One property does not a market make!
Last week somewhere around 1,400 homes were sold across the whole of New Zealand. In Auckland that number amounted to around 530. The vast majority of those properties would have been sold in a traditional manner with a face to face protracted negotiation between a seller and a single buyer facilitated by an agent eventually leading to a signed unconditional agreement. Most of those properties would have likely been on the market for many weeks or months before the buyer approached the agent and started discussing an offer. None of these properties were of any interest to the media as none of them makes for a headline story.
The single property sale from last week that did make an interesting story and made the front page from among these 1,400 was the sale at auction of a Grey Lynn villa which sold for $3.28 million and as the NZ Herald rather simply implied "a staggering $1.1m leap since 2012"
The fact is that this property did sell for $2.12 million in April 2012. It was at that time a brand new house - a beautiful reproduction of a Bay Villa - a large house with a pool, but without much garden and no garage. I took the opportunity to view the property at the time and could not fault the craftsmanship and attention to detail. It was located interesting right next-door to a rather shabby rental property.
Just over 2 years later and without any improvements or additions (although with a considerably improved neighbouring property) it sold at auction for $3.28 million.
I did not attend the auction and I would love to hear from anyone who was there. My assumption though is that there was significant competitive bidding that pushed this price to this winning bid.
The fact is as I am sure you all know, is that this property sale is not reflective of the market. There will always be, just as there have always been, 'Outliers' - property sales for which conventional wisdom and financial logic shoot straight out the window.
The sale of this property at this price says nothing about property prices in general and certainly cannot drive any view that this is indicative of prices in Auckland or in Grey Lynn. There is though something that this sale does in my opinion tell us.
It shows us that in Auckland we have a global city, a vibrant dynamic city. A city that is attractive to talent and wealth. A city where those with capital to invest see a bright future. This property sale is a more important pointer to the future economic health and wealth of this country than to any view as to trends in the property market.
This property was bought at a price that I would challenge anyone to try and convince me was not far more than any respect registered valuer would have apportioned to the property. A significant amount over the valuation. That amount is the result of a buyer with the capacity to pay and the willingness to pay "what ever it takes" to secure this property. This is a unique property and the buyer wanted it and was prepared to pay that price to get it to the exclusion of anyone else. At that price level this was not a pre-approved mortgage borrower worried about servicing a large mortgage. I would believe this buyer has the financial wherewithal to buy this outright with no borrowing. This is the confident decision of a buyer who knows what they want and they can afford to pay that price. This sale is a great indicator for the future of our country and has nothing to do with the property market.