By Bernard Hickey
Auckland's biggest real estate agency group, Barfoot and Thompson, has reported an 18.6% fall in sales volumes in October from September, but says average prices held up despite a 16% rise in new listings.
Sales volumes of 561 in October were down 36% on October a year ago and below the 583 reported for January this year. However they remain above the recession low of 503 in October 2008.
About a third of all property sales in New Zealand are from Auckland, with Barfoots' market share in Auckland around 41% in September. Barfoots was responsible for about 16% of sales nationally in September. It is the first group to report sales and price data for September October.
Barfoot and Thompson said sales in October fell to their lowest level in 20 months, but the average price, at NZ$524,004, was in line with September's average price of NZ$523,861.
“Normally when there is a large decline in sales, prices often retreat. However, prices for the past two months have gone against that trend and have remained between 2 and 3 percent higher than August’s average price of NZ$510,978," said Barfoot and Thompson Managing Director Peter Thompson.
“This year the spring boost in housing activity has been slower to start, but in the last few weeks of the month new listings have increased significantly, and this normally precedes a lift in sales," he said.
“October’s average price is also only 3.8 percent lower than in October last year when the market was already on the rise in the lead up to Christmas.”
New listings at 1,396 in October were up 16% on those for September, bringing total listings to 5,861 at October 31, up 5.2% from a month earlier.
“New listings create new interest in the market, from both those that are actively looking, and those that are thinking about their next move," Thompson said.
"This level of choice, the availability of bank funding at historically low interest rates, and stable prices are all criteria that lead to buyers being prepared to commit to a purchase,” he said.
Record weekly rent
Barfoot and Thompson said average weekly rents rose NZ10 to a record high NZ$417 in October, up from NZ$403 a year ago. The average was from 697 properties, which was 20 less than rented in September.
"It points to the market price lifting rather than the increase being due to a shortage of properties. Rents have risen as landlords seek to improve the operational return they receive from their investments," Thompson said.
Barfoot Auckland
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49 Comments
With those excremental sales volumes there will be a lot of agents thinking of another career............
A near 20% fall in sales volume month-on-month at traditionally one of the most busiest time points in the year? That speaks volumes (and we ain't talking sales obviously).
Don't read in too much with that Aus stuffs - they are staying on purely for schooling reason. Seems to be only the mining sector gets more pay overthere. The rest gets about the same pay as NZ, and cost of living more expensive there. Mine job pays the same in Aus as in Auckland.
Just like property prices, rent is only worth what the market can pay. Incomes are going backwards, while prices for most things steadily increase. You can try and kid yourself otherwise (afterall, you've been living in lala-land for the last seven years) but it doesn't alter the facts. Sooner or later (and almost certainly sooner) the wannabe slumlord tycoons will have to say goodbye to any tenants they may have.
Landlords will be able to get away with minor increases as per this year.
Many tenants will tolerate say a $10 increase (I have after just re-signing another one year contract) because they are happy where they are and moving is a hassle and costly
but there will only be limited tolerance
If my landlord had wanted to increase say $25, we would have simply moved to a slightly lower quality rental. And he would struggle renting it at $25 pw extra.
So a certain equilibrium gets reached
Property spruikers shouldn't get too excited. Rents hardly went up for many years now there is a minor rise. Yields in general are still poor (generally you will only get 7% gross or higher for crap properties that are likely to have tenant issues, and zilch capital gain) and will be that way until either prices drop, rents rise further (another 4-5 years of steady increases) or both
Put those undeniable factors together with tax changes and it is hardly surprising that investors are very inactive
And how would your increases look in the face of an interest rate rise of 0.45% that the Aussie banks have started to inflict over there? Average house is what, $352,000; 0.45% increase in funding ( or equity sacrifice, doesn't matter) is $30 per week net. Average mortgage has increased A$500 per month since the RBA started to push rates upwards. But maybe it's just us, now, and not us-and-Aussie, that are different? And here's the really disconcerting bit; traditionally, NZ interest rates have always been ( until the last 18 months or so )... 2% higher than Australia's! (or $135 per week...)
http://www.moneymorning.com.au/20101103/bank-bubble-denial-spreads.html
We (our property manager) put the rent up $20pw in June. We didn’t even do anything to the house apart from chopping down one small tree behind the garage. The tenants were expecting it and didnt complain.
$20 doesnt get you much of anything these days, people just dont care, and i certainly dont feel richer with the $20 extra a week to be honest.
Matt, you talk a lot of sense these days, almost sound like a seasoned property investor ;)
Your comment further down the page - "flattish nominal prices for the next 2 years will mean large real falls 2007-2012" - that is exactly what happened 1997 - 2002 and I said back in 2008 that it would probably be similar to that (for which I got a bashing from all the doomsters who were convinced Bernards 30% nominal price drop by Nov 2009 was spot on the mark!) I wouldn't be surprised if it dragged on for a couple of years longer this time.
$10 may be a 'minor increase' but over 10 years that's an extra $100 per week income (or expense, depending on which side of the fence you sit!) If you have multiple properties it can add up to quite a healthy pay rise.
As an example, one of my rentals (which is fairly typical, I'm not quoting my best horse/house!), I bought in 1995 for around $150k and it rented at $180 per week (a 6% return). Initially I had to top up the mortgage by around $80 per week or just under 3% of the purchase price. It's currently worth around $350k and rents for $350 per week (a 5% return, and an average of 'only' $11 rental increases over 15 years). If someone bought it currently as a rental, they would probably have to top the mortgage up by around $200 per week, again just under 3% of the purchase price. The thing is though, thanks to the magic of a 25 year P&I mortgage, my loan is now just $79,000 on which the current rent gives a 22% return. In the first year I was paying something like $2k principal, $10k interest, and topping the rent up by $80 per week. Now I'm paying something like $7k principal, $5k interest, and have about $3,500 per year left over after rates and insurance. In just 10 more years, it'll be mortgage free and providing an income of $400 - $500 per week, regardless of capital gain or tax breaks. I've more than made back the original top-ups I paid (again not even counting capital gain or tax refunds) so it hasn't actually cost me a cent and is providing an ever increasing income - I don't know of any other investment where I can achieve this. I've tried various other investments and still have shares, but nothing comes close, so I'll stick with what I know - I'm quite happy with the income!.....
Two reasons:
First, BH introduced registration and disabled anonymous posting.
Second, almost all of the property bulls have gone (not surprising, is it?).
Before the bubble began to burst in earnest, the bulls tried to deny there was a bubble and/or that it was bursting, and still claimed that borrowing far more than you could ever pay back, in order to buy a rotting breadbox as an "investment", was the Bestest Thing Evar. Now of course they are gone.
So it's hardly surprising that post counts are down.
Are we seeing a generation of people many who expect to have' good' everything? They want to buy in desrable areas of a city, and if they can't afford that, then to rent some place that provides a good quality standard of accommodation.
If so, that would mean properties for sale in desired areas are sought after and holding their value, and good properties for rent are sought after and rent tracking upwards. Am guessing that a lack of sales in less desirable suburbs could be keeping the average/median price of properties up?? [ I do understand that however the very expensive properties are selling at quite a discount] Have no facts or figures, it's more a hunch, if someone has actual facts and figures I would be interested to know
I have a rental in a desirable suburb (but not top line) and the tenant said to me he preferred to rent there, didn't want to have a big morgage which he would need to buy in the area, and didn't want to go to buy in a 'lesser 'cheaper area.
Is this what others are seeing, or am I seeing things??
"However, as the RBA clearly demonstrated yesterday...housing is still stuffed. .... housing will lag other assets most of the way because rates will have to be so much higher. You could watch your house devalue 40% without it dropping a cent. "
But Australia is different, of course, just like New Zealand.
Abslolutely. But ithat isn't happening, is it?. And take away any tax-offsets ( that will come) and what have you left? A rental market that is unable to charge increased rents if wages stagnate. If it's just an equivalence game, bank vs rental income, why take the risk with property prices, interest rates, tenants etc.? Just shovel the capital in Kiwibank and take away the heartache.
"It points to the market price lifting rather than the increase being due to a shortage of properties. Rents have risen as landlords seek to improve the operational return they receive from their investments," Thompson said.
The landlords have worked out that 10% per annum capital gain is unsustainable?
Problem is, in the meantime, investors have bought too many properties, leveraged off capital gains on existing properties. Of course this has kept rents depressed. Now its the day of reckoning for investors who have low equity in their properties.
Following "Dr HousingBubble" for a few years is very illuminating - one can see again and again, the same things playing out here, as in California.
And across the ditch we have....." The banking industry has defended the rights of banks to make unilateral interest rates rises, arguing bumper profits are needed to allay concerns of international investors about a potential housing bubble.".(syd morn herald).....haaaahaaaaaahahaha
You couldn't make this crap up
Wolly, my gut feeling, crediting Ralph Norris at least with more intelligence, is that any bank that LOSES mortgage customers to its competitors right now in Aussie or NZ, will be doing itself a favour. No-one will say so publicly, though.
International hedge fund tipsters are recommending "shorting" Aussie Banks with big mortgage market shares though. Google "shorting Australian housing" and see what comes up.
Isn't it funny how the great masses of people down under like to knock the Yanks for their stupidity, and yet on the subject of house prices; "we're different"; OUR high prices are different to THEIR high prices; (People actually WANT our houses, it's demand driven, yadda, yadda, yadda).
FYI Mortgage approvals down 25% from a year ago in the week to October 30.
http://www.interest.co.nz/news/mortgage-approvals-hit-record-low-nz5612…
It's getting ugly out there.
People have stopped adding debt.
What happens to house prices when that happens?
cheers
Bernard
From Money morning
Borrowers that are geared up to the eyeballs, and who were suckered in by the Fairy Ruddfather's bribes have seen their mortgage repayments increase by over $500 per month since the RBA started jacking up rates again.
Perhaps you don't think that sounds like much.
But think of it this way. In annual terms it equals an extra $6,000.
And more importantly, for an average income earner with an average mortgage it means that an extra $8,571 of before tax income needs to be re-allocated from saving or spending into paying off the mortgage.
For the average income earner who earns around $65,000 who lives with a second income earner who earns around $48,000 that's an extra 7.5% of their gross income they need to free up.
That would take their total annual repayments on a $350,000 mortgage (the average) to $30,264, or the equivalent of before tax income of $43,234.
In other words, nearly 40% of gross income.
But that's if they're lucky and didn't take the advice of the property spruikers who told them property prices always go up and that interest rates would stay low.
Because according to the Commonwealth Bank home loan calculators, borrowers with the income levels I've mentioned above could now borrow up to $568,000 or an annual repayment of $49,116… or $70,000 of before tax income… or 62% of gross income.
Over the weekend I had the opportunity to chat with one Harcourts agent and one Barfoot agent. The Barfoot agent is definitely more optimistic about the market than the Harcourts agent.
Harcourts agent (looked like he's in his 60s) expect things to be even worse in December.
Barfoot agent was trying her best to convince me with stories of her customers who bought last month are already making a profit on paper.
These figures simply support the notion that the market is pretty much dead flat. We will see small falls in prices before the end of the year. Then steadiness. Then another small fall winter 2011.
I don't see any drastic nominal price drops (save a bubble burst in Aus). But flattish nominal prices for the next 2 years will mean large real falls 2007-2012
having looked at a few properties recently I remain convinced that property in noddyland remains one big con, notwithstanding the price falls since 2007. Almost all of the properties I have looked at in the last month or so have had major flaws (eg. located in a flood zone without adequate floor clearance, potential leaky buildings, poor insulation, overly small space relative to asking price etc etc). It seems to buy in a good area, unless one is really wealthy, one has to "Accept" significant flaws.
My wife says as an architect and generally cautious and diligent person I know too much. Of course she's totally wrong and she knows it, but she is totally "right" according to the NZ mentality of buying any old dunger, she'll be right mate because despite its flaws it will rise in value maaaaaaaaaaaate
But the reality still seems to me that to buy a good house (not out of this world) in a good suburb with basically no issues you need to pay a small fortune. and to my eyes, people are still paying far too much for good solid properties as well as fundamentally flawed properties.
I mean, sorry, I don't care if its a townhouse in the "grammar zone", if its old and raggedly and is located in a high flooding zone without sufficient building mitigation then I don't think its worth 400K (let alone 600K)
Conclusion: I'm happy to keep renting and saving, knowing I am living in a house that would cost me in the order of $400 pw more if I owned it
Yeah Matt definitely don't buy a property unless you are totally comfortable with it.
But personally speaking, I would rather buy something I knew I could add some value to, especially if it just meant a bit of hard work painting the outside or something similar.
I'd rather do that than buy something I knew would be very hard to add value to, provided you don't over pay for it.
Once you've added the value your equity goes up, and you will probably feel more comfortable about owning it.
If everything is already done, you'll pay top dollar, and have no way of increasing the value of your investment.
I agree people have been repaying debt which is a good thing. However with housing I think one of the major points that seems to be missed is that we have lost about a decade of houses in NZ with the leaking and untreated timber issue.
This has made a huge number of houses virtually unsaleable and that is a major reason for volumes being down and prices remaining firm. It is simply difficult to find a good property to purchase.
With the low volume of new builds I don't agree that prices are going to drop any time soon, though many are hoping they will. I beleive they will be disappointed, just look at the price increases coming through in timber alone and convince me why prices will drop!
a few aushousing stats if anyone.s interested---they.re a few months out of date
February 21st, 2010 at 11:56 am
Some information from Suncorp
1990 2000 2005 2010 Average House Price $110,600 $195,700 $334,100 $481,310 Average Individual Monthly income $2,296 $3,213 $3,965 $4,808 Average Interest rate 16.5% 7.8% 7.3% 6.6% Average Monthly Mortgage Repayment $1,234 $1,060 $1,819 $2,124 % of Household income for mortgage payment 34.4% 25.2% 32.1% 29.0% therefore Average Household Monthly income $3,587 $4,206 $5,667 $7,324 being a multiple of individual income of: 1.56 1.31 1.43 1.52
Average First Home Buyers size of Mortgage from 1992 to 2009
New South Wales First home buyers
Dwellings financed Number Average size Annual % increase Jan-Dec 1992 20,709 $91,755 Jan-Dec 1993 27,482 $96,642 5.33% Jan-Dec 1994 33,023 $105,038 8.69% Jan-Dec 1995 27,814 $108,178 2.99% Jan-Dec 1996 30,040 $116,244 7.46% Jan-Dec 1997 30,530 $127,374 9.57% Jan-Dec 1998 27,928 $139,235 9.31% Jan-Dec 1999 32,221 $160,378 15.19% Jan-Dec 2000 31,714 $159,114 -0.79% Jan-Dec 2001 45,064 $171,118 7.54% Jan-Dec 2002 34,379 $190,308 11.21% Jan-Dec 2003 26,867 $224,435 17.93% Jan-Dec 2004 24,965 $254,833 13.54% Jan-Dec 2005 31,594 $260,528 2.23% Jan-Dec 2006 38,317 $257,241 -1.26% Jan-Dec 2007 40,240 $257,693 0.18% Jan-Dec 2008 38,160 $267,054 3.63% Jan-Dec 2009 60,618 $292,734 9.62%Source: Australia Bureau of Statistics 5609.0 Housing Finance Table 9b. Original.
Australian Dwelling House Financing, by State, 2009. For owner occupation.
These figures show the average amounts financed for each state, and for each type of purchase; New or Existing property.
Year Average Dec-09 NSW Purchase of new dwellings ; $309,242 $340,300 Purchase of established dwellings ; $287,617 $310,800 VIC Purchase of new dwellings ; $277,975 $307,600 Purchase of established dwellings ; $262,350 $283,800 QLD Purchase of new dwellings ; $300,792 $331,700 Purchase of established dwellings ; $267,983 $280,700 SA Purchase of new dwellings ; $232,492 $237,300 Purchase of established dwellings ; $212,075 $218,500 WA Purchase of new dwellings ; $313,975 $338,300 Purchase of established dwellings ; $284,192 $289,800 Tas Purchase of new dwellings ; $223,367 $215,800 Purchase of established dwellings ; $190,717 $199,200 NT Purchase of new dwellings ; $330,683 $227,200 Purchase of established dwellings ; $269,575 $289,000 ACT Purchase of new dwellings ; $309,192 $311,500 Purchase of established dwellings ; $264,717 $286,700 ALL Purchase of new dwellings ; $293,317 $319,100 Purchase of established dwellings ; $268,458 $285,100Source: 5609.0 Housing Finance, Australia. Table 10c. Owner Occupation
Average Mortgages December 2009
Purchase of New Dwellings.
December 2009 $340,300 NSW $338,300 WA $331,700 QLD $319,100 ALL $311,500 ACT $307,600 VIC $237,300 SA $227,200 NT $215,800 TasAverage Mortgages December 2009
Purchase of Established dwellings.
December 2009 $310,800 NSW $289,800 WA $289,000 NT $286,700 ACT $285,100 ALL $283,800 VIC $280,700 QLD $218,500 SA $199,200 TasSource: 5609.0 Housing Finance, Australia. Table 10c. Ownership
okay that went well--here.s the link--look in the comments section down the bottom for more current data
http://www.abcdiamond.com/australia/average-australian-mortgage/
This comment seems to sum up the mood of banking exec talk behind closed doors...
Screen Play.....
Ralph : Hello Gail how are you?
Gail : Not bad, trying to work out how to spend my salary this year.
Ralph : Yeah I was hoping for 18million and I only got 16million
Gail : I suppose its the new normal Ralph.
Ralph : And I was determined to be so different...Rather than living in your world.
Gail : So what do you intend to do, to be different that is.
Ralph : I really want the lear jet so I suppose the only way to do that is boost my Short Term Incentives
Gail: So does that mean.......
Ralph : Yes, its tough on Aussie Battlers, but I am going to have to pull one of smoking Joe's levers
Gail: But thats such a cheap thing to do, especially as you have the largest share of residential mortgages.
Ralph: I never said I was the sophisticated type, cheap is good for me.
Gail: Well, I suppose if you go first, then I can follow this time. I'd better check with Mike and Big C to make sure there is at least a day between us.....
Ralph : Right you are petal, good luck, and this time don't slip on that banana.
Scene ends with long pause as Ralph puts down the phone. Gail stares forlornly out at the sydney skyline
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