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It's A Shore Thing

The North Shore is many things to many people, from sandy white beaches to big shopping hubs, exclusive clifftop houses to more modest homes, as Sally Lindsay reveals.

By: Sally Lindsay

1 April 2022

Until the late 1950s when the Auckland Harbour Bridge opened, only 50,000 people lived on the North Shore. It was a favourite with day trippers who used ferries connecting Auckland.

The East Coast Bays were full of holiday baches, but most have now fallen prey to the bulldozer or been rebuilt into something completely different to accommodate the 205,000-plus people now living in an array of stylish neighbourhoods, each with its own distinct vibe, and 22,000 businesses now homed on the Shore.

The North Shore is one of the most densely populated areas in the country. Unlike many other cities, almost all of North Shore’s area is urban or suburban, with practically no rural land.

With an area of 129.81 square kilometres and a coastline of 141km, the Shore runs ahead of the pack when it comes to sandy, sunny beaches. The white sand strips at Takapuna, Milford, the East Coast Bays and Cheltenham in Devonport are just a few minutes away from most of the North Shore’s residents.

Exploring the Shore can be done by walking along its eastern margin. The Takapuna to Milford walkway traverses black lava and passes some of Auckland’s most beautiful and expensive homes.

Further north there is a shoreline between Campbells, Mairangi and Murrays bays, and up over the cliffs to Rothesay and Browns bays.

At the northern end is Long Bay, one of the first and the most popular of Auckland’s regional parks, where hiking or biking the coastal walkway up onto the cliffs rewards with spectacular views.

Spectacular views and house prices can be found along the North Shore’s bays. Data from CoreLogic shows homes in Mairangi, Castor, Browns, Rothesay bays and Torbay rose 21.7% to 25.8% over the year to February.

Houses in Mairangi Bay increased in value from $1,640,050 to $2,063,150, up 25.8%; Torbay from $1,137,300 to $1,398,000, up 22.9%; Castor Bay from $1,768,400 to $2,159,800, up 22.1%; Browns Bay from $1,172,500 to $1,428,150, up 21.8%; and Rothesay Bay from $1,520,650 to $1,850,850, up 21.7%.

Other suburbs with big increases in house prices include Schnapper Rock, up 23.2% from $1,478,300 to $1,821,300; Greenhithe up 21.9% from $1,563,200 to $1,905,900; Fairview Heights up 21.4% from $1,476,450 to $1,791,950; Northcote up 21.3% from $1,203,200 to $1,459,700; and Birkdale up 21.3% from $952,750 to $1,791,950.

Sales Fall Away

While prices are still rising, but at a much slower rate, sales have fallen away. There is less competition in the housing market as it goes through a transitional phase, says Glenn Carpenter, Ray White Carpenter Realty owner and head coach.

Investors are few and far between when bidding on existing properties. Two years ago they would compete fiercely against each other for houses in the cheaper suburbs of Birkdale, Beach Haven and Glenfield. “They are now mainly absent and there is often one investor vying for a property compared to 20 first home buyers,” says Carpenter.

The market has definitely softened but whether it will flatten or drop is anybody’s guess. “It feels like a lot of waiting and seeing going on.”

Carpenter believes once the borders open and there are predictable migration figures property prices will perk up again.

Just a year ago the market was in a frenzy with people competing on every property. Carpenter says more properties are now available, but there is a slowing in buyer enthusiasm.

“Recent lending restrictions are having a $100,000 effect on buyers. A lot of buyers have been beaten up by the new CCCFA and LVR rules and interest hikes and can’t buy what they expected to.”

Carpenter says the latest CCCFA changes announced by Commerce and Consumers Affairs Minister David Clark are a step in the right direction. “Positive messages are coming from a mortgage broker that banks seem to be getting their heads around the changes and she had a number of mortgages approved in the past few days allowing buyers back into the market.”

However, there are still buyer impediments. The new tax rules barring investors from claiming mortgage interest payments against rental income for tax purposes on existing property has meant investors drifting to new properties where they can still claim the tax and the bright-line test stays at five years.

Many new builds are priced at more than $1 million, and with mortgage interest rates an average 4.5%, Carpenter says an investor will need $900 a week rent just to cover costs. It doesn’t really stack up. “When mortgages were at 2.5% it was not out of the realms of possibility.”

Projects Stall

Much of the growth in the past two years has been investors and developers cashing in on Unitary Plan (UP) changes allowing for intensification. Many full site 900m2 properties with a single house have been snapped up for redevelopment into five townhouses. Sellers have cashed up on the huge rise in capital gains.

While it has boosted the overall housing market, the new build sector has recently stalled due to long resource consent issuance times, rising construction and material costs, and the unavailability of some essential materials. As a result, fixed priced contracts are nearly impossible to get.

“What kills developers is time,” says Carpenter. “A lot are in limbo with projects stalled and weekly price increases for materials. The UP is great in terms of freeing up land to build more homes, and then it stops. The government needs to get the Commerce Commission to hurry up its study into residential building supplies if it wants more houses built by the private sector.”

A draft report is expected in July. Despite the sector’s woes Carpenter says good properties are still being sold by good agents.

“Although there is less market energy, there are more opportunities for buyers to get a property at a decent price.

“People are now walking away from auctions feeling they have not overpaid. Before that they just had to pay the price.”

Unlike other areas around the country, the North Shore’s rental market is not in desperate straits yet, but supply is down 16% and demand is up.

‘The North Shore is a desirable place to live and the demographics mean people can afford the rents’ Deb McKinnie

Harcourt’s property management general manager, Deb McKinnie, says there is not the desperation seen in other areas by renters who have nowhere to go, but there is still a big need for more rentals across the North Shore, particularly as investors are cashing out.

She says demand is expected to increase once the country’s borders open and Kiwis previously shut out can return home.

Rent Bracket

Most demand for rentals is in the affordable $500-$600 a week bracket in the Glenfield, Beach Haven and Birkdale suburbs, where most rentals are. Rents can go as high as $1,500 in suburbs such as Milford and Takapuna and despite the “cost of living crisis” they still rent at that price to two or more families moving in together or flatmates, says McKinnie.

Private investors supply a large proportion of the North Shore’s rental stock. “As the sector is shifting from a seller’s to a buyer’s market, quite a few mum and dad investors with one or two rentals have sold up and other properties from privately held larger portfolios were cashed out while prices were high,” she says.

“Some investors have freed up capital for retirement and others have sold because of the slew of legislative changes, such as the Healthy Homes Standards, removal of tax, LVRs and the CCCFA changes making it harder to keep up with increasing costs or to borrow money to buy more properties. It is now much harder to keep investors in the market.

“They have been replaced by cashed- up investors and those able to bring in money from overseas. They don’t have to worry about lending restrictions to add to or build a portfolio of rentals.”

Many of the sold rental properties will be redeveloped for terraced housing of up to 15 units on some sites, which many developers prefer, although there are apartment blocks clustered in Albany and Takapuna. Apartments make up only 3-4% of the North Shore’s residential stock.

While North Shore rentals are expensive compared with many other areas, there is not a lot of downtime for landlords between tenancies. “The North Shore is a desirable place to live and the demographics mean people can afford the rents,” says McKinnie.

“There is competition for rentals at Albany near Massey University at the beginning of the year, but the North Shore doesn’t have the same student demand as Auckland and Wellington and most of the demand is from families who want to be close to good schools and the motorway.”

A big issue for landlords is the dropping yields for rental property. The best yields, according to McKinnie, are now on the Hibiscus Coast, Red Beach and Whangaparaoa. “Those areas, at least 20 kilometres from Takapuna, have seen an increase because tenants have been moving there aware the seven kilometre Penlink connection will be going ahead after the alliance to build the project is announced this month,” says McKinnie.

While Harcourts is still adding properties to its management portfolio, they are mainly from landlords who have been self-managing their rentals but have decided to use professional managers to make sure they are meeting compliance standards and de-risking their investment. New stock is now growing at a fast enough rate to meet demand, she says.

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