old homes, the villas and so on, but more houses build in the 60s, 70s and 80s. You’re not doing things like rewiring them, getting them re-piled, re-plumbed and so on. In those older homes you can spend a bomb on all that and it doesn't really look any different.”
But even at the top end of the market some houses are taking longer to shift, he says. The impact is less in the actual number of days than it is in the area of perception and expectations. “Things are taking a bit longer but not in a big way. You might take three months in Mt Victoria: that’s not a lot but, after what we’ve been seeing, people start to wonder what is going wrong.
“I think people have got to stop listening to their well meaning friends – the ones who say that a house down the road sold in a matter of days. The prices are holding up but the chaos in the market has gone. And we’re still getting, typically, 10, 15, sometimes 20 offers on a good property. Things are taking a bit longer to sell but some people are unrealistic about what sort of time they can reasonably expect it to take.”
Coltart says the main change in the market is buyers becoming more discriminating.
“There’s still good demand for good property but the lower quality property is much harder to shift. We operate mostly in the northern suburbs and I suppose we’re very fortunate in that – places like Churton Park have got plenty of new houses coming onto the market and even somewhere like Newlands has a broad spectrum of value coming on.”
On an annual basis, property sales, and the value of sales, in the Wellington region are holding up. The year to September saw a rise of 15.5% in the value of sales across the region. This was the second largest in the country (with Southland leading the pack).
Compared with the other main cities, Wellington has remained strong. “When the media discuss the property market they tend to think about Auckland and that’s misleading,” says Heptinstall. “When the Auckland market goes it goes through the roof like you would not believe and when it corrects it does the same. If the Auckland market stops it’s like someone turned the tap off. Wellington though is a nice steady market. I’d be running around with about 10 deals on the go in Wellington and in Auckland there would be nothing.”
“We are a bit protected in Wellington,” says Coltart. “Markets like Auckland and even Christchurch have massive highs and lows. Wellington goes through on a steady path. Even with the winter slowdown we’ve seen, we’ve got multi-offer tenders going on at the moment. That’s a pretty healthy sign. We’re just not going to see properties selling in seven days flat any more.”
On the rental market, says Ross, there has been a jump in rents. Also, for perhaps similar reasons to the slowdown in volume of new properties being sold, there have been far fewer new rental properties coming on the market. “We manage about 1200 rental properties and there is very strong demand from tenants but the lack of stock available for them to choose from has become quite pronounced over the winter.”
There has since been a spring surge, particularly common in the rental market, he says. “The increase of rents has been quite strong, ranging form $10 up to $50 or $60 a week. We don’t think that is going to continue. Rents seem to go flat for a long time and then we see a big jump before another flat period.
“We did a big push for our landlords to get them to increase rents. From February this year we did a sweep right through our portfolio and we probably ranked up about 80% of them. A lot of the landlords were quite reluctant – they felt they would lose the tenants – but that hardly happened. I would highly recommend all landlords speak to their agent about whether they are asking the right rental.”
Arrears, he says, are on the low side, despite the changes. “The arrears stats are well down on the average figure. Maybe Tenancy Services are doing a better job. That’s not to say they’re down on tenants but I think they’ve got perhaps a better knowledge of when it’s a tenant trying people on.”
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