Barfoot & Thompson, Auckland's dominant realtor, has reported a strong finish to the year to a weak year, enabling them to report 8576 sales in 2023, marginally more than the 8469 in 2022, and the second lowest annual sales level since 2010.
They sold 830 properties in the month, more than in eight of the other 2023 months.
These December sales were almost +60% more than the 527 sold in December 2022, but far less than the 911 sold in December 2021 and way less than the (record) 1479 sold in December 2020.
Listing levels were low, with them adding just 666 properties in the month, the lowest for a December since 2018. They now have 4383 listings on hand, about an average level for the past two years but notable more than the five or ten year averages.
These recent low levels of listings enabled them to record a very low drop-out rate (listings that went off their books unsold) of 6%. (The average per month over the past two years has been 14%.)
Apart from last year, this is the highest number of listings they have started the year on for more than a decade.
Median prices have held up, as have average prices. In December the median was $1,045,000 and up +2.7% from November. But that was still down -2.1% from December 2022. Recall, the peak was November 2021 at $1,240,000 and median prices are still -15.7% below that level.
While prices have picked up significantly since August, the rise has been steady and gradual, with buyers being selective and price conscious.
Barfoots also said they see improving interest in rural and lifestyle block properties. Rural and lifestyle property to the south of Auckland was in heavy demand, while in the north they undertook a far higher number of appraisals than is normal at year end.
Barfoot Auckland
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62 Comments
Yay...
We are back on track !
Also I suggest the RBNZ should consider lowering the risk-weight of 30% of mortgage assets - so that the banks can create money more freely and as a country we can move forward. This would make sense as there is actually 0% risk in this ponzi , if we follow like this.
Also I suggest the RBNZ should consider lowering the risk-weight of 30% of mortgage assets - so that the banks can create money more freely and as a country we can move forward. This would make sense as there is actually 0% risk in this ponzi , if we follow like this.
You understand well young Jedi
The graph above (select Average Price) quite neatly shows the effect of Auckland Unitary Plan of 2016 (AUP2016) with prices flatlining after its introduction ... 2016-2020.
The AUP2016 massively increased the zones that allow high density housing and most of this newly zoned land is still single unit dwellings. (The NPS-UD and the MDRS increased it further.)
Where will Auckland dwelling prices go in the next 20-30 years adjusted for inflation?
Nowhere! There's a heap of underdeveloped and/or underutilized land now available in Auckland.
If you doubt this, I'd love hear why. No one yet has put forward a plausible theory as to why the price flatline between 2016 and and 2020 won't just reform.
Yes I think the Unitary Plan had an effect. But so did the surge in prices 2014-2016 which resulted in profound unaffordability, limiting further gains.
What did the HPI do from 2016-2020? That will be more revealing than median prices, which would have flatlined to at least a certain extent because of the masses of small townhouses built between 2017-2020.
Without having the data in front of me I would guess that ‘like for like’(ie. HPI) prices rose circa 15% between 2016-2020.
The HPI for Auckland was also more or less flat between 2016-2020. I agree with Chris that the Unitary plan has had a massive effect. But I am not sure if I agree with him that it will continue to have an effect. As far as I can tell anecdotally, all of the properties that can be practicably intensified under the unitary plan have already happened. Further intensification will be more expensive to achieve than the low lying fruit that has already been exploited.
The majority of Aucklanders are in favor of higher density. (See AC's various surveys on the matter.)
And, counter to what you say, that includes the MDRS. (Again, see surveys.)
The MDRS would drive dwelling prices down by 10's of thousands because no Resource Consents are required.
An extremely noisy and horrifically ill-informed minority is against the MDRS. But media just loves these pearl clutching morons so their whining gets amplified way beyond their numbers.
The THAB zone already exceeds the MDRS by some margin. The next zone down MHU (Mixed Housing Urban) is very slightly smaller then MDRS but is often exceeded. The two zones together cover slightly less than half of Auckland.
Auckland may opt out. But mainly because a) they're very close already, and b) their 'planners' love the Resource Consenting process where they can lord over the property owner while waffling nonsensically and inconsistently about highly subjective b.s.
Sorry. You'd be wrong.
Only about 3% of newly zoned land has been "exploited". If you doubt me, pick any areas in Auckland zoned either THAB or MHU, or even MHS, that's 60% plus of Auckland, and use a mapper (AC's tool has good satellite pictures or even Goggle maps on satellite view) and you'll see.
The 'low hanging fruit', from a developer's perspective, comes into the market like a dripping tap. New gems come to market with unceasing regularity and there's plenty of it now. Back in the boom, prices were ridiculous, but now? Bargains aplenty and almost all pass under people's radar. (People focus too much on the house rather than the land and it's zoning.)
Where will Auckland dwelling prices go in the next 20-30 years adjusted for inflation?
So they will indeed be going up in nominal terms then? So better to lock in todays nominal price (or maybe wait a few months till interest rates start dropping) and let inflation (including your wage inflation+ career progression) eat away at that than buy in tens years time at a much higher nominal price and lose that advantage. :)
Rents need to almost double to pay interest.
If property is only going up with inflation and if interest rates are staying high then I would wait for now. But my personal opinion is that inflation is well dead and interest rates will come down, in that scenario I would buy now.
What about over 20 years? Rents generally increase over time, but not the mortgage principal amount. Only the rates/insurance/maintenance are subject to inflation which are roughly 1/3rd of what rent generally would be at any given time. Interest rates being the other potential issue, but high interest rates would generally imply high inflation.
The renter starts with an asset of say $200k (20% deposit on $1m house), whereas the home owner starts with an asset @ $1m. The time value of money deflates the burden of debt while increasing the value of the home, but creates an uphill burden for the renter to beat inflation.
A 7% return in the NZX50 compounded including the savings between renting & mortgage payments will struggle against 3% p.a. house price inflation. One is taxed and the other isn't. By about year 20 - 25 the renter will have enough to buy the $1m house (now worth $2m) if the above returns are consistent. But at some point the owner will be mortgage free, so "investing the difference" doesn't really apply anymore.
I'm not suggesting owning is better than renting, if you're confident that by renting and investing elsewhere you'll come out better off then I would recommend doing that. It's all crystal ball stuff and could go either way (house prices could absolutely tank, NZX50 could bull run).
Yesterday a comment was made about a couple renting a $600k townhouse for $540pw. The investor if bought at that price at 7% would be negatively geared by $30k.
It would take 18 years for that rent to increase enough to cover the negative costs of the rental at that interest rate and assumed 4% annual increase.
So yes, if you're looking to make money then it depends on where you see opportunity and weighing up the cost of your life savings tied up in one home rather than multiple other assets.
If you're looking for some additional money in the short term, to save, build a deposit or fund something self driven, it makes no sense to rush.
Actually thinking now - until someone has around 25% of their mortgage borrowing capacity, it might be a worse decision to buy. Until then saving money will boost your purchase price by 5x based on needing a 20% deposit. Every $1 saved is $5 added until you reach 25% of your maximum borrowing capacity (a 20% deposit), then it's 1:1.
All else about FOMO is just noise, people should be encouraged to research and plan their future rather than the false statement that somehow there will be a point where nobody can afford to buy. Because that thinking only enforces the eventual price collapse.
Let’s say it costs half as much to rent than own, and let’s say you put that difference into a TD paying 6% instead, that’s quite a bit of money you could be saving instead of waiting for rents to go up.
Normally it would make long term sense to own due to inflation paying off the debt and increasing the rent, but things are so far out of whack right now it’s hard to know.
Let's assume you're right. And that what has happened over the last 40 years repeats in the next 40, by 2040 the average house price will be ~$4m. The average household income will be ~$220k. Buying your first home will be impossible without significant down payment from mum and dad ~$3m and ~$1m mortgage. So then, investment property. Yield will be roughly double what it is today, maybe even 3-4x. Let's be extra generous and go with 3 times yield even though we're assuming salaries and wages will double. So a 50% real increase in rents. Aaaaaand math:
Yield: 2.25% or $1800pw
Mortgage: Let's say 3% just to really drill this home - $3900pw
Rates, PM and maintenance: I'll be generous and go $20k here, $400pw (I think rates will go through the roof at some point)
If rents increase at the same rate as wage inflation, that yield is 1.5% or $1200pw
If interest rates are 4%, that weekly payment is ~$4500, at 5% ~$5000. At today's interest rates, over $6,000 per week.
And then on top of all of that - you need to find someone to buy the $4m property and the bank to say yes.
For the numbers to add up in 2040 at 5% as they do today (they still don't add up today), rents will need to double in real terms. That means twice as many people in every single rental. To achieve this, the government will need to remove the laws preventing crowding in houses. The official cash rate will need to be negative. The accommodation supplement would need to be about half of our GDP.
How many people will be living in the streets?
Edit: Yesterday you made a statement about my opinion that none of this will happen, and that my opinion is "warped".
I think the obvious conclusion is that house price increases in the future will not look like those experienced in the last few decades. I expect housing to be a pretty miserable investment going forward - low income, if any, and limited capital gains.
Happy to continue owning my own home for the stability, predictability and ability to do what I want to it. Also happy to own some of the commercial/industrial REITs that are trading on big discounts and paying high yields. Wouldn't consider buying a rental at this point in time - even a TD looks like a better option.
So now you have answered your own question and maybe see the reason why Auckland is, A not the place to buy a owner occupier home and or rental investment property and why alot of people are moving out to the regions also for a better lifestyle and keeping more money.
Net internal migration is out of Auckland and has been for many years. Decades, it's nothing new.
Population increase in Auckland comes only from international immigration.
Lifestyle is a factor, but actually the regions do very well money wise. Sure there are some poor spots, but nothing much in comparison to some grim Aucklañd suburbs.
re ... "Wages simply do not keep up end of story."
The rate of wage increases exceeds the rate of inflation - fact.
Where cities increase dwelling supply to meet demand, either through higher density zoning or spread, dwelling prices stagnate while wages keep rising - another fact.
Sorry if those facts break your narrative. (They do however point the finger at how awful our NIMBY driven Councils have been / are.)
I agree in part. I dread to think where Auckland house prices would have been if it were not for the unitary plan. But the good effects of the unitary plan surely have an end date? As far as I am aware, our property is the only one that hasn't been subdivided on our street as greenlighted by the AUP. Driving around I see very few 1/4 acre sections like we used to 10 years ago. Auckland now has a similar density as other comparable cities. I don't foresee the Unitary plan suppressing house price rises any longer. Perhaps if Auckland adopts MDRS or opens up vast swathes of greenfield developments in Dairy Flats and Helensville? I expect Auckland will play catch up in the next ten years and will have higher capital gains than other regions. Not so much in 2024 though because of underlying affordability ceilings.
And even if the average house goes down due to increased supply, that doesn’t mean that your house(s) go down. If you buy an average 3 bed on 600m2 that is 10km from city, and they keep expanding until the average is a 2 bed terrace in Helensville, your house is all of a sudden way above average.
re ... "But the good effects of the unitary plan surely have an end date?"
Correct.
The good effects will have an end date. Actually, more of a 'tailing off' effect as the marginal costs of the remaining sites gets higher and higher. I.e. flat sites are long gone and hilly ones in outer locations are all that remain. And/or land bankers are holding up apartment developments holding out for absurd prices.
At the peak rate of new dwelling development from a year or so ago compared to Auckland population growth rates ... wait for it ... that's about 20 to 30 years away. Quite possibly more.
https://www.stuff.co.nz/life-style/homed/real-estate/301037376/heres-ho…
does not sound like sellers market
“Negotiation really depends on how realistic the vendor's asking price is. What we are seeing is more realistic listing prices, and when that happens properties are moving. It’s those that are trying to get year-ago prices that are having to lower prices.
“As a general observation, houses are selling below rating valuation – quite often 5% to 10% below – and prices are still soft and buyers are getting good deals.
Listings climbing, obvious dip for Dec. Lets see what the second half of 24 brings once debt holders can exit and avoid paying tax, especially if interest rates say around the new normal. Picking the listings queued up in late June to drop on 1st July will be immense. All before DTi kicks in requiring real tax paid equity (shudder), and a possibility of higher OCR with the removal of the unemployment mandate.
Lets see what happens...
The banks have a duty to consider how you will repay a mortgage once you have turned 65
Overpriced markets always correct we are already well off the highs.
Belief that the down cycle has reached its lowest point is based on hope rather than facts regarding affordability.
LOL. Use interest.co.nz's advanced mortgage calculator and test that theory.
Sure, the monthly repayments go down a bit but it's a serious case of diminishing returns.
Smart buyers will temper their wants and meet only their needs. They'll buy smaller (cheaper) and pay it off faster using term of 15 years or less. One paid off they'll look for something bigger that meets their needs and pay that mortgage down just as quickly. And so on.
It's called a housing ladder for a reason. Sad that too many want to jump the first half of the rungs and start in the middle.
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