Auckland Housing Market Faces Slump Amidst Oversupply of Townhouses and Low Buyer Demand

Date Published: 6 June 2024

Key Facts

• A significant number of new townhouses listed on the market in Auckland are contributing to a slump in sales prices.
• At its peak, Auckland’s annual home consents reached 21,985 in September 2022, with 60% of those being townhouses.
• The number of two-bedroom townhouse listings in South Auckland increased by 23% year-on-year in May.
• CoreLogic’s data shows Auckland’s property values fell by 0.8% over a month, 1% over a quarter, and 1.9% over the year.
• Auckland house prices are 15.8% below their peak compared to a 10.7% decline nationwide.
• Economist Kelvin Davidson mentions that new builds might be heavily discounted similar to post-GFC trends.
• Affordability remains a pressing issue in Auckland, impacting housing market performance.

Article Summary

The housing market in Auckland is experiencing significant challenges, largely driven by an oversupply of new townhouses. In September 2022, the annual rate of home consents peaked at 21,985, with nearly 60% being allocated to townhouses. However, this construction boom has now clashed with diminished buyer demand, particularly in more remote parts of Auckland. Listings on TradeMe show a 23% increase in two-bedroom townhouse availability in South Auckland over the past year.

According to CoreLogic’s latest House Price Index, Auckland has seen a notable decline in property values compared to other regions. While property values increased slightly on a national scale, Auckland’s prices fell by 0.8% over the past month, 1% over the quarter, and 1.9% over the year. Particularly noticeable are the price reductions in suburbs like Manukau and Papakura. Affordability and high mortgage rates continue to stretch the financial limits of potential buyers in the city.

Property economist Kelvin Davidson suggests that current market conditions might lead to new builds being discounted heavily, reminiscent of trends during the global financial crisis. The presence of a steady flow of new listings combined with relatively low sales volumes has resulted in buyers having more leverage. This is echoed by real estate insights which indicate that sellers who adapt to market conditions can still achieve reasonable prices, though this might not always cover build costs.

Going forward, Davidson predicts 2024 will remain subdued in terms of sales volumes and property values. Affordability issues, mortgage rates, and future tax cuts will play crucial roles in shaping the market. Although townhouses continue to account for a large portion of consents due to planning rules favoring densification, the overall number of consents and market activity are expected to remain variable.

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