For years, I’ve been an advocate for Auckland property investment, promoting its unitary plan opportunities, limited supply, and high demand. The city’s growth trajectory seemed almost inevitable. However, the past few years have brought about a significant shift in the market, forcing us to re-evaluate our strategies and approach to property investment.
The combination of rising interest rates, crushing inflation, and the Reserve Bank’s seemingly aggressive stance on the OCR has led to a noticeable exodus of Kiwis from Auckland. This, coupled with government initiatives to increase housing supply, has created a market where demand is waning and supply is on the rise.
While the potential for growth in Auckland’s property market remains, the dynamics have undoubtedly changed. The rapid appreciation we’ve seen in recent years is unlikely to repeat itself in the short term. As interest rates begin to ease and inflation returns to target, the market may experience a period of consolidation or even a slight downturn.
So, where does this leave us?
As an investor, I’m taking this opportunity to revisit my strategies and adapt to the evolving market conditions. While I remain optimistic about the long-term potential of Auckland property, I’m also mindful of the risks and uncertainties that currently exist. If you’re looking at purchasing, make sure to do thorough due diligence. The benefit though, is the abundance of choice means you can find a fantastic property that suits your needs and budget. With over 14,000 listings in Auckland, compared to just 6,000 in 2021, you have the luxury of taking your time and finding the perfect home or investment.
A Look at Sydney’s Market
Sydney, similar to Auckland a decade ago, is currently grappling with a housing shortage. Despite the challenges, its market dynamics offer valuable insights for Auckland investors. For example, a 550m² site in Sydney can typically only be developed into a duplex, reflecting the restrictive zoning regulations that once characterised Auckland.
The recent discussions in Sydney about higher-density zoning near metro stations echo Auckland’s Unitary Plan, highlighting the potential for similar urban planning initiatives in both cities.
The Impact of Excess Savings
Additionally, the substantial increase in term deposits over the past two years suggests that a significant amount of money is currently tied up in savings accounts. As interest rates continue to decline, savers may seek alternative investments, including property.
Given the current market conditions, now may be an opportune time for first-home buyers to enter the market. The abundance of choice and potential for negotiation, combined with the likelihood of decreasing interest rates, could make it a favourable environment for purchasing a home.
Key considerations for investors and first-home buyers:
- Buying in Low-Density Areas
Focus on properties in low-density areas, such as those zoned for single houses, heritage areas, or land with covenants restricting development to a single dwelling, even if the official zoning is mixed housing suburban, mixed housing urban, or for terraced houses and apartments. And, still seek sites with development potential, but in areas where there is a lower risk of overdevelopment. - Buying in High-Demand Areas
Target areas with consistently high demand, such as those within top school zones. Properties in these areas typically retain strong market value and provide solid long-term returns. - Scarcity of Resources
Look for properties in areas where resources are scarce, such as beaches nearby but still close to CBD. Areas that combine top school zones, low density, and unique geographical features like beaches offer long-term value due to their rarity and high demand. - Considering a Move to Australia
If you have strong capital and are thinking about moving to Australia, consider Sydney from a property investment perspective. The current market in Sydney resembles Auckland about 10 years ago, with opportunities for long-term growth. For further insights, refer to the article: Comparing Property Investment in Sydney and Auckland: A Strategic Insight.
While the Auckland property market may be experiencing a period of transition, I believe that homeownership remains a powerful tool for financial freedom. By approaching the market with a long-term perspective, maintaining a focus on adaptability, and considering the unique opportunities that this new landscape presents, we can navigate these challenges and continue to build wealth through property investment.
Remember: The journey to financial freedom is not always smooth. It requires patience, perseverance, and a willingness to adapt. Let’s embrace the changes and continue to invest in our futures.
Want to know more about the Auckland Property Market and it’s changing landscape? Book your spot at our next Auckland Property Workshop today: CLICK HERE