In the wealthiest cities and luxury markets around the world, the pandemic has been a catalyst for a reorganisation of buyer priorities. The result has been consistent growth in prices of beautiful homes and apartments. We are seeing it here in the lower north shore.
Buyers have reprioritised their property assets. It seems that the notion of home has newfound prominence as a result of COVID; partly because jet-setting is in jeopardy, and partly through the revelation that a centralised office isn’t central to business success. Homeowners are upsizing, investing in the place they spend the greatest amount of time.
Despite market obstructions, such as lockdowns in which agents couldn’t show properties and border closures where international buyers couldn’t inspect prospective new homes, there has been unmistakable growth in the number of sales and prices of prestige properties in economic hubs worldwide.
We’re seeing two distinct buyer groups: Locals in desirable markets like ours are investing in bigger properties while homesick expats are boomeranging back to their cities of origin.
Here in the lower north shore, locals make up about 70-80 per cent of luxury purchases and have been making their offers quickly, conscious that prices will only continue to rise as the borders reopen. Days on market (the time between starting a campaign and the sale) are far shorter than last year.
A standard auction campaign is four weeks, but we are continually being forced to shorten campaign days because buyers are eager and tired of waiting four weeks to find out they’ve been outbid, again. This urgency is making a mockery of some price guides. A recent auction which had offers at $8.2m sold for $9.7m within a week, and it’s not a solo occurrence. It can be a frustrating time to be a buyer.
Expats from London and Singapore are particularly active in this market, relying on inspections by friends and family before buying their next home sight unseen. They comment that they want to get into the market now because they believe it will continue to rise, and they do not want to relocate to a rental upon return.
Expats are usually happy to purchase with extended settlement periods because they need time to strategise their business opportunities from a new location, furnish and renovate their newly acquired home and coordinate their children’s schooling for their impending return. Nationally, private schools recorded their strongest growth in more than 10 years, with enrolments growing by close to 15,000 in 2020.
Liveable cities with desirable lifestyles are seeing huge price growth as a result of COVID. Auckland saw the greatest average growth in prices last year, some 17.5 per cent; in response, New Zealand is planning tax reforms to slow house price growth.
More recently, Dubai’s real estate market recorded a 13.8 per cent increase from January 2021 in terms of volume and 8.9 per cent rise in terms of value. And it’s not just cities seeing the prioritisation of homes being reflected in prices, UK countryside, Swiss skiing villages, the Byron Bay hinterland are all experiencing buoyant markets.
Lately, when I’m discussing today’s market with local owners who want to know what’s going on, what their property is worth, and what’s available there’s a common challenge they face, a supply-demand quandary.
As I see it, there are two types of buyers; the rare few that can buy without having to sell first, and the ones that want to buy before selling (to avoid price inflation and being outpriced, or subverting the need to rent in the ambiguous period between selling and buying in such a fervent bidders climate) but can’t do that in reality.
If you look on any of the portals, you’d be forgiven for thinking that few luxury homes are available for purchase in the lower north shore. In reality, many homeowners want to sell but are stalling because of this quandary. Many are not in a sure position to be able to write a large cheque for a property that settles in six short weeks. Subsequently stock is tight not because owners are not intending to sell their homes – which others would gladly buy – but because they want to buy something first, but practically cannot.
Thus, buyers either have to be prepared to miss out on their next home or sell their property now with a longer settlement which forces them to rent or reside in short term accommodation in the interim. The other alternative is to speak with a broker about the possibility of bridging finance to settle in six weeks.
It’s been curious to watch the market recalibrating on price. Prices considered ridiculous mere months ago are now validated. Two houses in particular that were for sale in December and November, but did not sell, increased their sale prices in February and March. Seems counterintuitive but the market had moved.
These were scoffed at by many as vehemently overpriced, nonetheless, they sold for their new and higher values. The market continues to move in an upward direction; we see it in the headlines: strong clearance rates and prices outperforming their reserves by a million or more here in Mosman, Neutral Bay and Cremorne.
Shortage of stock, low-interest rates and plenty of people worrying about expats pushing them out of the market has resulted in a frenzy over this first quarter. It will be interesting to see if the heat might come out a little bit over six months. We’ll wait and see.
Even when the pandemic is over, the threat of the virus is unlikely to ever truly disappear, so big spaces, beautiful balconies, leafy streets and manicured landscapes will remain desirable. And while remote and flexible working remains a semi-permanent reality, home offices, enviable locations and suitability for entertaining are still going to be key factors shaping people’s real estate decisions.
Speak to Geoff about your plans to buy and sell this year.