What Do Falling House Prices Actually Mean When the Housing Mix is Changing?

House prices were booming from late 2020. Single homes on large sections were selling at highly elevated prices due to their development potential. There were many people using cheap money to buy larger homes, especially returnees, and new immigrants paying premiums for newly built homes.

Now we have more houses, and many in Auckland are compact, sitting on handkerchief-sized patches. They are the result of chopping up the expensive big sections. So one $2 million house turns into five at $700,000 each – the median has dropped.

On the North Shore, highly compact four-bedroom homes are being built quickly and efficiently and selling for $1.2 to $1.3 million (140m2 GFA including a single car garage). In South Auckland, a three-bedroom home that might have sold in the upper $800k to $950k range is now around $700k.

Of course the median is falling, and that is a good thing.

The real question is what is happening on a like-for-like basis. How much are single-storey homes on 600m2 sections in desirable areas actually going for? What are the second-steppers or downsizers paying?

I don’t think we need to read these numbers in a negative sense. Hopefully the median will track down further as high-rise living comes about – the Simplicity and Ockham offerings, for example.

Based on my feasibilities, there will be very few compact infill homes in desirable areas coming onto the market at low values. There is simply no risk-tolerable profit available now. Greenfield on the fringes, perhaps. Towers, yes. Terraces or compact free-standing – unlikely.

Hat tip to Kelvin Davidson for prompting this thinking.