The national median selling price declined by $24,650 (-5.1%) in October compared to September, led mainly by a $22,500 (3%) drop in Auckland's median selling price, according to the Real Estate Institute of New Zealand.
The number of homes sold in September was also down, with 7838 homes selling across the country in October which was down 4.1% compared with September but up 18.6% compared with October last year.
Within the Auckland region the biggest fall in price was in Rodney where October's median price of $738,000 was down 9.4% compared to September, followed by the North Shore where prices dropped 4% compared to September.
October's median were down in all districts of the Auckland region except central Auckland (within the boundaries of the former Auckland City Council) where they were unchanged from September.
But the biggest drop in Auckland was in the number of sales , with regional sales volumes in October down 19.4% compared to September, led by Manukau (-26.6%), Central Auckland (-20.2%), North Shore (-18.3%), Waitakere (-18.2%) and Rodney (-13.8%).
There was also an increase in the median days required to sell a home in Auckland, from 29 days in September to 31 in October.
REINZ chief executive Colleen Milne said the decline in sales in Auckland was not unexpected.
"The drop in the number of sales in Auckland in October is the result of a softening of demand over the past few months and the new IRD and bank account rules introduced at the start of October," she said.
"However the fundamental supply and demand drivers of the Auckland market remain in place and the result for October is indicative of the market adjustment phase as it adapts to these new requirements,"
she said.
The median price in the Waikato/Bay of Plenty also declined in October, falling 2.6% to $380,000 compared to September's median of $390,000.
The biggest falls occurred in Taupo (-7.6%) followed by Mt Maunganui/Papamoa (-7.4%) and Rotorua (-7%).
The number of homes sold in the Waikato/Bay of Plenty was down by 5.8% in October compared to September.
Other regions where the median price fell in October compared to September were Central Otago/Lakes (-5.6%) and Otago (-3.6%) and prices were also down 2.9% in Christchurch with falls of 9.8% in Rangiora and 13.4% in Timaru.
However new record high median prices were set in Northland, Manawatu/Wanganui, Wellington and Nelson/Marlborough in October.
"During winter and into early spring the property markets in a number of regions have been far more active than would normally be expected, thus a slowdown or pause is not surprising following this burst of activity," Milne said.
Click on the link below to see the REINZ's full regional sales analysis and reports for October:
Volumes sold - REINZ
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67 Comments
Someone explain to me why it is important for the Fed to raise their ocr ? For the next ten years will we continue to see the Fed looking to raise their ocr, but never actually do it? What would it be like if in the future you have to pay money to bank your cash and the ocr normal is 1%? Does that seem that much out of this world? I won't be surprised if I am telling my kids about when the ocr was as high as 10% and they are as shocked as I was when my parents were telling me about when interest rates were 17%....
because the neo-liberals, self-proclaimed very important ppl, Roger and other associated financial parasites want it so.
"next ten years" google "peak oil" and hopefully you will conclude its 30+ years.
"the ocr normal is 1%?" yes, see "peak oil"
Short term I can see iits quite possible the OCR will spike occasionally but 1% is I think the new normal. The thing is what you will be borrowing for is what is important not what the OCR is set at. So if the OCR is 1% but the banks can only get funding at 7% you will pay 9%.
Low rates misprice risk, which has the consequences we can clearly see around us.
The worst impact is that borrowers pile into debt and use that to bid up asset prices. The worst are the investment banks, but ordinary people have adopted their bad example quickly. In NZ house prices have been the most obvious distortion, but all land prices have been distorted by the too-low price of money. And that is not to mention Governments; you now have public officials (and others) saying that because it is cheap to borrow, all these 'deferred projects' can now be funded. Low costs of capital allows dodgy projects to get approved.
Low rates can't fix low inflation in my opinion. Too-low rates just build up stresses that will need to be addressed by someone else in the future. The volume of QE in the system makes it [much] worse.
But NZ can't fix much of this. It needs a heavy hitter like the Fed to call an end to monetary madness. Lets hope thay are closer to at least trying to turn things around. But it won't be easy or painless. And there will be plenty of tantrums along the way. Despite all this, we still need money to 'cost' a sensible amount so bad financial decisions have a consequence. Otherwise we can all just hand over our economies to investment bankers and hedge fund managers. These will be the first hit by rising costs of money (along with the leverage buyout kings).
Leverage works both ways, as some highly indebted people may be about to find out.
David you are spot on when saying low interest costs leads to distortions in investment decision - making .
A project that is only just viable at 5% borrowing costs should be stressed tested at 7, or 8 or 9% , because the only thing we know for sure is that the tide will turn and things will change .
We have been debasing paper money with QE for too long now and it has to stop
The only restriction they could possibly change is the bright line test, but they won't. Removing the IRD or bank account measures is saying blatantly they want corrupt money and tax avoidance - they can't do it.
They've implemented the minimum possible and as such can't do an about face.
My nephew thankfully has not bought his first home yet, not for a lack of trying. He says the vendors are not so cocky and the agents he is dealing with are showing a bit of fear in their faces. They will have to actually do some work now for the sales to occur. I pity those FHBers who bought in recent times. Their lack of patience and brains is going to cost them dearly. When you have equity of 10% and you now know 3% at least has gone down a big black hole it is not a great feeling. Fear is a terrible thing. Fear will drive out more sellers this month especially after hearing todays news which is already old news. When will you know the bottom. When you see at least one months rise. Why would you risk buying now especially if it involves borrowed money. That would be one hell of a risk.
I don't think many FHB'ers are looking to sell after 2 months ownership. Month to month prices go up and down. I feel like a broken record but property has to be a long game unless you want to risk losing money. I would hope most FHB'ers are thinking 7-10 years of ownership at least. If so, they won't be disappointed regardless of when they buy.
If the drop is significantly more than 10% then some Banks will want more security. They might even make some people sell. Remember all loans are repayable upon demand. Customers do not have a say if the Banks are determined to protect their position. When the tide is out we will see how strong everyone is.
Let's not get ahead of ourselves.
With the recent changes I'd expect a slowdown for a few months. It happened with the LVR changes and many thought it was the beginning of the end but that was short lived. Seasonally we can expect reduced demand / sales in December / January. I'll be looking at Feb / Mar 16 results to get a good feel for what is really happening.
Not likely, even if values dropped 50%.
Besides, those people in negative equity (assuming houses dropped 20% or more) can still service the mortgage and will just sit on their houses, the number of homes listed will dry up and market supply will stall (especially since new-build activity will also drop off as there's less profit to be made).
This will mean increased competition for the houses that are on the market and prices will be cushioned from big falls.
All the while, rents will keep edging upwards.
You are in denial Esprit. Markets work on fear and greed, confidence and uncertainty. Fear is already creeping into the market and is likely to increase as data surfaces from herein. People are obviously fearful of the IRD and the consequences of being caught out over non return of income. Fearful that the IRD in NZ will convey information back to the IRD in China. Fearful that they will lose all or some of the capital gain they have achieved so far and the only way to lock it in is to sell. No asset is worth an exact amount until the asset is sold, the sale expenses are paid and the balance of the sale proceeds are in the Bank Account. Until that is achieved it is all hot air.
Exactly correct. The key is continued employment, as long as you have a job and can service the mortgage then situation normal. People are not going to sell their house for 50% less than they paid for it so they will hold their cards. Property on the market will fall to zero and maintain upwards price pressure.
Your also forgetting the rest of the world is going to hell in a handcart so everyone is going to be trying to get to a place like NZ and they all have to live somewhere. People that are waiting for a property crash so they can get on the ladder are dreaming. The population of NZ continues to grow and that's the thing about land in Auckland, they are not making any more of it.
Have these forced sales ever happen before? I cannot imagine a bank forcing someone to sell at a loss if they are managing to pay their mortgage. I think the bank will do everything in their power to avoid that. Why sell at a loss when you have a paying customer.
What economists fail to realize is that houses are different from other investments. If stocks are tanking you will sell. If they are doing really well, you may sell again to cash in. House prices on the other hand are more like a hobby for most people. "Look honey, we made 200K last year!" Makes you feel good about yourself, but realistically, it does bugger all for your quality of life. If the house prices are tanking, most people will just stop reading the papers for a few years until they come right again... It's not your typical investment, it's were you live. For most people at least, and that will shore up the prices.
You are naïve dejannk. Do you really think the banks will just keep sitting there doing nothing as their security keeps going down. They are in business and they like to minimise their risk. P:eople will be asked to sell and will be given some time to do so. If they do not sell then the mortgagee sale proceedings will start. A lot of people have multiple homes. Some will sell to lock in profits. Now they will have to pay tax because of the new forms to be filled out when you sell. I know as I signed one last week.
Sure, you are just describing the phase we are in: DENIAL
https://upload.wikimedia.org/wikipedia/commons/4/4b/Stages_of_a_bubble…
But after BACK TO NORMAL in a few months it's when the collapse happens!
The things in common are exorbitant prices, the Aussie government is also enforcing its foreign owner rules more seriously and the PRC government has also clamped down on its citizens taking more than $50k per annum (not previously enforced strictly). The one additional factor in Syd/Melb case but not in Auckland is a big supply response in the form of apartments. What is also interesting is that REINZ now admits that offshore buyers have been driving things (since they say that the IRD number requirment has slowed things down) - yet the whole industry denied it until they were blue in the face until those stats were leaked by labour party.
Seller has to supply IRD number (and overseas buyers and sellers need to also supply their home countries' IRD number). See http://www.ird.govt.nz/m/campaigns/property-changes.html
This is why all the ill gotten gains from China is drying up. Slows Auckland property prices but will also slow flow of funds into NZ at a time when they were the only thing keeping our economy chugging along. Nothing like a bit of Xenophobia to screw the pooch.
Maybe there will be a boom in foreign trusts..???
A smart Chinese Lawyer could do well setting up foreign trusts....
The trust would have its own IRD number and the it would be the trustees name on the property Title.
The beneficiaries would be relatively invisible..??
I'm no lawyer.... so this could be wrong..???
http://www.gra.co.nz/Foreign-Trusts (..just a random google search )
NZ small economy is not capable to service the debt related to such high level of hose prices. There was an inflow of 'unknown' money for years that allowed the prices to go to such a high level.
Greed and ignorance to the problem caused very dangerous situation.
I'm personally sick of investors buying the houses and then they rent it out to the flatmates that block half of the street with cars (5 or 7) and often have pretty rich social life.
Well... but as we can read: we have strong migration, housing shortage and the prices double every 10 years in Auckland ...... so we will see how it goes.
As much as I would like to see house prices coming back i.e. house prices have reached peak prices and possibly begin to drop 10 to 20% over the next few years and/or plateau off for five years or so, I still can't see any change in the fundamentals that suggest house prices will continue to climb at double digits for the next few years in Auckland. i.e. a years time the median house prices went up 15% is still likely. You'll see the same for all the other major cities around the world. Someone prove me wrong....
Surfisup you should watch your fat fingers. Don't you mean .4 million. The more news like todays that comes out of Auckland the more property will come on the market. There are a lot of people sitting on profits. Not all of them will cope with a fall in prices. Some will take whatever they can get to lock in some profit. If you bought at $500k , thought it was worth say $800k and someone offers you $700k why would you not take it. It might be worth $650k next month. That's why.
Fundamentals: demand and cost to supply i.e. still significant demand for housing in Auckland, costs to develop land and costs to build not dropping, council costs to develop/build not dropping, population growth in Auckland not dropping, ....
I'm as surprised as the next person the purchase prices for housing in Auckland, and yet so it continues. If all foreign buyers exit the Auckland market, will you see a drop in prices, or just a drop in sales ? In respect to ability to pay, NZ residents must have the ability to pay as properties are still selling, and the banks are still lending.
In respect to your valid point about affects on the NZ economy when the farmers are hit financially; it's already occurring and will continue - some regions are okay, some are hurting and many are continuing to shrink or at best stagnate.
In respect to demand, those who are leaving the regions, which city are they going to if they aren't leaving NZ?
Here's an interesting exercise: phone any of the building companies in Auckland and ask them what their realistic lead time is to supply housing - if they're honest, you'll be lucky to have a standard build all complete and signed off ready to move in to in less than a year. Prove me wrong, but we aren't even close to reaching peak prices in Auckland....
and it would be a flood if the same kind/level jobs could be found elsewhere in New Zealand.
the face of Auckland has changed dramatically over the last ten years.
Traffic, houses 2 feet apart, crowds, language, manners etc etc
the thing I notice the most when I come back from the country is the loss of the kiwi friendly spirit now its more dog eat dog.
Early indication of tapering of the Bull run in Auckland housing is due to age not sickness! Small price correction is always a good thing to buy more next year! In an unlikely event of panic selling especially by polio investors then its even more better to expand portfolio in Auckland.
In the last 3 years the REINZ 'median price' has gone down like this - or worse - about 12 equally spaced times. Each time with the same shock headline and commentary. I hope/feel that a plateauing is going to happen, but not so stupid to think that 1 months data is a trend - or I'd have sold up in 2013, 2014, and 2015.
Bob it is different this time. The overseas buyers have dried up as they have done in Australia. They do not want anything to do with the IRD. It is an anathema to them. More sellers than buyers and bingo. And todays news will create some fear into the hearts and minds of some who will not be able to cope with the fact. The interesting point today is the 20% drop in volume. More price reductions will have to follow as any prospective buyer with half a brain will now back off and wait to see what happens over the next few months. Remember the Banks will be seeing this data today and they will have to scrutinise those loan applications a bit harder than they used to. When the market was going up so hard it was an easy job to be a loans officer. Now their jobs are on the line. They have to work that bit harder. Be that bit more careful. First home buyers and investors/speculators will not find it so easy to get finance. Remember a healthy FHB market starts everything. People selling and buying their second home need a vibrant FHB market. For the love of me why would any buyer be actively in the Auckland market from today unless they get a massive price reduction to take away the risk of losing some or all of their hard earnt equity.
If I had surplus property (and wasn't thinking long long term) I would be selling now. It may not be as good as September and will certainly take longer but it is still over 20% higher than this time last year. Wait a few months and regret big time. These prices won't rise again for years.
I have not been so excited in years. When this report came out from the REINZ I rang my nephew in Auckland and he was equally excited. This is the beginning of the end for this cycle in Auckland. It is tremendous news for FHBers and for those who are not even at FHB stage yet. They were forgotten by all those who were lucky enough to be in the market already and by those who thought it was a one way ticket. This change in mood has been a long time coming. It is important that FHBers and alike remain very disciplined and essentially sit on their hands. They only have one opportunity to take advantage of a change in mood. The more that stay out of the market and do not buy the better. Paying interest to the bank is essentially paying rent to the bank. Just keep paying rent to the landlords and watch the market come your way. You might think paying a few hundred a week to the landlord is a waste of money but it could save you tens of thousands you do not have to borrow. You need to be patient and think with your head not your heart. Why would you buy now when their is the risk of prices continuing to drop as fear creeps into the minds of owners. No one likes to think their property is dropping in value. It was not that long ago all you heard at parties was how many properties people had and what they were worth. Human nature.
Chris you forget the government and Reserve Bank have implemented measures this time which ensure this correction could go in long and deep. Three words make he difference . Inland Revenue Department. Overseas buyers and NZ speculators avoid the IRD like the plague.
"There will be tears"
- Olly Newland
http://www.interest.co.nz/property/74363/olly-newland-says-property-inv…
"There will be tears"
- Olly Newland
http://www.interest.co.nz/property/74363/olly-newland-says-property-inv…
When Olly says there will be tears it must be time to sell and take those profits and pay your tax of course as all good investors and speculators have been doing in Auckland. Never thought I would see the day. Olly is one of the most successful property investors New Zealand has ever had along with Bob Jones.
When Olly talks we should all sit up and listen.
To be fair he is only one of many warning what may happen
http://www.stuff.co.nz/business/71394850/Auckland-property-investors-co…
You have to question the mentality of property investors trying to make a quick buck, when you have the RBNZ, IRD, government etc all determined to halt property price inflation. It's not a precise science, more of an art form when you consider individuals expectations and behaviours. The result being that rather than prices stabilizing, they could just as likely fall/ tumble at a great rate of knots!!!
a lot of it is down to feeding the frenzy. plentiful cheap credit, tax rules that incentivise investment in housing, naïve investors with plenty of sharks circling them. and lastly lack of safer investments that give a decent return.
all I have heard for the last five years is houses only ever go up in value, interest rates will go down and down. every bodies doing it, there are hords of Chinese buyers coming
for those of us that have been around since late 80's have seen the crashes and know people that went bankrupt or through a lot of pain it will not come as a shock if it happens again
...fueled aong by headliners such as this..http://www.stuff.co.nz/business/73879559/waikato-property-sales-streak-…
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