Astonishing Sale: Auckland Boat House Sets New Record at €1.1m amidst Uncertainty in New Zealand Pro

Knight Frank's latest index of luxury homes for the first quarter of 2023 reveals that prime property prices in Wellington have fallen by more than 27 percent in the past year, followed by Auckland (-17 percent) and Christchurch (-15.3 percent).

The New Zealand property market has experienced a turbulent 18 months, with prices on a downward trajectory since November 2021. Despite a drop of almost 20 percent, this doesn't necessarily indicate the absence of "irrational exuberance" or newfound affordability. In fact, property prices in the antipodean country have plunged over 17 percent since the winter of 2021, causing a staggering NZ$6 billion (€3.4 billion) decrease in household wealth, according to Statistics New Zealand.

Notably, New Zealand is currently situated at the bottom of most global house price indices. Knight Frank's latest index of luxury homes for the first quarter of 2023 reveals that prime property prices in Wellington have fallen by more than 27 percent in the past year, followed by Auckland (-17 percent) and Christchurch (-15.3 percent). With the economy sliding into recession, economic forecaster Oxford Economics predicts that rising interest rates will continue to burden housing prices in the coming months. It further anticipates a further decline before reaching a trough in the third quarter of 2023, resulting in an overall decline of about 21 percent.

Astonishing Sale: Auckland Boat House Sets New Record at €1.1m amidst Uncertainty in New Zealand Property Market!

Reflections of Exuberant Growth

The market was experiencing a strong upward trajectory just a short while ago, fueled by years of double-digit growth. In the summer of 2021, Auckland boasted a median price of NZ$1.15 million (€680,963), as reported by the Real Estate Institute of New Zealand (Reinz), with a national median price of NZ$820,000 (€485,556). Comparatively, the median price for Dublin was €392,500 and €265,000 for the entirety of Ireland.

To quell the rapid price growth, the government implemented measures such as tightening mortgage lending rules. Additionally, the Central Bank was given a specific mandate to consider the potential impact on house price growth when adjusting interest rates. However, it seems that the surge in interest rates has delivered a severe blow to the market. In May of this year, interest rates reached 5.5 percent, the highest rate since December 2008. Consequently, new homebuyers faced decreased affordability, while existing homeowners saw a considerable jump in their monthly mortgage repayments.

Greater Pressure on Households

This increase in interest rates has undeniably placed more financial strain on households throughout the country. According to Oxford Economics, the average mortgage holder now spends more than double the share of their disposable income on interest payments compared to 2021, amounting to 22 percent. Despite the decline in house prices, homeownership has not suddenly become affordable. The national median price has fallen to NZ$780,000; however, this still amounts to approximately €440,000. In Auckland, the median price remains at NZ$995,000 (€560,000) as of the latest May figures.

While the general trend suggests a decline, there are still instances of extravagant pricing. Sissons recently sold a boatshed in Auckland at a record price of over NZ$2 million at an auction, despite it lacking both a bathroom and a bedroom. The previous sale of a similar unit occurred back in August 2022 at NZ$1.35 million. This particular unit was marketed as a "once-in-a-lifetime opportunity" to acquire a serene retreat for painting, writing, relaxation, dream parties, and entertainment—which evidently appealed to buyers at a premium.

The New Zealand property market's downturn continues to be a topic of concern, with prices showing no signs of stabilizing just yet. While interest rates have played a significant role in dampening the market's exuberance, affordability remains a pressing issue for prospective buyers. Though there are occasional outliers that command astonishing prices, the overall landscape indicates a decline in prices that shows no immediate signs of reversing.

Nonetheless, it's important to acknowledge that property market dynamics are complex, influenced by numerous factors that extend beyond the scope of this article.