Crockers Market Research Issue 92 • July 2013

Crockers Property PO Box 74054, Greenlane, Auckland 1546525 Manukau Road, Epsom, Auckland 1023 T 09 630 8890Crockers Property Management Ltd and Crockers Realty Ltd, Licensed (REAA 2008)

© Copyright Crockers Property 2013

Topics this month • Renting vs Owning - Interest Rates and Return on Investment • CPII Survey Results – Investors Views on Mortgages and Interest Rates • Suburb Review: South Auckland • Auckland Rental and Sales Review

Respondents to the recent Crockers Property Investment Index (CPII) Survey in partnership with Ipsos were asked about their refinancing of mortgages in the past three months. 60% indicated that the question was not applicable to them, with the majority of the remainder indicating that they have stayed on a variable rate.

Your Views – Mortgages & Interest RatesFew refinancing as variable rates remain steady

Outlook for residential property market positive

Recent refinancing of variable mortgages

Source: CPII Survey June 2013

No, I have kept my variable mortgage(s) on a variable rate

Yes, I have moved some of at least one mortgage onto a fixed rate

Yes, I have moved at least one entire mortgage onto a fixed rate

Not applicable

When will interest rates rise?

Source: CPII Survey June 2013

continued over >

Divided opinions over banks’ attitudes to lendingDespite bank lending practices recently receiving attention from the Government in the recent Budget with indications that lending will be harder to secure, there is currently an even split between those feeling that banks are being more generous and those that feel that there has been no change in requirements for lending (26% each). Fewer (17%) feel that banks are making it harder to secure finance.

Interest rate rises expected to be 6 -17 months awayAround a third of respondents (32%) feel interest rates will begin rising in 12 – 17 months as indicated by the Reserve Bank. With 29% believing it will be around 6 months earlier, a total of around 6 in 10 are betting on sometime during 2014. 2 in 10 believe that they will rise sooner.

Bank’s attitudes to lending

Crockers Property Investment Index

T here has been a decrease in pessimism around expectations from the Auckland residential property market for the next 12 months, as tracked by the Crockers Property Investment Performance Index. Performance expectations rose again from May to June; 81 index points to 84 index points.T he Crockers Property Investment Index, which tracks whether people are planning to increase or decrease their Auckland residential portfolios, also shows positive movement, with fewer people planning to reduce the size of their Auckland property investment.

Sour

ce :

CPII

Surv

ey J

une

2013

100%

60%

Ind

ex P

oin

ts

80%

40%

20%

67

44

6165

58

48

56 5667

60

8387

8185

91 88

74

8781 81 84

68

77

0%

May 13 Jun 13Jun 12 Jul 12 Aug 12 Sept 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13

Investment Index: Auckland Rental Property Investment Changes - next 12 months (increase/decrease residential portfolio)

Performance Index: Auckland Rental Property Performance - next 12 months (better/worse)

Planned Rental Property Investment Changes – Next 12 Months T he reduction in expectation of worsening performance is reflected in a reduction of those planning to decrease the size of their Auckland rental property portfolio, down to 6% a twelve month low. One in five investors are expecting to grow the size of their investment portfolios.

Comparing return on investment, interest rates and sales volume

Var

iab

le in

tere

st r

ates

an

d R

OI

Nu

mb

er o

f re

sid

enti

al p

rop

erty

sal

es in

Au

ckla

nd

0

1000

2000

3000

4000

5000

0.00%

2.00%

4.00%

6.00%

8.00%

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep-

11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

Mar

-12

Apr

-12

May

-12

Jan-

13

Feb-

13

Mar

-13

Apr

-13

May

-13

Jun-

12

Jul-1

2

Aug

-12

Sep-

12

Oct

-12

Nov

-12

Dec

-12

Average variableinterest rate

Average rental returnon median sales price

Number of salesin Auckland

Interest rates and Return on investmentAverage rental return on median sales price in Auckland was relatively steady throughout 2011, decreasing slowly during 2012 before a small jump at the beginning of January 2013 that has since trended downwards. Over the past twelve months, our estimated average return for Auckland properties has been 4.38%, down from 4.70% in May 2012. Variable interest rates for first home buyers have held steady since decreasing early in 2011 which coincided with the beginning of on-going increasing activity in the Auckland residential property market. T he Reserve Bank has recently announced that the official cash rate will remain at 2.5%, which is in part due to the high NZ dollar. Increasing the exchange rate can cause the dollar to soar further, hurting exporters and the wider economy. No alteration has been made to the previous indications that rates will begin to rise in the September quarter of 2014. We look at your expectations of variable mortgage rate rises in our recent CPII survey.

23%

8%

9%60%

Within 6 mths

18%

29%33%

5%15%

6-11 mths 12-17 mths 18-23 mths 24 mths or more

They are being moregenerous & easier

to deal with

No change inrequirement

They are makingit harder to

secure finance

Don’t know

26% 26% 31%17%

Source: CPII Survey June 2013

Estimated return on investment based on 52 x average of 2 and 3 bedroom rentals / median sales priceSource: Real Estate Institute of New Zealand (rental and sales figures)Source: Reserve Bank of New Zealand (interest rates)

Crockers Property Group uses market data from a variety of sources which we believe to be accurate and reliable. This enables Crockers to provide analysis and interpretation on the property market. Opinions, statements and analysis are for general information only and should not be relied upon for any specific purpose. Crockers takes no responsibility for decisions you make based on data provided through Crockers Market Research.

© Copyright Crockers Property 2013

Suburb Review: SouthRentals Average rents across South Auckland remain well below the average for the greater Auckland region (Pukekohe to Rodney). Over the past 12 months, South Auckland 3-bedroom rentals had an average rental price of $403 per week, 20% lower than the greater Auckland 3-bedroom average rental price of $503 per week. 2-bedroom rentals in South Auckland were 15% lower with an average rental price of $331 per week, compared to $387 per week for greater Auckland.Looking at the individual suburbs, rental prices for both 2-bedroom and 3-bedroom properties have seen similar growth of around 5% give or take a little, with Papakura and Mangere 2-bedroom properties seeing the strongest growth of 7%.

Pukekohe Papakura Howick Pakuranga Mangere Papatoetoe ManukauAv. 3-bed rent $355 $362 $497 $449 $381 $401 $377

% changeMay12 to May 13 +6% +4% +4% +5% +3% +4% +4%

Av. 2-bed rent $279 $310 $394 $366 $314 $333 $320% change

May12 to May 13 +6% +7% +3% +6% +7% +5% +3%

Sales Both Eastern Beaches and Papatoetoe saw an increase in sales prices of 11% compared to 2012. Eastern Beaches sit well above the other suburbs in South Auckland in terms of both sales price and sales numbers; the average sales price here being $642k compared to the second highest, Papatoetoe at $401k.Sales volumes have risen strongly, between 21% and 46% across the lower priced suburbs with Eastern Beaches seeing a rise of 7%. However, volumes have not returned to the highs seen between 2004 and 2007 (which would have partially reflected a spike in greenfields developments over this period).

Figures shown are 12 month rolling averages Source:REINZ

Residential Property Weekly Rentals - South vs. Auckland12-month rolling average

Sour

ce :

Real

Est

ate

Inst

itute

of N

ew Z

eala

ndFigures shown are 12 month rolling averages

Ave

rage

Wee

kly

Rent

al L

evel

s

$300

$350

$400

$450

$500

$550

$403

$503

$331

$387

$250Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17

2-Bed: South3-Bed: South

2-Bed: Auckland Average3-Bed: Auckland Average

Residential Property Weekly Rentals by Suburb for South

Sour

ce :

Real

Est

ate

Inst

itute

of N

ew Z

eala

nd

Figures shown are 12 month rolling averages

Med

ian

Sal

es P

rice

s ($

1000

s)

$280

$380

$480

$580

$680$642k

$401k$383k$369k$350k

$180May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13

Eastern Beaches Papatoetoe Manurewa Papakura Franklin

Average Number of Sales - South12-month rolling average

Median Sales Price - South12-month rolling average

Sour

ce :

Real

Est

ate

Inst

itute

of N

ew Z

eala

nd

Figures shown are 12 month rolling averages

Num

ber o

f Sal

es

100

150

200

250

300

350

50

0

83

10986

154

197

Eastern Beaches Papatoetoe Manurewa Papakura Franklin

May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13

W hilst three-bedroom rental prices have increased in Auckland to $521per week, they have continued to hold at $380 per week nationally, resulting in the premium for Auckland to rise to 37%. Two-bedroom rental prices have also increased in Auckland to $401per week , but have held steady nationally at $330 per week, thus increasing the premium paid in Auckland to 22%.

Auckland Sales & Rental Update

Nationally Steady, Auckland Increases

Auckland residential property sales median prices

Auckland residential property sales numbers

$400K

$420K

$440K

$480K

$500K

$520K

$460K

$540K

$560K

$580K

$565K

Janu

ary

Med

ian

pric

e fo

r re

side

ntia

l pro

pert

y so

ld

Dec

embe

r

Nov

embe

r

Oct

ober

Sept

embe

r

Aug

ust

July

June

May

Apr

il

Mar

ch

Febr

uary

Median price 2009Median price 2011

Median price 2010Median price 2012

Median price 2013

1,000

1,500

2,000

2,500

3,000

3,500

Janu

ary

Num

ber

of s

ales

Dec

embe

r

Nov

embe

r

Oct

ober

Sept

embe

r

Aug

ust

July

June

May

Apr

il

Mar

ch

Febr

uary

# of sales 2009# of sales 2011

# of sales 2010# of sales 2012

# of sales 2013

3,061

Source: Real Estate Institute of New Zealand

Following the trend from 2012, the median sales price recovered from the small dip in April to a new high of $565k. T he increase on the same period last year remains at 13%. T he number of sales also bounced back, from 2,805 in April to 3,061 in May, although this May bounce back was not to the same extent as the same period in 2012.

Median Auckland Prices and Sales Figures Strong

Auckland Residential Property Weekly Rentals - 2 bedrooms

$300

$310

$320

$330

$340

$350

$360

$370

$380

$390

$400 $401

Janu

ary

Ave

rage

Wee

kly

Rent

al L

evle

ls

Dec

embe

r

Nov

embe

r

Oct

ober

Sept

embe

r

Aug

ust

July

June

May

Apr

il

Mar

ch

Febr

uary

2009 20112010

2012 2013

Auckland Residential Property Weekly Rentals - 3 bedrooms

$400

$380

$420

$440

$460

$520

$500

$480

Janu

ary

Ave

rage

Wee

kly

Rent

al L

evle

ls

Dec

embe

r

Nov

embe

r

Oct

ober

Sept

embe

r

Aug

ust

July

June

May

Apr

il

Mar

ch

Febr

uary

2009 20112010

2012 2013

$521

Source: Real Estate Institute of New Zealand

Intention to Invest in Residential Property RecoversT here has been a reversal of the change seen last month, with intention to invest in non-apartment residential properties returning to around half of respondents. T he main change of note, is the intention to invest in non-CBD apartments which has increased to a 12 month high of 17%. T his may well reflect the increasing prices of Auckland real estate, making it harder for investors to pay off mortgages solely through rental income. A shift towards cheaper apartment investing would be a natural reaction to the current price rises.

Planned Rental Property Investment Locations - Next 12 Months

70%80%

60%50%40%

10%20%30%

59%

20%

14%

52%

28%

17%24%

0%May13 Jun13Jun12 Jul12 Aug12 Sept12 Oct12 Nov12 Jan13 Feb13 Mar13 Apr13

Central CBD apartment Apartment elsewhereOther residential Commercial

Excludes ‘don’t know’ and ‘does not apply’ answers

14%

Sour

ce :

CPII

Surv

ey J

une

2013