Auckland Equity Analysis

Brought to you by Senior Research Analyst Wayne Shum

Executive summary

The New Zealand housing market has enjoyed substantial growth since 2016, the growth accelerated after the first COVID-19 Lockdown in April 2020. As a result, many homeowners have enjoyed equity gain, which some have “unlocked” to purchase additional properties and other consumer spending.

As the property market may be beginning to encounter some headwinds, Valocity analysed how much equity purchasers had built up over the past five years to try and determine what areas may be more capable of withstanding any softening of property values.

Key research findings

• As could be predicted. those who purchased their properties early have built up the most equity to withstand any potential price shock
• Buyers on Waiheke Island have built up the most equity as measured by today’s value
• Older suburbs performed better than newer suburbs; many of these homes have larger sections, increasing demand among a range of buyer types such as developers, further accelerating value growth
• CBD and CBD fringe suburbs performed poorly; these suburbs are dominated by apartments and townhouses where capital growth was the lowest over the past five years

How much equity have Aucklanders built up?

Across Auckland, homeowners who purchased in 2016 have accumulated nearly half of their current value as equity, gained from the rapidly rising property market over the past five years. Those who bought in 2021 have also achieved 16% in equity due to the continued buoyant market in the first half of 2021. The average gain for purchasers who bought since 2016 was 38%, with the final amount depending on the purchase date, property type, and location.

The below graph highlights the average equity gain for homeowners who purchased in each year since 2016.

Which suburbs outperformed the market?

The best performing suburbs can be categorised into two groups; outlying suburbs and gentrifying suburbs.

Homeowners in outlying suburbs such as Waiheke Island, Leigh, and Waiatarua built up the most equity since 2016. Many of these suburbs were coming off a relatively affordable ‘base’ – which may also be a contributing factor in their equity growth.

The gentrifying suburbs of Point England and Henderson Valley have also shown significant equity growth. These suburbs are located close to public transport hubs, and they also have larger section sizes suitable for redevelopment.

Table 1: Top performing suburbs – Equity gained since 2016

Which suburbs underperformed the market?

Some of the poorest performing suburbs were Auckland Central and CBD fringe suburbs. Apartments and terraced houses dominate these suburbs. Since 2016, the key driver to Auckland value increase was section size and development potential. These homes with little or no exclusive land area did not enjoy the same level of equity gain as the rest of Auckland. There have also been other drivers which have had negative impacts on demand within some of these submarkets, such as the impact of a devasted international student market on demand for inner CBD apartment stock.

Suburbs such as Coatesville, South Head, and Waitoki are rural settlements, and whilst these properties tended to have large landholdings, there is no development potential in these areas. Therefore, they did not enjoy the same equity gains achieved across the rest of Auckland.

Table 2: Top performing suburbs – Equity gained since 2016

Which suburbs are most vulnerable to a price shock?

Equity growth alone does not always paint the full picture, it is important to understand when buyers have entered a market and what the movement has been since then to begin to consider how ‘exposed’ an area may be to a market softening.

To measure which suburbs would be the most vulnerable to a price shock, we have investigated the amount of gain and when these properties were purchased. As the market has risen since 2016, as already identified above, those who bought earlier had more equity to withstand a shock.

We have created an “At-Risk Index” to determine which suburbs are the most vulnerable. The two major factors affecting the ability to withstand a price shock are the proportion of the suburb purchased recently, therefore lacking the time required to build up substantial equity. The other factor is the price growth during the same period; the greater the price growth, the better the homeowners in the suburb can withstand a price shock. The suburbs deemed the highest risk are those where the highest proportion of the market purchased recently, with low value growth since this time.

Table 3: Suburbs most at risk

Analysing the above results, we see that the suburbs least prepared to withstand a price shock are those with recent large-scale developments. These all had a high proportion of sales and relatively low equity gains made in 2021. These suburbs also have many new developments proposed or underway, so oversupply will further dampen any future price growth.

Table 4: Suburbs least at risk

Realised gains

As a result of the significant value growth since 2016, some homeowners have realised the gain in equity and sold their property in these locations. This is particularly evident in some suburbs where they had experienced strong gains, and “flipping” activities are more evident.

Table 5: Suburbs with highest realised gains

Appendix