The housing market slump deepened in July with sales volumes hitting their lowest point for the month in 12 years and median prices now lower than they were a year ago.
The latest figures from the Real Estate Institute of NZ show that 4678 residential properties were sold in July, a drop of 36.7% compared to the the 7391 sold in July last year.
That meant last month's sales numbers were the lowest they have been for the month of July since 2010.
Not surprisingly in such a quiet market prices are also sliding, with the national median selling price dropping by $40,000 in the month to $810,000 from $850,000 in June.
The national median is now 1.8% lower than it was in July last year, the first time it has fallen on an annual basis since July 2011 and that means all of the capital gains that occurred in the last 12 months have now been wiped out.
The national median price has now declined by $110,143 since it peaked at $920,143 in November last year.
As usual the movement in the market is being led by Auckland, where sales volumes dropped to 1419 in July, down 16% compared to June and down 49% compared to July last year.
Auckland's median selling price dropped by another $50,000 last month to $1,100,000, and is now down by $200,000 from its November peak and down by $65,000 compared to July last year.
The REINZ House Price Index, which adjusts for differences in the mix of properties sold, was down 2.9% compared to July last year and has now fallen 10.8% since it peaked in November last year.
Other regions to show significant price falls last month compared to June were Waikato -$50,950, Bay of Plenty -$40,000, Wellington Region -$40,900, Otago -$105,000 and Southland -$25,000.
Not surprisingly, properties are also staying on the market for longer, with the median days to sell hitting 47 in July, up from 31 in July last year.
"Real estate markets are cyclical, after a period of strong upward movement it is slowing," REINZ Chief Executive Jen Baird said.
"However, prices tend to decrease more slowly than they increase and after a period of stability, the market tends to regain momentum and median prices start their climb.
"We are in the easing part of the market cycle," she said.
The comment stream on this story is now closed.
The interactive charts below show the trends in the monthly median selling prices and sales volumes in all regions.
Median price - REINZ
Select chart tabs
Volumes sold - REINZ
Select chart tabs
221 Comments
The long-expected housing market correction is turning into a bit of a fizzer - as if it's running out of puff. What we've seen is an orderly slowing down of activity. The rate of house price falls isn't matching the rate of house price increases in the months leading up to the November 2021 market peak.
Clearly, the banks and other sizeable lenders are keeping the lid on interest rates - which have risen at a much slower rate than was generally anticipated. (Market interest rates certainly haven't exploited the potential of this year's OCR increases.) Notably, distress selling hasn't featured prominently in 2022.
Already, there's talk of a recovery in the not-too-distant future - as soon as early/mid in 2023. Who knows?
Anyway, we're seeing a gentle (and healthy) letting off of steam in the housing market, In fact, a good many (well-located) properties are not witnessing price declines at all. No wonder it's been referred to as a well-managed correction or, in economics-speak, a "soft-landing".
TTP
The correction is a crash** FTFY :)
Indeed. Since the month TTP recommended people buy in Auckland and Wellington prices have dropped in both regions by $200k.
that is far from a “fizzer”
Recent FHB loses their entire life savings within 12 months, meanwhile facing a 50%+ mortage payment increase: "an orderly slowing down of activity"
Apparently losing $1,000 every day on your investment is just "an orderly slowing down of activity."
Sheesh, imagine how much you could lose every day if things become disorderly 🍿.
TTP resorting to comedy...
1K a Day !
Losing the average yearly after tax salary every month - BE QUICK!
Yes, another month, another steady fall with no sign of prices stabilising.
Sadly many Kiwi’s have been badly conned by the likes of TA and AC who have given far too much voice in mainstream media when they are nothing more than puppets (some would say muppets) for the property industry or those with vested interests that collectively blew up the largest property bubble in the world (on most metrics) - there is no debating the situation we find ourselves in.
Anyone with half a clue or a real independent economist could see these price falls coming
Cameron Bagrie - Dec 2021
https://www.newshub.co.nz/home/money/2021/12/housing-crisis-everything-…
"I think it's prime for tough times in the latter part of 2022 which some people won't like, but I think it's fundamentally a good story about bringing the market back into a little bit more balance. House prices are going to fall… valuations are stretched, you've got the regulator of the Reserve Bank telling the banks to rein things in, banks are reining things in, you've got a fundamental shift in the housing supply situation in Auckland, interest rates are starting to move up…. and we've got these tax changes. The tax changes have already shifted the investor market.”
Of course at that time, 8 months ago anyone with this view was dismissed as a DGM, rather than realist.
Why - because it’s not the news we want to hear. No one wants to hear prices are going to fall. No one likes to lose money.
Now, no one wants to hear that we’re in a crash.
FFS - this is a property market crash - this is how they happen - slow and steady, until prices finally stop falling when it's cheaper to buy than rent.
You don’t have to try and pick the bottom of the cycle/market because prices stabilise and stagnate for long periods. Look at the data of past cycles - the regions stagnate for 7-10 years.
Without capital gain there is no incentive to leverage yourself and risk cash/equity to buy. It's cheaper to rent, and the supply of rentals is increasing.
It’s happened over and over around the world before - it’s just finally our turn now.
Tony Alexander still spruiking hard yesterday in oneroof article ,shameless really. Quoted excerpt from 10th Aug. 22
"As a first home buyer, wouldn’t you like to take advantage of the current buyer’s market before these older people get active again and the migrants return – especially the 200,000 being switched from working to residency visas which bring a legal ability to purchase property?
Remember. Housing markets move in cycles. This downturn will not last.
- Tony Alexander is an independent economics commentator."
only those of his contemptible" Newbies" could continue to get sucked in by his non- independent Shyte.
I am surprised anyone still listens to the wild guesses of Tony Alexander. He is about 50% correct, which is about as precise as playing roulette.
I really rate Cameron Bagrie, an intelligent straight shooter in an industry full of arrogant self centered morons.
He might have been quite close to picking the peak and drop in prices this year.
I agree. CB over TA , in unbiased presentation of the facts.
The issue I have with TA continuing to Spruik into a declining market,is the same that many commentators have and have had, that young couples ,making a first entry into housing ,their first home,having sacrificed a lot , over a long time ,to get into deep debt ,highly leveraged,on a declining assett, is they lose all their capital and are left as the bag holders,to older wealthier, more experienced vendors.
It is a huge negative blow, if forced to sell,well below purchase price ,and carry that sale out by taking a personal loan to repay the full mortgage after net sale proceeds.
Life destroying outcomes.
And callous self serving spruikers,who do know better, are still proposing that young buyers jump in.
Yes, having lived through a property bubble in the US and talking first hand to people who were in negative equity, during a recession, and on the verge of losing their employment (some did), with a bad jobs market...the level of stress these people were under cannot be taken lightly....the stress levels were extreme.
The situation is no joke.
There were broken marriages and suicides etc.
If you know any FHB's who are now in negative equity and who will have (on paper) just watched their life savings disappear before their eyes in a matter of months, keep and eye out for them. It can be a sole destroying experience.
Hence my warnings on here for years that you need to be very careful about who you take advice from. When people saying things like 'now is always the right time to buy property'....well this simply isn't true. There are life changing times to buy property...both from a positive perspective and from a seriously negative perspective.
Well said. Most young folk we know of who would love to buy a house are forced to wait on the sidelines waiting for huge changes in market and financial conditions to enable them to buy the poorest of dwellings. Who knows how long they will have to wait to get on into their own home. The stars may never align for them. Even the bank of mum and dad need to find several hundreds of thousands of dollars to push them into the zone of possibility.
If the 'doom gloom merchants' turn out to be right, then there might be hope and possibility of future prosperity for the FHB's you mention.
Odd isn't it - that if the people who are called 'doom merchants' are right, then prosperity for young people becomes a possibility...
How bizarre..
It makes you wonder who the doom goblins might really be? Perhaps its those who wish to benefit by destroying the possibility of future prosperity for younger people by continuing the status quo of ever rising house prices, completely detached from income growth in this country.
At least in the US you can’t go negative (or is that state dependent?). Here you could end up losing your savings, house, and owe the bank hundreds of thousands for the privilege. I think the RBNZ should not allow that; if the bank gives a loan to someone with not enough equity and house prices go backwards, let the bank take the fall after the deposit has gone.
Zollner also seems fairly objective.
Yeah she’s ok, but some of their forecasts have been rubbish.
Agree with all you said apart from comment that nobody wants to hear that prices are coming down. Many do - a whole young generation in fact, since it starts to give them some hope that they might one day be able to afford their own.
We’ve got to stop seeing house price rises as great and falls as bad. A reasonably priced and stable market where young people can afford to put a roof over their heads is far more important than one where a few make fortunes but the basic function of providing accommodation for the population fails.
As a home owner I like the idea of them coming down too. It brings the next rung on the ladder a little closer.
It also redirects investment to productive assets, which is good for the future of our economy.
"The correction is " - Looking like -30% Crash in Home Prices By December TTP !
" The correction is " - 100 agents going down to 50 agents TTP
"The correction is " - Selling the Palmy Penthouse for a 50% reduction TTP.
Jesus christ ttp, get a grip
He is kind of right, it is a bit of a fizzer so far, looking at that chart it still needs to come down another 25% just to get back to 2020 prices which at the time were considered crisis level. But unlike TTP I hope that does happen!
No, it's not a fizzer.
Prices are stickier on the way down, and as others have shown before, the decline thus far has been much quicker than many other 'Bubble Bursts'.
People said the same thing after the GFC. I think we enter crash territory when there are a high number of forced sales (not just the one the herald reported on). At the moment it is a very mild correction with prices still well above 2 years ago. But as the mainland add says, good things take time.
The housing market isn't like the stock market, prices move much slower. This downturn could last for years.
Personally I'd love to see an equivalent of the 1987 stock market correction which put off a generation of Kiwis. Imagine how much better off we'd all be if the national focus turned towards solving problems more useful than how to build a property portfolio in a tax efficient manner.
Irelands property crash started of with a decline of around 5% in year one. That didn't turn out to be a fizzer in any way, shape, or form. We're down 15% in 9 months. No one is call a turnaound anytime soon. We'll be down 20%-25% by Christmas and there will still be more pain to come.
If that comes to pass you can kiss a lot of construction jobs goodbye. A lot of those laid off will head to Aussie but only IF they can tee up work there.
Construction is slumping even worse there than here.
You are probably right. But we had a similar situation after the GFC but then it just headed back up again, so there is no guarantee of Ireland happening to us. Normally a 15% loss would be significant, but after the last 2 years of craziness it’s hard to know whether it’s just the craziness reversing or a proper crash. Like I say we will know for sure once the forced sales begin, at the moment it feels like the typical NZ downturn where sellers are in no rush to sell.
We've already fallen further than in the GFC and there is no sign of bottoming out.
Noone knows how far down we go but I don't think we've hit the floor yet.
Post GFC we had a huge amount of room to cut the OCR to save the housing market. We don’t now.
Totally different situations.
I, for one, welcome your changing tune.
TTP, you are embarrassing yourself, even more than usual.
Can I please have some resilience-dressing with my word-salad?
You can find it a level 9 on the Beehive. How many litres do you want?
Stop it. There is every chance that its just getting started. Lets pray the $300bl property ponzi in China doesn't fall on its face. Oh wait...it looks like it is...
When I predicted, in 2018, a big recession and house price crash in 2022/2023, I thought it would be a property crash in China that would cause it.
"property brokers country, robbing me with pride"
The First comment of the day was from TTP, and this is all it said.
"The correction is "
TTP has changed his original post of 3 words to what it is now. Just letting the newcomers know.
Remember, this is the owner of Property Brokers.
It's important to get the spin in early, before people have a chance to see the steady downward slope in the HPI graphs.
Auckland leading the charge down this month, taking the reins from Wellington. Christchurch joining the party.
https://www.reinz.co.nz/Media/Default/Monthly%20Press%20Release%20Asset…
So Akld now about 15% down from peak last November?
Yup, and Auckland City in particular is 17% down from peak.
This is drop from peak by region (HPI)
Nice! Thanks for sharing.
That’s great thanks. Gee look at Tauranga, delayed in seeing house price falls but already above 8%.
Gee, most of the urban areas of Auckland and Wellington down 17-18% from peak.
We will see that replicated in many regional cities within 3-4 months.
Hi MMXXII,
Just letting the newcomers know.
I don't see any "newcomers" here.
As always, it's just you old hacks trotting out your usual uninformed gibberish.
TTP
Maybe TTP is actually Ian Foster. He thought last weeks loss in South Africa was the AB’s best performance this season. Totally delusional on the current performance of the AB’s and housing. Where I live in a regional capital housing is dead unless it’s new or near new.
old hacks trotting out your usual uninformed gibberish.
Now, who does this remind me of.. ?
Have you roped in two more people to your usual three to give you quick 'thumbs up'?
there are many viewers on here who don't have to say anything but recognise who the experts are.
Are you blind? How can you possibly be looking at the same data everyone else is and type such rubbish?
Bahahahaha
"We are in the easing part of the market cycle,"
NZ's version of it just being in a little gully!
She'll be right!
Or, in true kiwi fashion: I reckon she'll be right ay!
"we're seeing a gentle (and healthy) letting off of steam"
NZ property prices are currently falling at a faster rate than some of the biggest property crashes in recent history. The Irish collapse in 2008+ being a notable example.
This guy reminded me of someone ran into the back of my car years ago. The damage he caused cost my insurer 12k to repair. His initial response was " oh the crash wasn't too bad, it will buff out ok"..
I guess "crash" or correction is this context is a relative term.
Don’t take this the wrong way TTP, but you are an absolute plonker.
But I hope he stays, he provides a laugh
One of the most comical comments in a long time. I could not stop laughing.
I guess if you can't make it as a broker anymore, might as well make as a comedian.
What a ridiculous take.... You can't control the narrative TTP, and you know it.
Negative equity has entered the room. It's game over and the falls will accelerate from here for the next 2 years. Good-bye credit cycle, hello economic cycle.
This is not unintentional.
All political parties have advocated at one time or another for a correction in the property sector of our economy.
Here we have it.
The RBNZ is being apolitical, and doing what has to be done. Retracement, at this stage, looks unlikely. Otherwise, what has been the point of getting us this far? "Never let a good crisis go to waste" and all of that.
I agree, it has been a long time coming, neither party should want to change this. National will want to make changes in a years time when the work on price reduction will be a long way through but circumstances may force them to focus elsewhere.
"Never let a good crisis go to waste" and all of that.
I would say it's a waste if the cycle just repeats.
So last time we had the OCR at this rate, the national median was ... $475,000
Once the correction gets legs, the OCR will become largely irrelevant. The upswing was driven by irrational exuberance, and once emotions get involved in the downswing it'll take on a life of its own.
As we see from the Doom and Gloom comments above and below, a certain group of people is getting desperate.
In the grand scheme of things, not too many will be influenced by their verbal incontinence. The comments on this blog are hardly representative of the real world and well-informed thinkers. Rather it's a place where a group of fuzzy-minded, disaffected people come to vent their spleens.
To end on a cautionary note: don't be fooled by the emotive language and inept use of statistics of those who lack property market acumen.
TTP
Property market is on the edge of a cliff.
Teeter
Teeter
Plummet.
"My god... it's full of irony!"
It is a capital "G", and watch out for lightening bolts.
Don't you mean "lightning bolts"? =D
TTP Tim Mordaunt, I think it is obvious who is the one getting desperate here.
You need those sales, and you need to retain those agents thinking of leaving.
You also have a rather big bill to pay.
https://www.stuff.co.nz/business/91418098/property-brokers-manawatu-and…
Also a dental bill.
inept use of statistics
Odd of you to mention statistics, since you use precisely none of them.
Bahahahahaha ..... Bahahahaha
Interesting how you conflate real world and well informed thinkers. Always seemed to me that the real world was poorly informed and did little critical thinking.
Still in the denial phase huh?
> So last time we had the OCR at this rate, the national median was ... $475,000
You need to adjust it for inflation and there's a target.
Hutt Valley Market Update 8th Aug
Interesting new sales tool (that hasn't been seen in over a decade) being used in the market which will benefit cashed up buyers. Cash is King – is back.
A couple of houses are advertising two prices – a price for buyers who are conditional –subject to sale and a much lower price (in one case 110K lower price for cash – 10% reduction off the subject to sale price) for buyers with cash.
This creates leverage for cashed up buyers – effectively offering a 10% discount on the listed price for an unconditional offer – would be my starting point in this market.
Current Market Listings
556 houses on the market- Up 19 on last week . As per a number of my updates I predicted a couple of months ago that I thought listings would drop to the mid 500’s by end July and then roar back in Mid Aug as Spring selling season approaches- this now appears to be happening.
We have now had 5 months of less than 100 houses been sold in the hutt valley – making the average number of houses sold each week 25. This is well down on last year where 40 houses were selling a week and at the peak in March 2021 50 houses a week were selling.
556 houses on the market with 25 a week selling means there is 22 weeks stock on the market.
House Price Reductions
295 houses have a listed price
63% of the houses listed with a price have reduced their price since listing
The average markdown has surged this week from 98K to it is now $105K (back in March the average reduction was 75K)
Of those that have listed prices (pool 295) -65 have reduced their prices by 100K
15 have reduced their prices by over 200K, 9 have reduced their prices by 300K and 2 now has reduced their price by 400K with the biggest reduction been 455K.
The data continues to show the majority of houses listed are under 900K. The Median house price for all 556 listings is steady at 799K.
Market Valuations
The latest QV valuations (valuations by QV which are updated every month and give an approximation of a houses value) have now dropped $200K since Jan for the Hutt.
Keep in mind new RV ratings for the Hutt Valley are due to be calculated in Sept and released in Nov. A number of people who bought in the last 12 months are going to find their house is worth a lot less than what they paid for it.
As for homes – some massive drops in the last round of updates released last week.
- Woburn (the hutts most expensive suburb) – average house price dropped 120K in value in July and is down 280K from $1.66M (in Feb 22) to $1.38M, this is a 3.8% drop YOY
- Petone – dropped 65K in value in June and is down $180K from $1.19M to $99K and as predicted a month ago has dropped below $1M this month. This is a 10% drop YOY.
- Wainuiomata (the hutts cheapest suburb and attractive to investors and FHB’s) – dropped 50K in value in July and is down $140K from $870K in Feb to $715K. this is a 10% drop YOY
Houses sold vs houses removed
My records show 268 houses listed with a Price have sold YTD
I have records of a further 238 houses that have been removed from the market unsold YTD.
28 of those houses removed from the market have been listed on the rental market.
Length of time on the Market
- 424 houses have been on the market for over 30 days - 76% (last week it was 422)
- 327 houses have been on the market for over 60 days - 58% (last week it was 293)
- 210 houses have been on the market for over 90 days – 38% (last week was 197)
- 146 houses have been on the market for over 120 days - 26% (last week was 133)
- 94 of the houses have been on the market for over 150 days - 17%
- 61 of the houses have been on the market for over 180 days (6 months) – 11%
The number of houses on the market over 60 days is now over 58%. This has risen from 32% of houses in mid March (one in three), 1 in 3 houses have now been on the market more than 3 months , 1 in 4 have been on the market over 4 months and 1 in 10 have been on the market over 6 months.
Rental Market
This week the rental market has 184 properties for rent, this is the lowest number since mid April but up 60 on this time last year, – when just 123 houses were for rent.
The lower number of rentals is not translating into higher rental prices as the percentage of properties listed at $650 is 40% and whilst up on last week when 36% of properties were listed at over $650, well below the 53% of houses listed over $650 on the 23rd March.
Median Rental price for the Hutt valley is $600 a week
Average rental price reduction is $54 a week. The number of new build 10-15 listings has slowed in recent weeks but there are still some great rental prices in this space with a couple going for $600 a week for a 3 and 1 new build.
ikmpaul
As always, a posting of superb quality.
KeithW
As a Hutt Resident myself, I was checking out FHB priced open homes, the places are dead. No one turns up and no one is interested at current prices.
Nothing will restore prices until the FHBs return, which ain't gonna be soon.
Brilliant analysis as always, but you are conflating cash vs unconditional. They are not the same.
In reality, all sales are cash sales. Some of it is borrowed cash and others, 'sitting in my bank account' cash.
The discount is really for an immediate unconditional offer, basically, auction terms without it being an auction, and maybe without the pre-auction information that you would have expected as part of the auction process.
But it is more definitely buyer beware territory, in spite of what looks like a better price.
I'll reassure you i'm not confused. The properties in question are clearly stating the following
1. Cash Buyer Price - they are still accepting conditional sales as long as the condition is not a "subject to sale" clause. ie you can still get the cash price and be conditional to LIM's , builders reports and finance. All of which would clear the sale within 10 days of your offer.
2. Subject to sale Price- which is if you are subject to sale - there will be a higher price as a subject to sale would require a much longer time before the deal clears.
What this is illustrating is that those who are not subject to sale ie have cash - either in the bank, through the sale of their current home or finance can put in a lower offer than those who need to sell their home.
I'm assuming those advertising this way- already have brought and have bridging loans and the cost difference is their interest premium on those bridging loans.
Thanks for clarifying.
Great work - the detail builds a way better picture than a few averages.
Do you have a slot on your spreadsheet for "Presumed burnt down for insurance"?
not hard to foresee this drop.
but anyone foresee a rebound?
I see one and one from policy changes.
you work at Westpac in Christchurch?
what policy change are you referring to?
I keep seeing Ross Barnett post videos on the actual numbers of rental property as in investment on fb investors page.Not one has shown a house making a profit. The average loss is $15-20k a year.
I don’t know what policy that can actually make them profitable.
Genuinely interested
not hard to foresee this drop.
Do you ever read the comments here?
Brace, brace, brace
Last month someone posted a line-graph showing the current NZ property bubble declines overlaid onto historic market crashes (Spain, Ireland, USA etc).
It would be nice to see the latest iteration of this graph if possible!
#resilient
It's Miguel - hopefully he's working on it now.
How does this work? Where does the price drop come from? The dwelling value or the land value? Or a combination of both? Also when would this be reflected in dropping section prices? Way too complicated for my old brain.
Pertinent questions I might add
Most likely from the land value, as construction costs have been going up lately. Land value depends on the investment mood and available money. Both of those are going downhill fast.
I imagine the price drop comes directly from what people can afford to borrow, in the same way that property-prices-to-the-moon came from people being able to access more debt.
It will show up in land values on Ratings valuations. So if your house was rated last year at $1.5M (with $1M for alnd and $500K for house) and its now $1.3M - its likely the land has devalued- although keep in mind that house values are adjusted each year for depreciation so over time they lose their value
Didn't new house build cost actually go up 20 percent in 2021. You would remember
Most valuation sites use the existing value of the house/fixtures - not the "cost to rebuild" - only insurers use a cost to rebuild valuation and consider the current cost of rebuilding a home in their calculator.
QV - which is the main issuer of Council Valuations - normally determines the house value - based on when the house was built and then depreciates the value of the property over 30 years. This is why if you go in their site- your house which was built 15 years ago - may have an RV of $1.1M - it then shows your land value as $1M and your house/ fixtures is 100K even though you know from your insurance calculation it would cost 600K to rebuild today.
Your house/ fixtures valuation will increase if you have either recently built on the land for the first time or you undertake renovations. The amount then listed in your total valuation would be the amount you paid for the renovation or build and this is then depreciated over the 30 years.
When house prices fall (as quickly as they are falling now) then its the land value amount that will decrease - not the value of the fixtures (although these fall every year by the depreciation amount - but this will be relatively small vs the decline in the land value)
Thanks for that. Very helpful.
Both, but more the land value.
Where's the guy who had been repeatedly mocking me for not borrowing a million dollars a year and a half ago? Seems to have gone very quiet lately. Only the dumbe... I mean, most dedicated spruiker remains.
How much do you think you would be offered by first tier lenders ... as in right now
Back then I had pre-approval for a million. Today I'd maybe get 60% of that, despite my salary going up 20%. I haven't asked though, not looking to buy just yet.
That is my point... can only borrow 600k down 400k yet the 1.3m house that you could afford with 300k deposit last year is now 1.1m and requires 500k deposit. Is that what you would call winning
Not losing most of my equity and not having my mortgage payments increase by 50% for the same home is what I call winning.
Edited:
The narrative at the time was to fix for just 1 year, as RBNZ was telling retail banks to prepare for negative rates, a crystal clear signal that rates will be going down down down. I'd have fixed for 1 year like most people did. So I'd now be paying a few hundred dollars more per week for the same house, which would be in fact depreciating more per year than my annual salary. Doesn't sound like winning to me.
The RBNZ has a lot to answer for. It sucked a lot of people in with that "negative rates" narrative.
Well done! You've inadvertently stumbled on the answer to your own hypothetical. The prices are in the process of adjusting sharply downwards to meet the drastic reduction in borrowing power, it just takes a little longer as housing is so illiquid.
Prices well above his purchasing power dropped 200k. His purchasing power dropped 400k. As banks and govt go conservative and restrict borrowing it is a smaller group with the readies that are able to buy, which explains the drop in turnover.
If CJ is ready to buy a home now, he has to cough up even more and that's the ironic thing for fhb during a downturn
I agree with your current assessment - but contend that prices will continue to correct until they are back in line with the new borrowing environment (actually history suggests they'll overshoot to the downside first). In the meantime, he's avoided torching $200,000 of borrowed cash.
I realise you don't know what you are talking about. If you did then history would be on your side
"(actually history suggests they'll overshoot to the downside first) "
Sounds a bit like a Pendulum Swinging !
Why would you need to borrow $1m for what sounds like a first home? Surely something around $800k for a first home, less 20% deposit - so borrowing of $640k. At a rate of 5% that's $1,600 per fortnight over 30 years. If you think you are smart enough to predict the bottom of the cycle then good luck to you - but you are going to need to pull the trigger and buy at some point...all the while funding a property investors retirement via weekly rent payments.
Really? Am I funding my landlord's retirement? I thought that the capital depreciation on my rental has been outstripping rent for months now...
Think long-term, it's not all about the last 12 months.
Fitzgerald the house prices have only started the journey down anyone who buy now will lose deposit by this time next year and even if you miss the bottom it won’t go up quickly again for years.
all the while funding a property investors retirement via weekly rent payments.
This is a typically emotive argument without concrete financial reasoning to back it up.
If you delayed buying by renting over the last 18 months, purely from a financial point of view, you're far better off. Conversely, a landlord who bought 18 months ago, has eaten into their retirement, not funded it.
If you think you are smart enough to predict the bottom of the cycle then good luck to you
That works both ways though, you can use this reasoning to delay.
Comment of the day and Im a bear. For me a fhb would do well from 2023 onwards, not now.
Try 2024 at the earliest.
I have a very specific area in mind where I want to live. I don't want to buy a house to "get on the ladder". In this area, you won't get *anything* for 800k. Well, not back then anyway. Maybe this will change very soon...
At the moment I live in a decent typical FHB house in that area for 600 per week. My mortgage would be twice that for the same house. Add rates, insurance and maintenance and suddenly it all makes sense.
all the while funding a property investors retirement via weekly rent payments
- Assuming they bought 3+ years ago, perhaps. Even then not by much if they have a mortgage on it. As I mentioned above, I'd be paying about 1200 per week for this house if I bought it last year. Probably around 1000-1100 if I bought it 1.5 years ago.
To give him some rare praise, 'former spruiker' Yvil has turned DGM.
Although he still loves TA.
All the lords of the land will jUsT nEeD tO pUt ThE rEnT uP 🤪
Believe it or not, this still seems to be the narrative in the general public. Then you see the posts in the property investor FB group from Wgtn landlords...
Dripping wet with sarcasm. Anyway, what do you think happens to the commercial rents as a result of inflation. That's right, correct. So now what do you think resi rents do
Crash even faster as the commercial owner is now out of business and cannot pay his resi mortgage.
Good job all the office staff can work from home like they have in the last two years then. All I see in the commercial market is stories of people massively down sizing their leased footprint. Smaller footprint make it easier to relocate to a less idiot commercial LL.
We just got a 75% rent reduction for our office space. Anecdotal evidence of similar deals happening all over the North Shore. WFH is the new norm for IT workers.
Putting the rent up might sound like the solution to all problems...but if values are falling doing so could result in rent freezes and nobody wants that .
'The national median 1.8% lower than July last year' ... Not rocket science that folk that bought at the market peak are gonna be feeling some discomfort but overall its likely indicative that the peak values wont hold and to be fair their might still be some give yet .Nice having crazy high values but cementing them in is another thing. Rapid gains have to prove themselves over much more than a few months .
"We are in the easing part of the market cycle"...REINZ Chief Executive Jen Baird said.
All these talking heads who are pretending that this is a normal cycle.
They are all pretending that they have seen this before, that this is cyclical and that they can extrapolate past data to predict what is happening here.
This is not some normal little property cycle. This is the big one. The bursting of the big puss filled boil that is the NZ property bubble. The floor is a long way down... 50% down or more. Buckle up.
"50% down or more" - oh, just wait and see what happens when the first Mainstream Bank sells a 7% mortgage and breaks the Seal of the Scroll. The Prophet has a treat for you.
Agree. And this is not a sign of a normal market cycle. The massive gains and now the sudden drop from the market peak is the sign of a cantankerous market, one which has a significant bearing on the wellbeing of the entire nation.
The attempt to run the country on a "wellbeing budget" was completely negated by the market madness that started two years ago, and it was always destined to hurt a lot of people on the way down too.
The attempt to run the country on a "wellbeing budget" was completely negated by the market madness that started two years ago, and it was always destined to hurt a lot of people on the way down too.
Disagree. The "madness" was already in full swing before Covid. You're probably looking back to around the early to mid 2000s when it really started kicking in.
True! But the covid bonanza lifted things to a new level of stupid
Prices rose 30% in a year, yet as you say people pretend it's normal and cyclical. I guess they think prices will just fall 23%, reversing that 30% fall and then flat line again, like negative sentiment will just disappear and people will say "Great we're back where we started let's pile in again".
people pretend it's normal and cyclical. I guess they think prices will just fall 23%, reversing that 30% fall
I think you overestimate people. Most think that prices need to fall 30% to reverse the 30% rise of last year.
When prices have fallen by 23% percent, many of those <sarcasm tag> super smart, savvy landlords and investors </sarcasm> will go: "Well, I've still kept 7% worth of the past year's gain! Not bad at all.."
I think you overestimate people. Most think that prices need to fall 30% to reverse the 30% rise of last year.
Only needs to fall 23%.
Account for inflation as well.
Account for inflation as well.
If you account for inflation, how you really need to frame this is share of h'hold wallet weighted to purchasing power. If you take that approach, house prices have much further to fall.
I was simply considering that even if the asset price remained the same in dollar terms from 12 months ago, those dollars are worth ~7% less.
Too simplistic (genuine question)?
Yes. It is too simplistic. People need to snap out of the mainstream thinking as to how inflation works. If incomes are rising faster than inflation, it is possibly true.
But also CPI inflation only affects the portion of income that is not put towards a mortgage.
If 40% of your income is to the Mortgage, then 60% is CPI. A 7% CPI inflation = 4.2% inflation against your income. If you're fixed for 5 years for arguments sake, a 4.2% pay rise will compensate for 7% CPI.
Yep, I agree. The maths itself is spot on. But most people's maths are not, actually, spot on.
So those who understand this 30% up vs 23% down fact will need to be patient during this so-called 'correction/soft-landing/slight weakening' while waiting for the penny to drop. People are notoriously slow to catch on during property crashes.
It's very basic math.
Looking at the chart above, house prices still need to fall from about 800k to 600k to go back to 2020 levels. Basic maths says another 25% fall needed just to get back to house prices we used to consider unaffordable.
So you’re calling a 50% + drop? Median sitting at 1.1m in Auckland, presuming build costs remain steady, sections will be say 50k? Taking it back to 1990s levels.
Have build costs (margins) just followed up the market up? You'd have to be an idiot if you were in charge of price quality at Winstone Wallboards or any of the other manufacturers and didn't adjust your wholesale price inline with house price increases. There's more to setting the price of materials than just "cost + ".
Watch what happens to the price of a sheet of GIB if nobody is buying any.
1.54 million was the peak in Auckland. And yes I can definitely see 50% drops from peak.
There's no way prices will fall by 50%.
They could fall 25-30% though, which would be very significant indeed.
Are you talking real terms or nominal terms? I think there's a chance prices could fall by 50% in real terms.
Say 30% nominal fall (we're already halfway there and panic hasn't set in yet)....and then 2-3 years of 7% inflation in the mix....there you have a 50% price fall in real terms.
Or panic could really set in and we have a 40% drop in nominal terms...with faster than anticipated disinflation resulting in emergency OCR cuts again so only 18 months of 7% inflation.
Nominal.
So yeah 40-50% in real terms is very possible.
But I think Fitz was referring to nominal prices.
Once nominal price falls, across NZ, are down 20-25%, we'll see OCR cuts. That will limit the extent to which further declines occur.
That's the big assumption huh - my only caution would be not to underestimate the animal spirits involved in these types of events.
It appears you assume that rate cuts will stop price falls.
If you look at other property bubbles around the world, this isn't a solid foundation to justify a view from....i.e. dropping rates failed to stop further falls for a significant period of time...its like a snowball that if it gains enough momentum (like the price rises) can take a long time to turn around in either flatter, or rising prices once more. I watched this first hand in the US as their property bubble burst....people didn't want to touch property even if lending costs were dropping....because they feared prices would fall even further and be able to buy in the future at a cheaper price. If that narrative takes hold here in NZ watch out! And if you observe many forums, that is starting to become a much more commonly held view. Could be a sign..
Not saying you're wrong...just saying that you might not be right.
Good points.
By the way, I never said that rate cuts will stop price falls. But I do assume they will significantly reduce the extent to which they fall.
But I could easily be wrong.
Yes I guess its our turn to 'wait and watch' as the central banks do their thing.
The fact that we will be forced to drop rates will mean the economy is in bad shape....that is we will have rising unemployment...so whether dropping rates to save the housing market counteracts the rise in unemployment and debt defaults....I guess we will see.
As it stands, the low unemployment is bad for house prices (opposite of what you will hear from bank economists) as it gives the RBNZ the mandate to simply keep raising rates until inflation is back to where their mandate stands.
Perhaps the leveraged spruikers should start praying for widespread unemployment so that their debt costs reduce with falling interest rates - while at the same time their renters stop paying rent as they lose their jobs? (50% sarcasm).
Ben new builds will be toast. The housing market is toast like I said to you yesterday the market will only find bottom when average wage couple can purchase a home.
HPI is where the real results are!
- Auckland City vs. PEAK -17% vs. YA -11%
- Franklin vs. PEAK -9% vs. YA +6%
- Manukau vs. PEAK -18% vs. YA -9%
- North Shore vs. PEAK -13% vs. YA -4%
- Papakura vs. PEAK -15% vs. YA -4%
- Rodney vs. PEAK -9% vs. YA +1%
- Waitakere vs. PEAK -17% vs. YA -8%
- AUCKLAND vs. PEAK -16% vs. YA -8%
No wonder it's been referred to as a well-managed correction or, in economics-speak, a "soft-landing" -TTP
Rodney also only peaked 5 months ago compared to the other districts 8 months ago, so all the Auckland districts have a comparable annualised rate of decline between 20% - 25%.
Excellent point. If you just look at the total falls since peak it paints a very messy picture, largely because the market peaked at very different points in different regions. When you annualize the falls since peak you start to see a much clearer trend:
Nice Miguel. Love your analysis.
Nice work! I think we're all likely to have the same spreadsheet, it would be handy if Interest.co.nz maintained a time series HPI table like they do with rental yields and so on.
Great work, Miguel. Thanks very much.
I'm hoping you're also updating your graph that overlays the Irish, Japanese, Spanish and American crashes with where NZ is tracking in terms of falls? I would much appreciate it if you'd be willing to share that again - as I'm sure many others would too!
Akld down $200k from peak, another $250k to fall by this time next year. lock it in!
"Akld down $200k from peak, another $250k to fall by this time next year. lock it in! "
I suggest you bring that forward to December this year !
That's almost half a million smackeroos. Wonder what that does to the wealth effect.
It will reduce the wealth effect by many simoleons.
I notice the NZ Herald are now putting these stats behind a paywall... hardly surprising.
The Nanny Herald are bought and paid for by the Vested Interest Brigade !
Price slump revealed: Big cities' house prices down more than 15%
RBNZ and all the bank economists told us it would take at least 18 months to see a fall this big, and most only picked a decline of 10%. We got here in a little over 6 months. This is an historic moment.
Bank economists are worth their weight in manure
Best I've heard all day CJ !! ......that is worth it's weight in gold :) ......yet the "sheeple" absolutely lap it up, totally "unbiased" commentary from these clowns since the GFC !
I'm disgusted by this comment.
As a farmer I use lots of fertilizer of varying sorts and qualify. There's no way I'd spread economists on pasture and actually expect positive results.
Well speaking from experience while trying to buy an Auckland property over the last few months is that prices have not really crashed at all on desirable quality houses in good locations with a view. The "Good ones" are still being snapped up. NZ may suffer from over priced housing but it sufferers even more from a pile of crap on the market. Really nice houses are still selling no problem.
https://homes.co.nz/address/auckland/ponsonby/75-islington-street/O8Goj
Bought for $2.7m in June 2021, sold for $2.4m less than 12 months later. Nice house in Ponsonby.
The June 21 RV was $2.6m so what ? Properties we are looking at are sub $1.6m and vendors are still wanting $200-300k over their June 21 RV. Nice house ?Maybe those old rat infested Ponsonby villas were never worth that kind of money in the first place ? You have to take every house on a case by case basis, no good just looking at overall numbers with your head stuck up your ass, you need to be in the market as a buyer. Just incredible at what people are prepared to compromise on just to get the "Right Address".
I'm seeing the same. BUT of those wanting over the 2021 RV that I've looked at, none at all have actually sold in the last month. And for the couple of months prior to that only a couple. They're either still for sale or the listing has been removed.
Realistic sellers are now basically getting a little over the new RV if they actually want to sell. When you ask a RE what it sold for and they start replying "Still over the RV" you know they are talking 10's of thousands not 100's of thousands.
Yes of course this is to be expected. When bread is your only option and is in short supply, the price is very high and the price difference between fresh and stale is very low.
But when the demand lowers, then at the same price you can buy fresh bread and the price of the stale bread falls dramatically.
The next step in the cycle is that even when there is no demand for fresh bread, then it too will fall until the supply equilibrium is established.
The bottom of the market is always the first to fall out.
Those who bought at the bottom give the next tier up excess cash to go and spend excess cash on the next level up. As that excess is pulled out of the market from the bottom, the following tiers start collapsing as well. Wait and watch. Without the FHB's to throw on the debt Ponzi, everything starts collapsing, as Kiwis simply don't earn enough money to pay these ridiculous prices. It has all been propped up by cheap debt and one fool paying another fool more money.
Key event on the back of 2022 will be the documents from the RBNZ showing what DTi will look like. Anything that limits farming debt at the expense of society gets my vote.
The national median is now 1.8% lower than it was in July last year, the first time it has fallen on an annual basis since July 2011 and that means all of the capital gains that occurred in the last 12 months have now been wiped out
Here we go, house prices lower than the same month a year ago, and the fall is going to continue, although I still don't think it'll go down 30% yoy
I believe this link has been posted here before, but it's worth repeating....
5 Years of The Irish Times Headlines Related to House Prices
Perhaps TTP et al need to sit down and look at these 2 links and use all their "business acumen" & "critical thinking" skills hahaha and come up with at least 3 points as to why "it won't happen here, we're nuzullin'. were diffurunt" !
If it eventuates that we are not diffrunt to Ireland, then the internet is full of rather bleak articles on what we can expect:
Ireland The Rise and Fall of the Economy, Real Estate, Development
Just got a lovely take on the REINZ reports from an ASB Senior Economist in my inbox:
There was across-the-board weakness and faint signs of the downturn accelerating. From this perspective, the data were marginally weaker than expected, but we haven’t changed our forecast for a 12% peak-to-trough fall in nationwide house prices.
The REINZ HPI, our preferred house price measure, fell 1.4% m/m in July. That dragged annual house price inflation into the negatives (-2.9%) for the first time since 2009, and brings the cumulative decline since the November 2021 peak to 8.1%. The July fall in the HPI was a little larger than the prior three months (-0.6% to -1.1%) but the house price correction to date nevertheless remains very much in the “orderly” rather than “messy” camp. House prices are only back to where they were in June of last year, and are still 30% above pre-COVID levels.
I think he must be reading the May report because July has the national fall from November 2021 at -10.9%. Not a lot of wiggle room for his 12% peak to trough prediction.
Popcorns have started to pop
It's a hot housing market out there... it helps if you buy an eHaus
https://www.trademe.co.nz/property/residential-property-for-sale/auctio…
2 houses have sold on our street this month, will be interesting to see what price they got. One sold at its first auction, another took quite a few months. But I guess there are still some buyers out there...
Ive been trying to find out what a house in my street sold for, Im guessing the RE agents can cover up for a while, the pair that sold it have another 2 listings in my street. Everywhere I look the sale price is TBC. My assumption is way lower than they would like it to be
My wife and I are working through a house sale for an elderly friend who has recently moved into a rest home in Napier, she has no immediate family.
At the start of this year the listing agent thought the small 3 bedroom home would have been worth $680,000, on the market now for $625,00, only 2 couples through the first open home last weekend which surprised me as it's in a good area.
It is interesting to see all these opposing comments, but the good news is there is a moment in time coming when you will all agree with each other.
And that is, at the bottom of this crash, when the property owners will celebrate (those that survive) no further falls, and the potential FHB will celebrate the best time in the cycle to buy, then you will all be of like mind, ie all looking forward to the next boom in prices.
Except, what if we changed the rules so house prices now were stable and only rose with the general rate of inflation and that affordability relative to come was now stable for generations to come, just like it use to be in NZ and still is in many overseas jurisdictions.
Who is willing to accept that? Are we still all happy?
Sure. Getting the speculative yoyo out of the housing market will deliver a more stable housing environment for all. The speculative will make less money but no great loss as they appear to bend every rule possible to avoid tax.
I remember patiently trying to explain that Auckland being priced higher than cities like London, Sydney and Melbourne was a massive red flag that it was an enormous property bubble.
A lot of people, particularly those who have never lived abroad, became hostile upon hearing The Truth.
Now the magnitude of the stupidity is revealing itself, just as Minsky taught us that it always does.
Auckland is not a world-class "global" city. It never was, and never will be. There is, in fact, almost nothing of significance happening here.
Despite what the real estate spivs and shysters try to assert, that million+ dollar terrace shoebox in Massey or Manurewa is not going to provide a dream lifestyle just because there is a Pak N Save ten minutes drive away.
That lousy townhouse in Hobsonville is actually not worth two-million dollars just because Doris puts up a K-mart gazebo next to the old aircraft hangers on Sunday and sells home-made bread for $12.
Instead of listening to the oral flatulence of the vested interest brigade, astute people would have been asking the question. Is this place actually providing anything worth committing financial suicide over?
Thank you BL , great comment .....been to 50 countries and still don't understand the "hype" around Auckland ? - sure there are some good beach properties (that are going to face insurance issues with rising sea levels) and some nice "leafy suburbs" houses that are now fighting for their lives not to be "built out" next door by all and sundry. While the rest of Auckland is very "ho-hum" , while TBH in some parts quite depressing.
Glad I left the Auckland market in 2017 ! :)
In my opinion (and I've lived in a number of countries and cities, and travelled very widely), overall, Auckland is a very nice city - ANY city has plenty of crappy areas.
But I think Brock's key point is that Auckland is NOT a world city, so does not justify world city prices.
Always thought it's a shame that international visitors don't, by default, get to fly into Wellington instead of Auckland, as for its size I think Wellington is world class. Most of the foreign visitors to NZ that I personally know, and there are many as I've lived abroad for 15 years, are quite underwhelmed by Auckland.
I disagree with this I have travelled to many places and Auckland is a great city and comparing to Wellington which I like is a bit strange. Wellington is a small town, nice but not a city. Auckland is a gateway to Tauranga, Rotorua, Hamilton, Coromandel and Northland. Not to mention business being the largest city.
It does not deserve House prices equivalent to New York, London, Paris, and other major cities, but that is a different argument.
I don’t agree. I lived my first 20 years of my life in Wellington. It has a horrid climate and many parts of the CBD look like they never left the 1990’s. It’s also full of government bureaucrats and pretentious ‘creatives’.
HM .....I am talking about "value for money" when you buy a house in Auckland....whether a city is "nice" or not is another story. I have seen in the USA, for the same money in NZ dollars, where you would get a lovely 6 bdm 4 bth house on 3 acres, only 25 miles from the Whitehouse - while in Auckland that same money would of bought a old 4 bdm house in Avondale...... so same as Brock and agree that Auckland is not a world city ,while that's why these prices are just "ridiculous" in anyone's language.
I own a property and it doesn't worry me if they fall - you just buy and sell in the same market. However, the best thing about prices falling is that more FHB's can get into the market and we can finally run the country economically, where house prices are of little consequence, so we can concentrate on so many other things.
It’s very hard to compare cities. What do you get in Manhattan for $1 mil? I would say like for like properties are much cheaper in Auckland than Sydney for example, you tend to get a lot more land here than there. You can get a 3 bed house on 800 m2 10km from the city for ~1mil in Auckland, I don’t think that exists in Sydney (I could be wrong). Not saying Auckland is cheap or even anywhere near reasonable, just saying it is hard to compare.
Re-read my post. I said Auckland is a nice city, but it is not a ‘world city’ that justifies its crazy prices. It’s very overpriced.
Auckland has always had a Walter Mitty complex, or should I say the Mayors of Auckland in particular.
Great comment BL. Unless you fetishize the free stuff in the country like going to the beach every weekend, which can wear thin in winter, NZ can be tough.
How long before the muppets at ANZ provide *yet another* house price decline forecast
haha
Anyone into technical analysis on charts? If so, where would you see the supports for the housing market and potential bottom?
I'm not into TA but if you tell me your starsign I'll read you your horoscope.
Haha yes its a bit like that isn't it...but its hard to see where the price floor might be in a market like ours...2019 prices? 2015 prices? 2008 prices?
We've managed to avoid a price correction for decades now which many other markets have experienced.....so how do you tell where we bottom out if the current trend continues?
If you follow the trend from the 1970's Corelogic HPI through to the early 2000's (i.e. before we starting bubbling and house price growth detached from income growth - the fundamental cash flow driver that can be used to value this asset class), then prices could fall substantially more than what many people think is possible. Not saying this is going to happen - but just saying that it is a possibility that should be considered.
Corelogic house price index | interest.co.nz
If the 1974 - 2002 ish trend line is the real, sustainable rate of property price growth, and the 2002 - present has been a speculative fueled bubble (which it might be), then prices could fall 50-60% to revert back to mean - which would also be aligned with long term affordability ratios. Do I think this will happen? Not sure......could it....yes it could.
Would I risk a million dollar mortgage on the possibility of being wrong? Hell no.
It's a tired trope, but even from the 1970s property in NZ was doubling every ten years. Look at the graph you linked, the scale is all scuffed because of 2017-2021 but if you mouse over and read the values for a given 10 year period you'll see it's doubling. That isn't a sustainable rate of property price growth.
Both Ireland and Japan dropped 64% from peak. We're far worse than Ireland were, and I think about equal with Japan (which I think were pushing 14x income - but were their households dual income like many of ours are? - again anyone feel free to correct!).
I could see desperate immigrants coming here from poorer or less stable countries, but none of the type we need as our pay rates are simply too low to compete. But that will only prop up the rental market, and then only if more arrive than leave.
Those holding large amounts of debt against housing or wanting to retire on their property portfolios in the coming years need to start praying for rapid and imminent deflation - giving an excuse for more QE....but even then...that is only a can kicking exercise to push pain further into the future at which point when reality arrives (like it appears to be now) that the pain experienced is of an even higher intensity.
And we may find that central banks are now gunshy when it comes to rapid rate cuts and money printing after the scare and tarnished image they have after the events of the last 12-24 months.
Holy cow. Is that a 4.7% drop in a single month? Man, that's seriously tumbles for a real estate market.
The "interviews" in these articles always crack me up:
First-home buyers: Should you buy now or wait for prices to fall further?
They read like one of those Sesame Street books you use to get your three-year-old to brush their teeth: "look, honey, Elmo's brushing his teeth! You should too!".
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