It’s often been said that you can tell if a city is humming based on the number of cranes on a skyline. And I’ll tell you what, I’ve noted a fair few around here recently. So, is Wellington really humming?
Cranes, and their association with a thriving economy, are generally an indication of new commercial construction. But in Wellington’s case, the bulk of the inner-city development sits firmly in the residential space. So, what does this mean for the market? On the back of a booming property market coupled with cheaper finance, there are more property developers around than ever before. Historically developers have focused on high value locations, either in the inner city or central suburbs. But the council has a mandate to build more houses, so in our hilly city where there is little available land, suburban in-fill housing is on the rise.
Who’s buying the developments?
Most ‘sales off plans’ are to buyers that already own property and are looking to invest in a post Covid era. This has become particularly apparent after the removal of tax deductibility and the bright line extension of March 2021. Other factors include;
- The inability of cautious first home buyers to visualise the end product
- Lower deposit requirements for new builds making subsequent purchases attractive to investors who can leverage off existing equity
- Investors looking to purchase and sell pre-completion, benefitting from gains
- High development stock is often more suited to renters than long term owner-occupiers e.g. Soho development
Back in March we sold a twelve-unit development in Johnsonville out over a weekend. It was so frenzied, it didn’t even hit the market. Of those twelve purchasers, only two were owner-occupiers and both owned properties already.
New builds and rents
It’s a year since we emerged from lockdown and returned to a sense of normality. The mad rush of ex pats returning to New Zealand seems to have declined as vaccine campaigns are in full swing and restrictions have been lifted in many of the world’s largest economies. Anecdotal evidence from property managers is that there is downwards pressure on rents. But are we really surprised? With all but a few working visas on offer, migration is near zero, so the sheer numbers looking to rent in the city are no longer there. So, what impact will the rise of development stock have on rents? If for example all ten townhouses in our Johnsonville development are advertised for rent at one time (which they will be) it will be a case of supply and demand, with the most attractively priced option the winner on the day.
Beyond the city limits
In times gone by, pricing varied across the regions. From Upper Hutt to Lower Hutt, Porirua, Kapiti Coast and the Wairarapa, you could pick a market to suit your budget. These days new build pricing is similar throughout, with the major variation being the cost of the underlying land. So, why is this? Construction is a fixed cost which forms an important part of any development equation and it is a similar price across the country. This means that building a three-bedroom townhouse in Upper Hutt costs about the same as building a three-bedroom townhouse in Johnsonville. And most developers are looking to achieve the same return on investment. Just compare new build pricing between Churton Park and Aotea – Porirua’s premium development. Despite being ten km’s closer to the city, the pricing is on comparable. And to this point, buyers have begun to shop by budget, searching the region to see what their money can buy. Shiny developments look very appealing, particularly in the renders, so a buyer with a budget of $900,000 will consider what the home offers with little consideration given to location. Just last month we had a buyer looking to offer on a new build in Newlands when a new home in Aotea (Porirua) caught his attention. He is now standing proud in that as his new home.
The Wellington Market
It would appear the shine is coming off the market with enquiry levels down and numbers at open homes significantly off their peak. Houses are still transacting, but where twenty offers on every property seemed normal for a while, these days a great outcome is two or three competitive tenders. A seasonal reduction in stock levels should see the market remaining buoyant across the winter period.
Wellington Market Quick Stats:
What’s on this June in Wellington?
Get Soulful at Wellington Jazz Festival, 11th – 13th June, Various locations
Just as the nights get darker and you start to look around for cosy ways to spend a winter’s evening, Wellington Jazz Festival comes along.
Running from 9 – 13 June, the Wellington Jazz Festival is an explosion of jazz gigs across the city in venues ranging from conventional to the only-in-Wellington, including the Opera House, to St Peter’s on Willis and Rogue & Vagabond.
Celebrate Winter Solstice At Lōemis 2021 , 9th – 21st June, Various locations
Marking the shortest day of the year, the winter solstice has been celebrated across cultures since prehistoric times. Wellington’s Lōemis Festival (pronounced lew-miss) honours the occasion with a unique mix of winter harvest food events, traditional craft workshops, and a diverse programme of new theatre works inspired by the solstice.
Drax Project & Mitch James, 25th – 26th June, Shed 6, 4 Queens Wharf
With a full and entertaining night of great Kiwi music comes the new show, Drax Project and Mitch James, with special guest AACACIA.
With songs that get stuck in your head and have your feet tapping the beat, Drax Project began their musical career in 2013 as buskers, and have since become one of the biggest groups to come out of New Zealand. Their self-titled debut album, released in 2019, swept in more than 300 million streams from around the globe and 18 platinum certifications.
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always happy to help.