Auckland's largest real estate agency is reporting strong sales in May but mixed price signals.
Barfoot & Thompson sold 916 residential properties in May, up 30% compared to April, and up 27% compared to May last year.
It was also the highest level of sales for the month of May since 2021.
However price signals were mixed.
The average selling selling price declined for the second month in a row to $1,182,630. That's down $30,198 compared to April, and down $44,865 compared to March.
That means the average May selling price was down $96,017, or 7.5%, from the December 2021 peak of $1,278,647.
Unusually, Barfoot's median selling price headed in the opposite direction, rising to $1,011,900 in May from $1,007,500 in April.
But the biggest concern at the moment is not which way prices are headed but the amount of stock on the market. And Barfoot's latest stock figures could signal a difficult winter.
The agency received 1695 new residential listings in May, well ahead of the 916 properties it sold.
That pushed the total number of properties it had available for sale at the end of May to 5763, barely changed from 5770 in April, and up 31% compared to May last year.
That means the current stock level is at its highest level in 13 years.
Barfoot & Thompson Managing Director Peter Thompson said the boost in sales over May was the result of vendors cutting their asking prices.
"Vendors have trimmed their price expectations in recent months as the summer selling season draws to a close and buyers have responded positively to the opportunity," he said.
And buyers have plenty to choose from.
"Currently, for every home being sold, there are another six on the market," Thompson said.
The interactive charts below show the monthly trends in Barfoot & Thompson's, sales, listings and selling prices.
The comment steam on this story is now closed.
Barfoot Auckland
Select chart tabs
•You can have articles like this delivered directly to your inbox via our free Property Newsletter. We send it out 3-5 times a week with all of our property-related news, including auction results, interest rate movements and market commentary and analysis. To start receiving them, register here (it's free) and when approved you can select any of our free email newsletters.
143 Comments
Totally anecdotal, but several places that were sitting unsold for months where I live have sold in the last 2 weeks. I understand that all vendors had to accept lower prices than they were hoping for.
Yep stuff still selling just without the frenzy. Mortgagee numbers still low although understand banks are being ‘friendly’ behind the scenes to avoid this where possible.
Once that OCR comes down it will be all-on again, lots of people waiting on the sidelines to jump back in
Central banks hold for too long ... A recession isn't guaranteed at this stage but it sure isn't looking unlikely.
Hi HouseMouse, you might not have seen my bit of personal happy news in another article. I'm re-posting it here as I'd like you to know how much the Interest.co.nz site, as well as the commenters such as yourself, meant to me over the past three or four years.
When I first came across this site (around 2020), I'd simply do a search on the word 'house' on property related articles. I had little financial background, so was (at the time) only interested in everything and anything that involved residential property. As result, your comments always came up in my search as soon as I'd read beyond the end of the article. This bit of serendipity meant that I've benefitted loads from your comments over the years - the vast majority of which have aged really well. Kudos!
by tuisbest | 24th May 24, 12:17pm
A bit of personal and exciting news on my side is that we bought a house in April! I found a great brick and tile that ticked most boxes (and then some) for a price we could, surprisingly, afford. We paid almost 10% under the 2017 CV adjusted for CPI inflation. (Yes, a pretty rough indication of value, but still the best I can put here).
The vendor already bought another place and was very motivated.
Although prices are likely to continue tumbling after the recent RBNZ's announcement, I believe this was a great find.
Finally, the kids can have pets and live in a decent, quality home with bedrooms painted whatever colours they want, I can hang beautiful paintings where I want and we can upgrade and renovate as we see fit. Not to mention, with a bit of luck, I never have to talk to a real estate agent (seriously, what is the real doing in there..!) again in my life.
I've previously thanked Interest.co.nz and all the generous contributors on here and can't but gush with praise for you all again. I tried to convince my partner to donate to Interest.co.nz (long overdue!) and we plan to do so soon as we've got the mortgage payments in place.
Thanks again, you guys and gals, for the all advice, the recons, the entertainment, and the invaluable information I've read here during our house-hunting journey that spanned more than 3 years.
Congrats on the purchase but are you serious in suggesting that commentators here motivated/inspired you to buy a house at this time lol?
Yes, lol!
If not for the commentators on here, we might have made the horrible mistake of buying in 2021 and would have regretted it ever since. The house we bought is a far cry from what we could afford back then. It's an actual, family house we're looking forward to moving to, as opposed to the depressing chicken coups, mingy new builds and dilapidated hovels we were viewing in 2021.
I don't want all our kids' childhood memories to be of us living in mouldy, pathetic rental shacks while saving up a house deposit, so we wanted to buy before they're adults.
Tui
Given his consistent inaccurate predictions, HouseMouse is the last person I would take financial advice from . . . and it is personally costing him. A few years back he rubbished ANZ that interest rates would go higher and claimed that interest rates would be back to 2 to 3% by last year (so why bother with the 2.99% for five years). He has put it out publicly that he had a $400/$500k mortgage and was going two years (presumably in the expectation for a return to 2 to 3%). That is currently costing him $12k plus annually ($480 fortnight) in after tax income each year for two to three years.
He will deny, call me a liar but I’m happy to back it up as well as provide other examples.
Anyone with any basic understanding knew a few years years ago that house prices were unsustainable and that the government extension of the brightline test as well as removal of interest deductibility, RBNZ LVR increases, and signals for increase in the OCR and bank mortgage rates were going to result in a fall.
Since nobody can predict the future, I don't expect anyone to be 100% accurate and it would be a bit silly to expect otherwise. I'm more interested in opinions backed by relevant facts or interesting insights, and arguments that make sense.
At the end of the day, we're all guessing. I'm sorry if some of HouseMouse's predictions are costing him money, but he's probably (and hopefully) winning in many other ways (such as not having bought in 2021, for one!). It is refreshing that he boldly shares not only his opinions, but also his actions - and it's easy to criticise in hindsight.
If people generally had a basic understanding of all you mentioned, the property market madness of 2021-2021 would never have happened and many of the Spruikers' comments on here wouldn't be so entertaining in hindsight. At the time, most people took financial advice from Tony Alexander and Ashley Church, for goodness sake. I mean Tony Alexander is probably more educated and experienced in finance and property matters than anyone else, yet he probably got it more wrong than just about anyone else.
The arguments of commentators such as HouseMouse made more sense to me in 2021 than the ridiculous opinions put forward by the likes of Tony Alexander and many other Spruikers. But you're welcome to take financial advice from whoever you fancy.
"I mean Tony Alexander is probably more educated and experienced in finance and property matters than anyone else, yet he probably got it more wrong than just about anyone else. "
2 December 2021:
19 reasons why there's no crash
https://ndhadeliver.natlib.govt.nz/delivery/DeliveryManagerServlet?dps_…
Some questions to ponder:
What did he not see? What did he miss in the $1.76 trillion housing market in NZ? What is the lesson to be learned?
This was similar in the Irish housing bubble - most high profile economists didn't know the red flags to look for to identify the extremely elevated house price risks.
For those unable to open the link:
1. Rising construction costs
The more it costs to build a new house the greater the incentive for people to keep searching amongst listings of existing properties and the greater their willingness to raise their bid price.
2. Construction delays
Shortages of materials, labour, infrastructure, and council inspection timeliness mean projects will increasingly be delayed. Concerns about delays will curtail the speed with which the housing stock grows whilst also encouraging buyers to turn back to searching for existing property listings.
3. Sunset clause activation
Awareness of the risk that some developers will take advantage of delays to exercise clauses allowing them to cancel agreements with off-theplan purchasers will also encourage some buyers to switch back to current property listings.
4. Construction firm closures
A lot of inexperienced, under-capitalised, underfinanced people have and will soon enter the property development sector. Difficulties managing uncertain flows and prices of materials and staff will cause cashflow problems which banks will not always be willing to solve. Closures and failures will inject a level of caution regarding new builds by new operators which will not dominate the sector but will at the margin encourage some buyers to switch back to looking for properties through listings – or confine themselves to the large and long-established industry players.
5. 165,000 migrants
The government’s recent decision to allow 165,000 migrants on temporary visas (including family members) to apply for residency visas, will open up the possibility of home ownership for some. This greater demand will be spread over a number of years, but it will nonetheless go some way to offset new government curbs on the number of migrants they will allow in.
6. Job security
The labour market is extremely tight and at some stage people will realise they have strong bargaining power and that there are many options beyond their current position. This will lead to New Zealand’s version of the so-called Great Resignation underway in the United States – though one aspect of that for us will be people deciding that if they’re going to shift for higher pay, they might as well make a big leap in income by hopping across the ditch.
Overall, once people realise they have high job security they are more likely to consider purchasing a home or investment property.
7. Backlog of buyers
The ending of the first nationwide lockdown last year revealed a surge in housing demand from the many young people who had been unable to find a property. While a lot of the backlog of frustrated buyers will have been cleared out recently by the stepping back of investors from March 23 providing space for first home buyers, there are probably plenty still remaining.
8. High household wealth
People’s wealth levels on paper have soared in the past two years as housing and other assets have soared in price. Feelings of high wealth are likely to encourage some people to remain interested in gearing into another property. But it pays to note there is a risk that the opposite effect listed above is larger.
9. High inflation expectations
People’s inflation expectations have increased. If people expect inflation to stay high, they will seek to move their investments into assets which tend to at least hold their market value as the general level of prices goes up. This includes property, except to the extent it is funded with rapidly repricing debt which might become expensive.
10. High test interest rates used
Over the past few years banks have not tested the ability of borrowers to meet debt servicing requirements at the rate they have actually borrowed at, but at something perhaps 3% - 4% higher. A substantial interest rates buffer is therefore in place which will cushion the impact on the housing market as mortgage rates go up – but perhaps never actually reach the test rates which were used when people borrowed funds in recent years.
11. Christchurch catch-up
The long-overdue catch-up of prices in Christchurch began in winter and is likely to run through the next 2-3 years. Affordability in our second biggest city is much better than elsewhere and some internal migration to there from up north, by young buyers in particular, is likely to continue.
12. Bank panic will pass
For the moment, banks are restricting credit availability more than is likely to be the case to house buyers over the coming couple of years. They have stopped low deposit lending in some cases for fear of breaching the new rule that such lending cannot exceed 10% of all new lending. Willingness to lend at less than 20% deposit for existing properties will return. Banks have also been scrambling to meet new requirements of the CCCFA and over time they will form more realistic opinions as to which expenses to include and which income sources to allow. Hopefully, willingness to lend to those on variable incomes and entering their 50s will return also. Banks are also voluntarily experimenting with DTIs to get their systems up and running for when such rules are officially imposed. Experience will make DTI application eventually more efficient.
13. Development potential
Soon, virtually all sections of all sizes will be subdividable and developable in our top five cities. This possibility will make property owners more willing to hold onto their properties through tough times.
14. Forecast declines wrong
All forecasts of house price collapses have been wrong, and it is notable that last year as we learnt about Covid-19, border closures, and lockdowns, no mainstream prediction of house price declines came close to those made during the GFC. Almost all those who have believed decline predictions in the past and held off buying have been worse off. Experience will make people cautious about believing forecasts of big price declines and they will remain engaged with the market.
15. Auckland departees
Covid-19 and soaring paper wealth from higher asset prices have combined to encourage many older people to activate their downsizing and retirement relocation plans years earlier than they had been planning. This effect is likely to continue through 2022 and 2023 and be of benefit to the regions which seem to have benefitted most so far from Aucklanders relocating – Bay of Plenty, Waikato, Northland, Gisborne, and Hawke’s Bay.
16. Auckland not over-priced
The last time the Auckland housing market faced “corrective” forces (ignoring the first lockdown) it was at a peak with prices well out of line with the rest of the country. That is not the case now and there is little reason for believing that our biggest city will experience a worse housing market in 2022-23 than anywhere else – in fact it may easily outperform a lot of the rest of NZ.
17. Higher listings will encourage buyers
Many people who would like to buy are not in the market currently because listings are hard to find. But listing numbers are already rising and will rise further as agents get less success selling to buyers without listing (friendly ‘phone calls), vendors reluctant to sell for fear of not being able to buy lose that fear and list, and existing investors take profits and slowly react to tax changes.
18. Frenzy freedom
Many people wanting to buy a property have withdrawn from the market, tired of stress in auction rooms and the expense and time involved in repeatedly assessing potential properties in order to bid for them. As the market calms down, auction rooms become calmer (they already are), and a summer rest is hopefully achieved, these buyers will slowly re-engage.
19. No taxation double-down
One week after the March 23 tax changes I started delivering this warning. If house prices are still rising above 10% per annum come March 2022 a majority Labour government failing to achieve any improvement in housing affordability will conclude it did not go far enough with removal of interest expense deductibility for investors. They might double down and remove all other expense deductibility as well. The chances of that happening are now very slim given the slowdown underway.
In summary, the ending of the prices boom is good news for first home buyers because listings are set to improve and price growth will be slower.
Its good news for good real estate agents as they will get more listings to transact. It’s good news for investors because the risk of additional unfriendly legislation has fallen.
Reminder of the warnings given by the RBNZ governor on the elevated house price risks:
1) Feb 2021: https://www.stuff.co.nz/national/politics/300238808/reserve-bank-govern…
2) March 2021: https://www.stuff.co.nz/business/124430525/adrian-orr-frets-over-soarin…
3) Nov 2021: https://www.rbnz.govt.nz/hub/publications/speech/2021/speech2021-11-02
4) Nov 2021: https://www.1news.co.nz/2021/11/24/first-home-buyers-encouraged-to-wait…
In light of subsequent house price changes, these warnings now may have a different interpretation by readers.
These warnings were similar to warnings by Civil Defense of a high risk natural disaster (e.g tsunami, earthquake, volcanic eruption, flooding, high winds, landslip, etc). People who chose to ignore those warnings potentially face the consequences of their choice.
People are free to choose, however people are not free to choose the consequences of their choice.
What a refreshingly light-hearted and astute comment :-)
You are quite hilarious. Hold one bad prediction against me like God keeping a score of people’s sins, yet somehow adore bank economists who are consistently wrong. And often very wrong.
Talk about odd. 😂
I also note that you consistently put down other people’s opinions in a pompous, derisive manner. Not just mine.
And it seems that you have no ability to move on. You are always the one bringing me up - not the other way around.
I almost feel sorry for you.
What a nasty little individual.
Buying 2021 was too late, you needed to be buying Q3 in 2020 latest as prices began to sharply rise and then you would have also benefitted from the very low mortgage rates that have been here for years with the opportunity to fix for 5 years at about 3.5%.
Wasn't 2021 way too late too? Shouldn't everyone have bought in the 1990s, when all the 'savvy' boomers bought? Oh wait, maybe some people buying today are so slow that they weren't even born back then, silly buggers.
Stop it. What happens next year when your cheap debt rolls off, and your 2020 price is already underwater....?
Well you would be wrong because my 2020 house is still way up. Anyone who bought in early 2020 is still way up, prices have still not fallen to those levels. Also factor in the interest you would have saved, the gain is even higher.
by Zwifter | 5th Jun 24, 5:12pm 1717564356
Well you would be wrong because my 2020 house is still way up. Anyone who bought in early 2020 is still way up, prices have still not fallen to those levels. Also factor in the interest you would have saved, the gain is even higher.
You need to have a chat to your local real estate agents, you are in lala land on make_believe st
Thanks Tui. Most people rubbish my comments 😂
I won't say 'most' people, HouseMouse, although saying 'some' people would be fair! And some of those who rubbish your comments write mind-boggling drivel, so bear in mind where the criticism comes from. 😅
Forums often become echo chambers full of like-minded, gas-bagging, back-slapping commentators (Herald's commentators instantly come to mind here), so it is refreshing when commentators support different and opposing viewpoints. It allows readers to weigh up conflicting opinions and insights from a diverse group. It can be hard to separate the diamonds from the droppings, but that keeps it interesting.
I was so relieved to find the sensible arguments of so-called DGMs on here during the insanity of 2020-2021 and it took away a lot of the FOMO, which gave my partner and me time to breathe and wait for the right time and property. And I'm not claiming that we're buying the property market bottom, but I think we are buying at a good time for our family.
Thanks Tui. Most people rubbish my comments
Going against the grain is not recommended for social inclusion in middle Nu Zillun.
No doubt his comments came up all the time. He used to bla bla bla every 5 mins.
You've got to be kidding me
Smart people getting what they can now ..
The 7.5 % price reduction excludes 17% general inflation during that time. Nor does it include the nzd vs usd ex rate which I think is about a 10% drop in the $ kiwi value. Be interesting to confirm this as it would mean in USD terms we are what 30+% percent drop in house values? And these values are still falling fast.
Jeez, that’s some effort…would be interesting to run those calcs on all investments…TD’s included, no argument about house prices & I’d guess like many we haven’t seen the bottom, but just this narrative to really push the point from a lot of folks on here is hilarious
pretty simple to calculate:
RBNZ inflation calculator: https://www.rbnz.govt.nz/monetary-policy/about-monetary-policy/inflatio…
Ex rate chart: https://www.xe.com/currencycharts/?from=NZD&to=USD&view=5Y
If one took their money, exchanged and invested in the USA share market for the same period.. i think a 20% average compunded growth - would be a financial disaster to hold NZ residential property? be interesting to check the numbers
Exactly. How is your 6% TD looking with 17% inflation?
If its in a term d with a view to a house purchase, looking pretty damn good.
And don’t forget the drop in the NZ dollar 😂
Very happy with my TD at present and it looks like rates will still be high come November when it rolls over. I have a bunch of digits in the bank and they throw me cash every month without needing to do a thing.
If interest rates remain elevated until the projected year of 2026, with a slow and staggered reduction thereafter, the prospect of price collapses becomes increasingly apparent, particularly in housing units lacking carparks, reminiscent of the risk posed by 'leaking buildings'. Additionally, the current challenges facing the coalition government in making financially prudent decisions exacerbate concerns. The apprehension among builders, compounded by the halting of KO, New Zealand's largest construction company, poses a significant threat to economic stability and investor confidence. These factors collectively portend a challenging period ahead.
I do not believe the RBNZ's projections, not for a second.
Orr will start reducing the OCR in November this year, by 25 bps, and he will continue progressively reducing the OCR to a more neutral level in the course of 2025, down to a level probably around the 3% mark.
If you look at current swaps, current markets do not believe Orr's projections either. Financial stability is also part of the RBNZ's remit.
Depends greatly on what happens overseas. The US won't drop rates for ages.. the voters are focused almost exclusively on getting inflation back in the target band. The same will happen here.. reducing the ocr anytime before mid late 25 is going to see local inflation via asset price rises and make life unaffordable for many poorer non asset owners all leading to significant social unrest.
Typically the length and depth of a bust cycle will be similar to that of the preceding boom.. for us the boom was used by rbnz to experiment with money printing, super low ocr and all at a time the govt closed borders... in effect the boom lasted way to long, assets price went stratospheric and inflation got way too high.. plus the govt kept spending... we wont be able to force another boom for a long time.. trying to drop the ocr to do so would simply lead to a longer and deeper recession when inflation returned.
Likely we will experience a crapp economy for a few years. Asset prices will drop much further... all of which is good for a better long term economy.
The main difference with the previous boom, is that a steadily reducing OCR in 2024/25 would sit alongside a weak NZ economy, improved supply chains, increasing unemployment and steady/rising net migration. Hence Orr may feel more comfort in cutting with minimal inflationary risk in the real economy.
Weight of HFL debt and economic headwinds continue to build. Will those meeting the market today consider themselves lucky in another twelve months time?
I think they will.
Will go down a bit more and then flat lining until 2026-27 IMO.
Chatted to an old work colleague, who is prospecting a move to Australia, Wellington sounds very grim with 5000 people already lost their jobs in the recent govt restructuring.
Considering what is happening to house prices in Australia, a lot of NZers will need to get their skates on and sell up while they can still get a price that enables them to buy in Australia. If they wait too long, they will become economically trapped in NZ and they won't be able to afford to buy a house in Australia.
so since January, the median house price in Auckland has gone up by 44k.
The sales rate is low and there is a lot of noise, but calling this a crash is a stretch.
People aren't generally calling Jan 2024 to May 2024 a crash, but have a closer at the data between Nov 2021 and Jan 2024. What is your definition of a crash?
Totally agree that Nov 2021 to August 2023 is a crash. Since then the median price has risen.
In the last 5 minutes house prices have barely moved at all! Market is as flat as the earth.
I'm not that interested, but am thinking there might be some interesting insights comparing shifts in the upper and lower quartile sales figures.
Plenty more room to go down:
- sustained interest rates (even if somewhat reduced)
- DTIs
- immigration drying up (or even running negative as the recession unfolds)
- large cohort of people cashing out due to age and needing cash
- large cohort of people seeing that prices can fall or be flat (less FOMO)
Anyone brave enough to say the bottom is in?
In any replies, keep in mind salaries and wages (for that that still have jobs) have risen quite a bit since the beginning of covid-madness in 2020. And also keep in mind that covid-madness also resulted in a mini-building boom so there is more supply.
I'll put my hand up. You can all pelt me with tomatoes later
I'm staying away, not even looking, waiting for the narrative to go mainstream negative and panic takes hold. We are not there yet.
Not the bottom yet. Unemployment still to come through. Tradies are only just starting to have to find work so I’d pick still 6 months off.
Just starting to see local Facebook groups peppered with "work wanted" posts from builders, landscapers, painters, electricians. As they say, its not the beginning of the end, but it is the end of the beginning.
Agreed. I would suggest six months of reality to unfold yet. If an overseas event kicks in, for example more banks start to fold in Europe or the US and inter-bank lending freezes other as they try to assess the extent of the lies on each other loan books, then 2015 prices are on the cards.
See what happens...
I'm not at all convinced.
Some of my previous predictions (right or wrong) over the last couple of years have been:
50% real decline peak to trough.
Flat through 2024.
Bottom in 26/27.
Good on you for quantifying your prediction. Not many do.
Largely agree re 50%, though expect it to reach that level at different times in different markets (Wellington being amongst the first - even as soon as end of next year).
This 👆
Nope - jobs retrenchment cycle has just just started and will drag out for the next 18 months or so. First of the rank is the govt sector then the knock-on will be on private sectors.
Yield curves would suggest we are still 12-24 months away from a bottom and recovery in an economy that would allow for rising asset prices.
In saying that, who know what insane intervention governments/CBs might come up with if we face a sharp recession and fall in asset prices if 2020 is a precedent (but then again if they do that once more - we are going to be even further up shitcreek with debt and inflation issues ie still in a very fragile position).
I'm in the same boat as you regarding how much water is still to go under the bridge based on the yield curves, 3mth-10yr. NZ property prices might have a fairly stable year and possibly tick up again over Spring/Summer but if it turns to custard overseas then I think we'll end up quite exposed.
Yes in my view the worst of the asset price destruction is still ahead of us, not behind us (if yield curves are correct once more, based upon their accuracy is predicting such things).
And here is where the US is currently at:
https://pbs.twimg.com/media/GPLbNMAW4AEwJXR?format=jpg&name=large
Note that I’m uncertain if the asset price destruction will occur in nominal or real terms - it could be either or both!
I don't think we have seen the bottom yet, feels like some realities are only just starting to kick in.
Having said that, I had a family member tell me I need to "Grow a pair" and buy an investment property the other day as National are "All about property investors", so clearly I have no idea what I am talking about.
Small minds = big problems
They must have meant a pair of bad investment decisions by the sounds.
I reckon we’ll hit bottom in terms of prices (HPI) August/September this year. Then we’ll oscillate around that bottom - slightly up, slightly down - until Spring 2025.
What forces do you see providing some kind of floor HM?
I think prices will keep dropping over the next few months, to the point where prices are ‘low’ enough to address misalignment between seller and buyer expectations. At that point the bottom will be reached, and prices will generally stabilise.
Further, while unemployment will rise, most will retain jobs and have good levels of job security.
HM - the issue I see with this theory is that the so called buyers may have just lost their jobs at the point you see as the bottom ie I think we are going to see rising unemployment over the next 6-12 months. This may see a flood or even more properties coming onto the market (see the PI FB page with numerous examples of people who purchased rentals in 2020-2021 who are now negative cash flow and topping up mortgages with own income).
The feedback loop could become quite severe where the recession causes job losses which contracts the economy even further while simultaneously distressed mortgage holder are forced to sell.
My personal view is that people are underestimating how severe this recession could become because of just how overextended parts of the economy became in the last few years (where incomes failed to justify the debt allocated to assets - the cash flows never justified the purchase price at anything other than 2% interest rates over the term of the mortgage)).
Also in the feedback loop are more people leaving due to the weak economy and the difficulty of making life work here.
The birth rate (TFR) is falling at a rate were it might end up being 1.4 for 2024 (down from 1.66 in 2022). Lack of family formation reduces the need for houses to rent or buy.
Could depend on the level of supply by late spring this year after 1st July when the bright line changes. I still think we'll see much greater supply come online but I could be completely wrong, most investors may be all ok to hold and weather it for longer until rates drop slightly.
I don't really get the narrative on the brightline rule change having a massive influence. Anyone who bought before July 2019 can sell anyway as of July. Anyone who bought after mid 2020 is most likely going to realise a capital loss anyway on sale.
So it really only captures a very narrow window of purchases between late 2019 and early 2020. This period was before the huge price spikes as well, so less chance of these buyers being under financial stress..
Most decent recessions in NZ wash ashore from the USA... We will already be in a decent recession when we get hit by the global factors.
My point is the unemployment rate won’t get bad enough to have anything more than a minor impact. In my opinion the rate would need to go to more than 8% to have meaningful impact. Although possible, that’s unlikely IMHO.
Anecdotal from my burb and workplace but the only people who would be FHBers are either leaving the country or happy renting because they think it's better value than buying.
For context I live in an affluent Auckland suburb full of lawyers, finance and marketing professionals and high percentage of skilled immigrants and my workplace is engineering / planning.
I could alway be wrong, but it feels like there is still room to drop (excluding some kind of intervention). There are very few tailwinds at this time.
Interesting to think about intervention as I've previously had this feeling that if things got really bad the government would introduce a new first home buyers grant to "help first home owners" but really designed to support the market like they did in Australia during the GFC.
But National has killed the Kiwisaver scheme which seems like they aren't interested in that sort of intervention - which is great to have a more free market.
If it falls enough FHBers will step in, its actually self regulating....
I'm picking...
- A general meander down, with each new market report bringing out the usual suspects to loudly proclaim "This is the bottom!"/"The slide is just getting started!" depending on the monthly direction.
- A very disappointing Spring/Summer 2024 season for all concerned who are truly in the market - note this excludes the many sideline commentators, who will derive just as much schadenfreude as they always do no matter what the market direction. A few bargains going from desperate sellers but otherwise things remain largely dormant-to-slippery.
- Status quo for next Autumn/Winter.
- Minor signs of life from late Spring 2025.
Yes I can’t see anything to give any uplift in 2024 so probably a meandering down seems reasonable.
Winter is coming.
I'm brave enough to say the bottom is not in :)
The market and wider economy have still not adjusted to the current interest rate environment.
Essentially this comes down to how quickly the economy can adjust and whether or not there will be stimulus added before that plays out. Without stimulus there is a lot to work through - job losses to come, some re-fixing still to be done, plans to sell only just being put in motion for many, businesses winding up, plans to emigrate, etc. The longer the downturn the more of this sort of thing needs to happen - the 'virtuous' circle that happened on the way up hasn't yet turned into a 'vicious' circle on the way down.
I expect to see prices maybe down a further 20-30% nationwide on average in real terms from today's prices by end of next year (barring some drastic stimulus like a 200 point drop in OCR). This could see some places 50% or more down from peak.
I also expect that rents will not rise substantially (if at all in real terms) over the next 18 months or so. This however is partly based on casual conversations with landlords in Wellington.
Yes I’ve always believed a 50% drop in real (inflation adjusted) house prices is/was a possibility for the likes of NZ/CAN/AUS - Ie those places that never reset during the GFC.
This is where we are at:
https://fred.stlouisfed.org/series/QNZR628BIS
Note that if you read Shillers work on asset bubbles (in his book Irrational Exuberance) that generally speaking, house prices are flat in real terms (why? because over the long term house prices can’t rise faster than the cash flows that determine their fundamental pricing - and those cash flows are rents/incomes which match inflation!). And you can see from the chart above, just how crazy our housing market become 1990-2000 onwards. For periods of time the real prices can get out of whack with fundamentals (due to Irational Exuberance) but in the end cash flows are king and the cash flows are linked to the general rate of inflation in the economy.
And isn’t it interesting how now that we’ve had above normal rises in rents/incomes, that house prices are dropping (then you realise the main reason we’ve seen such high house prices is because interest rates were the lever that was causing the gains - and now we’ve just broken out of a 40 year down cycle in interest rates and may now see 40 years of higher/flatter interest rates while asset prices adjust to those new discount rates applied to cash flows. And if the above is true, it could mean we still have another 20-30% (real terms) drop ahead of us in the property market - it could be more if animal spirits cause an over correction.
None of this may occur of course as who knows what interventions we may see from government/RBNZ - but the interventions will just cause other problems in our economy.
NZ/CAN/AUS - Ie those places that never reset during the GFC
This is a point I've often reminded people of but many seem to forget.
In general I think your comment sums up my basic view well - it's essentially interest rates and we've been in a special period of steadily declining rates for decades (which coincides with the speculative property markets across anglo countries). It can be frustrating when people claim things like 'property only goes up' or 'doubles every ten years' when their reference is essentially only the decades long boom and doesn't go back to even the 70's or 80's.
Your narrative does not support Always Be Closing....
So you're saying the RBNZ has been asleep at the wheel for quite some time? i.e. it failed to implement controls to keep huge amounts of debt from flowing into the residential property sector?
So you're saying the RBNZ has been asleep at the wheel for quite some time? i.e. it failed to implement controls to keep huge amounts of debt from flowing into the residential property sector
The RBNZ operates with the tools that it has.
1) Here is what the RBNZ governor said when the debt to income rules needed approval by the then government:
But he has suggested that the Government's decision around giving the central bank debt-to-income (DTI) restriction powers is a political one, as it might adversely impact first home buyers.
"It comes down to a political decision around whether they [the Government] are willing, or not, to provide those tools and accept some of the challenges that may bring," Orr told media this morning.
https://www.nzherald.co.nz/nz/reserve-bank-boss-adrian-orr-warns-mps-of…
2) Remember this from Dec 2016?
https://www.interest.co.nz/property/85201/reserve-bank-confirms-meeting…
Some other reading material:
1) https://www.bis.org/publ/cgfs69.htm
2) https://www.bis.org/publ/cgfs69_nz.pdf
This should be part of the financial stability that the RBNZ seeks, not open for interference by politicians. RBNZ independent from government? Hmmmmmm
Great link. For the most part since these 2020/2021 shenanigans began I've figured a return to 2020 prices would be about right, some here have suggested 2017 is where things should end up. I am tentative on that happening, but maybe come end of winter, that graph is trending downwards.
I think I’d be doing well to get 5% more than the price I paid for my townhouse in 2019, if I tried to sell now.
broadly I think prices are back around 2020 levels. As if the boom never happened.
See graph ...
https://www.interest.co.nz/charts/real-estate/median-price-reinz
Move the slider back to the starting date ...
I see two trend lines (1) 2002-2008 and (2) 2012 to 2020.
Prices now are a bit above at the continuation of the second trend line ... But way below the first trend line. ;-)
But (just quietly) both these trend lines indicate a silly market for the reasons Independent_Observer points out. And, IMNSHO, simply points to a RBNZ not doing a very good job. Many will want to blame successive governments for this but they don't have the skills to recognise a 'silly market' whereas this is bread and butter for central banks.
I think you are correct re rents - new Govt changes are doing their job, and the supply of rental housing is increasing rapidly.
According to this guy, advertised rental listings are now at a record high (well, at least the highest since he's been tracking the data)
https://johnbutt.substack.com/p/inventory-charts
This will cap the ability of landlords to raise rents. However, the corollary of that is landlords will be unable to recoup increasing holding costs, so more will seek to sell.
Barfoots May sales history
May 2024 916
May 2023 723
May 2022 782
May 2021 1197
May 2020 396
May 2019 821
May 2018 1027
May 2017 886
Potential buyers can continue paying extortionate rent, or buy themselves a house and pay off the mortgage. Not many are going to pick the absolute bottom, and that's a 100% guarantee. Buying when interest rates are up can be painful, but they'll more than likely make some dollars when interest rates drop.
My daughter lives in Melbourne. They were paying extortionate rent for a pretty average house. They bought a very nice place 50k out of Melbourne, and now their mortgage payments are a lot less than the rent they were paying.
I’ve consistently said over the past year it ‘could’ be a good time for a FHB to buy, provided you low ball etc etc
To be fair that is a pretty meaningless statement as it could always be a good time for a FHB depending on how much they lowball. 2021 would have been good if they lowballed by 70%.
To be fair, 50km out of Melbourne is bloody miles away. Its also a lot cheaper to buy 50 km out of Auckland, nobody wants that sort of commuting distance to work if you are forced to go into the CBD every day.
Hey, Wingman needs to sell his floodplain section, don't undermine his spruiking.
I'm going to make a fortune in Riverhead.
I've owned lots of properties, the last one I made $2m out of. My wife, who's very canny, found the property in Riverhead, and said "this will be the best one yet".
The clue is in the name, Riverhead. Once that areas is uninsurable the # of potential buyers drops and you are sitting on an expensive lemon.
I’m sure there are many commenters on here that have made a tone of money. Usually it’s the ones that don’t harp on about making lots of money. But you are the only person, out of all the claims and comments, who I can say 100% for sure is lying. Your brag does not impress anyone if it was true but it’s so painfully obvious you are full of it so it just looks sad. Goodluck with the millions you are suddenly going to make.
I'm certainly not lying, I can definitely tell you that. I've owned lots of properties, I've renovated some of them, built 4, and owned 2 industrial properties on Lincoln Road, Henderson, an area that was just being developed when I bought there. I owned 4 properties in West Harbour, 2 of them on the waterfront, and was one of the first to live there, when I was told by one person, "nothing will ever happen out here".
Now I believe Lincoln Road is the busiest road in NZ.
The aim of owning a property is to make a profit...isn't it?
"The aim of owning a property is to make a profit...isn't it? "
Yes. Despite the goal, it doesn't always work out as intended or planned.
Speaking of Henderson:
https://www.newstalkzb.co.nz/news/business/nido-founders-122-million-bu…
https://www.stuff.co.nz/business/125030553/a-lot-of-money-nido-building…
The aim of owning a property is to make a profit...isn't it?
Actually my primary driver is to have a safe and secure home to raise my kids in.....
"Wingman needs to sell his floodplain section, don't undermine his spruiking."
Is their scheme, the old pump and dump?
Only need to find one patsy to sell to.
True - but you're not waiting for the landlord to hand you a "vacate by" notice, or the next rent increase.
I am surprised your daughter did not buy earlier and I am equally surprised that she needed a bank loan when she did. You go on about how wealthy you are. My children own substantial homes with no debt. They are both professionals who work hard and they saved reasonable deposits. My wife and I would rather help them and their children while we are alive. If you have so much money and you have more than you need to live off why are you not helping them.
I did help them. But I'm not in the habit of giving large sums of money away. Lots of people don't know how to handle it.
So you're not in the habit of giving large sums of money away to your own children but you are in the habit of giving surefire, 100% guaranteed millions of dollars profit, business advice to random punters on an internet forum ...
I don't give advice, you're 100% wrong there. I've posted my intentions and history, and it's not advice. Kiwis don't like winners, they call it the "kiwi clobbering machine"
You see it everyday, even here, how posters want the so-called 'rich' hung out to dry, and gouged by the tax department.
So you are tight also. Why am I not surprised. So you don’t trust your children with money. They sure will have fun when they inherit it which is not too far away. They must be looking forward to it. I aim to have nothing when I die. My children and their children will have it all.
I'm not tight, I've just squandered $50k having a ball in Europe.
If you're giving your money away, it's gonna be pretty tragic if you need to go into care, because cheap rest homes are f awful.
You spent that on yourself. You are mean spirited in terms of others including your children. My children will pay for my care if I need it. They appreciate what we are doing now and will do in the future for them. You should try it. It actually makes you feel good. You seem so angry with life. Make the most of what you have left as you have not got much to go.
"My children will pay for my care if I need it"..... yeah, and dreams are always free. Cheap rest homes mate, you better hope you don't end up in one of them. If you live long enough in the rest home your kids might be going to the bank for bigger mortgages, or selling their houses.
I'm not angry, I'm lovin' life, it's as good as it's ever been, not a care in the world.
Keep dreaming old man. My kids actually like us and want to live close to us. We see our grandchildren every day. If you were generous you would help them enough to make sure they live in NZ.
When your kids are facing coughing up $50k a year for you in the old folks home as you stare at the wall all day, completely gaga, I think you'll find that increasing their mortgages or selling their houses is more than a little unpalatable.
Both my kids live in Aussie, they like it there, I'm going over in a few days to check up on them, and have another holiday.
They must be looking forward to that. Being visited by a mean old misogynist who lives down a rabbit hole. And (if we believe him and we don’t as it’s hard to believe someone can be so mean spirited) that he has helped ruin NZ to the extent that we live in Australia.
I've been very generous with my kids, they've travelled all over the world (mostly business class) and they had a great childhood. And I socked away money for them in stock market funds since they were born. I'm not a misogynist, I think you're confused and used the wrong word there old chap. Maybe you meant misanthropist, and I'm certainly not one of them.
Maybe a visit to the family doctor might be in order.
Why has your daughter got a loan? Your wealth is a myth in your mind only. We have you worked out.
Debt teaches people to be careful with their money. I don't give it away, nor do most sensible people.
You are typical of your generation. I had it hard so I won’t help my kids. Combined with your lack of sufficient funds you cannot help them. In the end they are paying interest to the shareholders of a Bank. Why would you allow that to happen unless you are not in a position to help them. We all know you are all talk as people who talk about how much money they have are generally talking rubbish.
My kids had their university fees paid, they've lived privileged lives, and they're grateful for it. They're doing well btw. You can give it all away, but when you're in the cheapest nursing home, I doubt the kids are going to go out on a limb for you.
The one thing you need to do is not go to bed tonight worrying about my finances, because as one of the 1%, it's all hunky dory.
No such thing as a cheap nursing home. They are all expensive. Don’t worry I will have enough to cover it if I go to one and my funeral costs. As I get older I will accelerate the gifting as I will need less the older I get. No point having unnecessary funds lying around. You could not get to that contented state as you love money or rather you love talking about it. Also your down the rabbit hole theories would not allow you to feel safe if you did not have surplus funds lying around unused. Money is your blankey. Everyone is out to get you.
Your posts clearly show that you think that because you have money you are somewhat better than other people. People don't belittle success or wealth, but when certain people like yourself talk down to others and lord wealth, it is plain and obvious that from all of your portfolio, your character needs the most investment.
Posters here, like the NZ public in general, despise success, and that's a fact - you're prime example.
You could have done what I've done, but you haven't.
How do you know Interesting is not wealthy. Not everyone has to puff up your chest like you. People know I have done well and it’s interesting how many people have said to me that they like me because I do not talk about my investments. I would rather ask them about their children/grandchildren and talk about my children and grandchildren. There is nothing more shallow than talking about wealth and money.
I agree, but they don't need to go the CBD, my daughters partner is a tradesman, and there's plenty of local work.
They can just wait until there is a clear bottom, say 6 or 12 months of continuous HPI increases for their area or another metric they like that has some statistical relevance. Some will need to pull the trigger before due to kids/family reasons, but others can wait and increase the deposit and do more research. They will have a good idea of what their current rent is vs the cost of owning so should be able to play out various scenarios to see what works the best for them.
tbf if they'd also rented 50km out of Melbourne, they wouldnt have been paying extortionate rent either.
You are still financially better off keeping your 20% deposit in the bank on 6.5% compounding interest, and paying 3% gross yield on a property to your landlord with zero rates/insurance/maintenance costs, then spending that 20% deposit on a house and paying 7% interest on the balance to the bank plus incurring rates/insurance/maintenance costs.
If you wait longer, instead of only being able to afford to buy 50km out of town, you might be able to afford to buy 25km out of town.
No one knows what's going to happen in the future. They got a terrific deal on a deceased estate, the family wanted it sold, put in a lowball offer and it was accepted.
Rent's wasted money.
"Rent's wasted money."
That is commonly accepted conventional thinking frequently repeated by property promoters. It is a belief that can lead to some outcomes that are undesirable. It can lead to owner occupier buyer collateral damage when house price risks are extremely elevated.
Under certain conditions, renting is better than buying.
Under other conditions, buying is better than renting.
Most owner occupier buyers are unable to recognise the different market conditions.
For owner occupier buyers not involved in the real estate business, it would have been far better to rent in Auckland and Wellington in the 2020 - 2022 period (& not seen a large proportion of their entire deposit evaporate or even go into negative equity)
Some people who are in the real estate business might have knowledge and experience to recognise a bargain. Most owner occupier buyers do not have this knowledge or experience. This is the audience that most commentators have in mind.
Yep, sure she did.
Even if she did what is your point? Move to Australia and don't buy until you can find a deceased estate 50km out of Melbourne that will accept a lowball offer?
My humble opinion on what will happen to house prices, based on my personal experience (the 1970's oil shock-induced recession), is:
"You won't know until you get there."
The turning point, whether it be up or down, will creep up on you. You will wake up one day and the reality will dawn on you.
Yes, but how old were you during that period? Old enough to remember what happened to house prices from 1974-1980?
Yes, I was 31-years-old in 1979 when I was talked into building three 'spec' home units by my father by contributing the $30,000 plus profit I had made from 'doing up' and selling a house I had bought about 11 years earlier.
I observed that house prices dived around 40% to 50% from the late 1970s through to the mid 1980s and only gradually recovered from there.
So, this order of price decline definitely can happen.
You could say I 'lost my shirt'. It took me the next 20 years to get back on my feet, but that was from buying a run-down business, talking the the vendor into leaving some money in secured by a mortgage over the balance of land from our failed development, and working my guts out for that 20 years.
Unfortunately, young NZ couples can't get rid of their mortgage these days by buying the likes of a dairy financed by the likes of Gilmours or AWL grocery wholesalers. But our recent governments have decided to open the immigration doors to Indian dairy owners as they must be deemed a specially needed category of skilled persons that is vital to the economic success of New Zealand. However, they seem incapable of forming a rapport with their New Zealand customers, hence the prevalence of ram raids.
I bought my first house in Te Atatu Sth in 1977, I sold it 5 years later for double what I paid for it, and I've owned probably 12 houses since then. I've made money on every one of them, and some of them have been renters.
"bought my first house in Te Atatu Sth in 1977, I sold it 5 years later for double what I paid for it, and I've owned probably 12 houses since then. I've made money on every one of them, and some of them have been renters"
The only deal that really matters is the most recent biggest deal. If people get that one wrong, it can result in some outcomes that are undesirable.
In business for 22 years:
https://www.newstalkzb.co.nz/news/business/nido-founders-122-million-bu…
When I read all the piffle here about the collapsing economy and approaching kiwi economic implosion, I know for sure that it's a good time to dip my toes in the water.
Being a contrarian really pays off.
"Being a contrarian really pays off. "
Yes, but the most important bit was omitted.
Being a contrarian really pays off, at the right price.
There may have been a discount at the time of your purchase and you believed you were getting a good deal at the time. Have you bought too early and paid too high a price? Time will tell.
I bought my first house.. in 1977, I sold it 5 years later for double what I paid for it
Okay Boomer....
That's the kind of comment losers use.
About that time was perfect to buy a house. We arrived in late 1974 and spent a couple of years actually living in motels before the first house in Browns Bay. The same house cost under $20K at the time and it now worth north of a million dollars, basically between now and then you couldn't lose on housing, the gains have been absolutely crazy.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.