The median sales price of houses across Devonport is on the rise.
Over the latest 3 months the median price has risen to $1,975,000; that’s up 26% compared to this time last year. Since the start of this year sales prices have risen by $155,000.
However, we are certainly not in any kind of boom market, far from it. The fact is, median sales prices are rising, but at the same time the number of properties sold is actually falling. The current level of sales (on an annualised basis at 178) is the lowest level of sales seen in the past decade. That’s the power of economics – the balance of supply and demand are exercising significant influence that’s resulting in rising prices.
Just look at the property data in the table below. At the end of July there were just 32 houses for sale, in the past 3 months, 27 houses have been sold with just 30 new houses listed. That is the very definition of a tight market.
Certainly, the next few months will very likely see a rise in new listings as prospective sellers plan to come onto the market in Spring. However the question remains, will the scale of this new inventory satisfy the demand? I personally don’t think so. In my judgement sellers have yet to recognise this market dynamic and therefore overall remain reserved about entering the property market at this stage of the property cycle.
Why is this situation arising? Well the fact is Devonport is effectively a micro-climate when it comes to property. This current situation of rising prices at a time of low sales is simply not reflective of the market across the wider North Shore or the overall Auckland region. The economic environment we face today is such that the cost of finance is cheap and getting cheaper (sub 4% mortgage rates are available and will become more available), however for those on average salaries the banks are making it harder to borrow with ever tighter lending criteria. However, for those on higher salaries, these low mortgage rates (which they can afford to service) are definitely attracting such buyers to Devonport where the lifestyle and relative prices offer better value than other city suburbs on the other side of the bridge. It doesn’t take many such buyers to create strong demand with the resultant rising of sales price.
Whilst the specific segment of the Devonport market of family houses is showing this strengthening of prices, the other key segment, that of owner-occupied and investment units is struggling to show real signs of recovery. As has been highlighted in previous reports this segment has been in the doldrums for well over a year with lacklustre sales activity and weakening prices.
The analysis of the 3 months to June shows that sales volumes are strengthening. However the base upon which this strengthening is matched means that actual sales volumes are not really worthy of note. The figure in the chart below is a 69% increase in sales volume for the year-on-year comparison. That actually means that in the 12 months to June of this year, 27 units were sold. That is only just over 2 per month. This compares to a moving annual total of just 16 sales in July last year - barely 1.5 sales per month. Sure an increase, but not of the scale of 35 to 40 sales per year seen a year or so ago.
And when it comes to median sales price, the rise in volume sales is failing to generate any movement with the July latest 3 month movement against last year down 9% at $650,000. This is a far cry from the peak sales price of $903,000 reached at the end of 2017.