Barfoot & Thompson, Auckland's largest real estate agency group, says house prices fell in the City of Sails in May versus both April and May last year as sales volumes increased demonstrating that prices are not starting to overheat.
The real estate agency said May's average price of NZ$529, 284 was down NZ$15,691, or 2.8%, on April’s NZ$544,975 average price and 2.5% below the May 2010 average.
"It reverses a three-month trend where the average price for the month was higher than that for the preceding month," said Peter Thompson, Barfoot & Thompson's managing director.
The company sold 889 properties in May, up 166, or about 23%, from the 723 sold in April, and 12% more than the 792 sold in May 2010.
"This combination of rising sales and the average price easing demonstrates that prices are not starting to overheat," said Thompson.
"The major issue facing the Auckland market remains lack of choice for buyers."
He said Barfoot & Thompson listed 1169 new properties during May. Although up 13% on April's new listings, it was 15% below new listings in May last year.
"At the end of May we had only 5249 properties on our books, the lowest number for 20 months," Thompson added.
Meanwhile, he said a contributing factor to the drop in the average sales price was the relatively low number of million dollar plus property sales that settled during May.
"In any given month 15% to 16% of our sales by volume would be valued in excess of a million dollars, but in May that number eased to 13.6%," said Thompson.
"Again it is lack of choice that is affecting this market segment as there are active buyers looking in this price bracket."
"Given the natural level of home turnover in a city the size of Auckland, it indicates that many home owners who are thinking of selling have adopted a wait and see policy until there are stronger signs that the economy is on the path to recovery."
He said there was a good level of buyer interest meaning people pricing their property at the right level were achieving sales.
'Household sector gradually starting to recover'
ASB economist Jane Turner said Auckland housing market activity has lifted from late last year, with sales up 32% on the weakest period. However, so far this lift in activity appeared fairly localised to Auckland, with nationwide activity still subdued.
"Nonetheless, the Barfoot & Thompson data highlight that housing supply in Auckland is becoming tight (particularly after a few years of low construction activity), and supports our view of rising house prices over the coming year," said Turner.
The bank's economists expect house prices to rise 3% over the coming year.
She added that the lift in Auckland housing market activity suggests confidence in the household sector is gradually starting to recover.
"Combined with the lift in business confidence over April and May, the Reserve Bank will take this as an encouraging sign that lower interest rates are helping to stimulate activity," Turner said. "However, the Reserve Bank will want to see a pick up in demand that is more widespread across the economy."
ASB economists still expect the central bank to leave the Official Cash Rate at 2.5% for the remainder of 2011, Turner said, adding that it will want to see evidence the New Zealand economic recovery has gained a firmer footing.
Barfoot Auckland
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(Updated with comments from ASB economist Jane Turner).
45 Comments
Are these results consistent with Auckland turning into a "seller's market"?
Some interesting stats by area here for the Auckland folk:
http://www.barfoot.co.nz/Info/Market-Info/Analysis/May-2011-Market-Anal…
My pick was price-up and volumes-down, but quite the opposite. Perhaps the realestate agents are finally starting to get it?
Why is it that property is always the thing that moves in value and not the thing that we measure it in- New Zealand dollars. ( and not NZD as measured in some other rapidly deflating currancy )
Why is economics so complicated, because you have to measure something that is a moving target with another moving target. Kind of sounds impossible doesn;it. So we end up listening to lots of hair brained notions as to why one thing is moving or not moving in relation to something else that is moving or not moving.
In the end we know that NZD are buying us less and less for every NZD we spend.
We also know that he country has been flooded with money over the past ten years through massive amounts of debt for housing/property in general via loose lending from the banks. (except that housing unaffordability i was always explained away as a housing issue rather than a money issue)
Now any 'Chicago School' Economist at Treasury will tell you that loose money results in inflation and we have had a whole lot of loose money but treasury and the Reserve bank have kept on telling us that inflation is under control- how is that?
Reserve Bank has said inflation is under control because housing isn't included in the CPI...in the mid 2000's inflation was running at 3% and house prices were increasing 10%....it's a rort...somehow housing needs to be included in the CPI, whether it's rent payments, mortgage payment, capital value of housing stock etc...otherwise housing bubbles will keep blowing up.
Personally over many years I have found that Barfoots tend to tell it as it is. How you interpret their information is over to you. All I know is that trying to buy a good property in the lower price bracket in a good location in Auckland is becoming increasingly challenging.
Playing with the graphs is interesting.....pick nov03 and look at the graphs.....for example year on year % is in decline and is a pretty clear trend down, within 2 years its looking like it would average 0%....suggesting price satuaration/limits to me.
....Also as the price rises the numbers sold declines.....but that may not be linked...
http://www.stuff.co.nz/national/5094541/Tenants-trash-house-to-tune-of-10-000
Yet another story about evil landlords (whom, because of their spruiking and greed, are the only reason house prices ever increase)
Exploiting poor tenants whose dreams of home ownership crumble.
Why isn't the government taxing these greedsters more so they won't 'invest' in property? They will probably claim this 'damage' as a tax break loophole and make a fortune out of it at the taxpayers expense - shocking.
Since 2005 house prices have actually declined over 50% in real money (aka Gold). In 2005 it took over 400oz of gold money to buy the average kiwi damp cold cardboard shack, and today it takes less that 200oz. The trend is clearly downwards from here..
I fully look forward to the day when kiwi carboard houses fall below 50oz, and I might even consider buying a few.
Property is such a great investment !!! q Tui Billboard....
What was the comparison in 2000, 95, 90, etc? Why is gold real money? Who actually pays for stuff in gold these days? Is it the house price that has declined or have gold prices increased? If gold keeps going up in value and house prices stay flat then the cardboard house may be less than 50oz but it'll still be overpriced.
Why is gold real money? Gold is considered by some to be the only form of real money, since fiat money (NZ dollars) are created simply out of thin air, and are backed by nothing more than faith. Fiat money also tends to loose value over time and is therefore not a good store of value.
Gold is also held by central banks around the world, as well as the IMF and World Bank, meaning that Gold is money and not actually a commodity as some might believe. The notable exception in our case is that our reserve bank sold all our gold ...
Gold and Silver bullion in NZ is treated as a currency, and as such no GST is applied during currency conversion (fiat to gold and vice versa). Unlike commodities with are subject to GST.
Who actually pays for stuff in gold these days? You wouldn't use gold in transactions per se, rather convert it back into fiat when you need to perform a transaction.
yeah... not many square feet of accomadation in a gold bar or two, and if there was a run on gold that would be another bubble burst. And who the heck needs gold - what's it really for, the stuff off it that is really there, the yellow that is not covered in blood from child slavery, military corpuption, thrice stolen and reforged has value in electronics but thats about it.
if it all turned to custard i would much rather be left standing in my own home than outside the bank with a bar of yellow stuff or a IOU from the reserve (how much physical gold is really there is another question)
i suppose people could do drivebys of their gold bars like i do drivebys of my bricks and mortar...I think people are understanding an assest must exist to have value...
President of Property
You cannot compare gold to property POP. I imagine most people in NZ who are holding some are actually holding it small quantities therefore their exposure is modest. But when you have a $500k to say $800k rental in Auckland as many do (one wonders on what planet they live) their exposure to potential losses is pretty substantial. Every year you have to beat inflation and the holding costs before you can actually say you have made some capital gain. With winter coming on it is going to be tough for many sellers some of whom are already blinking and dropping their expectations as todays data from B&T confirms. With the Australian property market on the turn for the worse one wonders where the NZ is going to end up. Very good times to have a home, no debt and some money in the bank and good shares paying consistant and growing dividends.
No way SK. $800k in the bank earns say $40k interest before tax. Would the rental earn you that after interest rates insurance and maintenance and the occasional down time without tenants. That is why I sold my rentals in 2007/08. As B&T confirmed today housing is still fragile even in Auckland and with the australian housing market turning downwards you would have to say this is not good news for us in New Zealand. Rental investments have had their day. Now it is a slow and consistant grinding backwards for those still holding them as inflation,rising costs such as rates and insurance and at some stage rising interest rates are eating into the gains of those years gone by.
The owner of the 800k property would not keep 800k if he sold it - as 99% of the time it will be financed.
Make it more realistic. Someone bought a place in 2006 for 650k now its worth 850k
he 100% financed it - so if he sells he keeps 200k.
Would you rather keep the 850k asset - or would you rather have 200k in the bank?
No brainer. $200k in the bank is safer as $200k in a property is at risk especially when those pesky mortgage rates start going up as the increasing costs of rates insurance and maintenance costs keep going up causing high inflation. 2007/08 was the time to sell and then look for the best place to park the gains. Maybe you were not flexible enough in your investment strategy to be able to sell then. No investment runs forever. One has to be flexible in one's strategy when investing. Property will have its time again but I doubt that will happen in my lifetime. People are generally struggling with their basic costs of living and this is all over the world. Now is the time to minimise debt in one's home and investments. Food power petrol and other basic daily costs are eroding incomes like never before. For housing prices to stop dropping and turn around the average person needs to achieve some reasonable increases in wages and salaries. Where are they going to come from in the foreseeable future?
That's fair enough of course.
I think we know we have quite different outlooks on debt risk and future prospects etc.
Taking a mid/long term view - this situation you describe will not last. Age must play a part also - not sure how old you are.
Sell in 2007? may have been a good idea in some situations - in other situations the years since then have added plenty of value to prices.
ps -the example given is not my own.
Mid fifties Sk and retired. Actually made most of my capital out of shares in public and private companies and the houses I have lived in. Glad I sold the business and the property investments when I did as inflation is certainly eroding the values of just about everything these days. Winter and rising interest rates is going to put a lot of pressure on property investors.My nephew who is looking at shifting into central auckland to be closer to the action says the world cup is inflating rentals and values at present so he is going to stay with family until after the cup is all over with and then look again as people leave the country. Be careful Sk. Be flexible and be prepared to move quickly as property can be difficult to move as it involves big numbers that more and more people are finding it harder to borrow.
You guys who don't understand gold listen up...
Do Govt's need money to pay public servants and fix our potholes? Yes
Can Govts print money? Yes
Can Govts print gold? No
End of lesson
I'm actually glad you don't quite understand this concept...it doesn't quite feel right does it. After all, if you did "get it" Matt S and I wouldn't be able to afford to swap our/your funny money into real money.
So please please please disregard what we're trying to tell you.
Question
Bayley says that one reason the average price was lower was that a smaller % of sales was in the million dollar plus bracket (13.6% versus 15/16%)
What I'd like to know is prior to the last 2-3 years, what was the typical % of house sales in the milloin plus bracket?
Maybe the baseline Bayley is giving at 15/16% is only the "norm" in terms of the last 2-3 years since the economy has been sick - ie it is an aypcial baseline
If that is the case, then a return to a lower propertion of sales above 1 million is a return to a more accurate reflection of the health of the market?
OK here we go......
I went to this link on Barfoots website:
http://www.barfoot.co.nz/Info/Market-Info.aspx
I went back to their 08/09 media releases
In October 08 - 30 out of 503 properties sold went for over $1 million = 6%
In February 09 - 30 out of 559 properties sold went for over $1miilion = 5.3%
I argue that even 13.6% of sales over $1 million is still HISTORICALLY HIGH, therefore the so-called strength of prices is being distorted significantly
this is a revelation!!!!!!!!!!!!!!!!!!!!
ESSENTIAL WEEKEND READING
http://macrobusiness.com.au/2011/06/banker-makes-housing-sense/
Leith says:
"Get it. Housing is currently a very poor investment, offering pathetically low yields, high transaction costs, and little prospect of capital growth. Of course, most of us knew these facts already. But it’s great to get such candor from a bank CEO. "
Bulls read and cry.....
Great article...... he implys/says that the supply of houses needs to be looked at..ie. when demand increases...and prices increase... then supply should increase.
Supply has not really increased because of the monopoly hold that Councils have on land use..... this needs to be looked at.
Common sense...
Think this article applies to Australia. Whereas in NZ from 2007 we stabilised and corrected somewhat, Australian house price increases carried on regadless until at least 2010 .
Anybody 'investing' in property there since 2007 is taking a risk. The article does also point out however, that whereas a huge supply of housing was built in USA where nobody wanted to go to , that the supply in Australia has been built in the more popular places.,
How has gold performed against housing when in 1980 gold was at $650 an ounce. Has house prices increases 1.5 times compared to this time? Gold costs you money to hold while (insurance costs, transactions costs and opportunity costs). At least at the bank you get interst which off sets some of the above costs unlike gold.
yup, agree Aus downturn will affect NZ - here in Melbourne we are moving out of a rental costing 520 per week, the house sold for 1.3 million. Moving into a 1.4 mill house for 600 per week. There is NO VALUE WHATSOEVER in Aus housing. The only possible way to make money on those yields is to make around 7% gains per year - as that is impossible given the consumer is saturated with debt, housing in Aus is pointed one way. Flat to falling prices will show up the supply myth once the following occurs:
- investors stop buying, why would you when you are guaranteed to lose?
- home buyers stop buying, why would you when you can rent for one third the cost and there is no chance of prices running away from your income in the near future?
- boomers start selling - they are retiring, and recent commentary is making them nervous
- foreigners stop buying (already happening, and the high currency makes it worse).
- foreigners sell to capitalise on prices and high currency
Will mining save it? I cant see how. Sydney and Melbourne have the most obscene prices and they aint mining states, in fact the worst falls at the moment are in the mining states. And in any event, in the long term any good investment is about INTRINSIC value. There seems to be an assumption that people will always be prepared to sink every last dollar into housing regardless of cost. They will only do this when they think houses will continue to rise. That perception is rapidly evaporating.
excellent analysis Jimmy
Many similarities with NZ but a few housing market differences
Aus strengths relative to NZ:
- Less emmigration, greater population support for housing
- Stronger economy (assuming continued strong Chinese growth)
NZ strengths relative to Aus:
- Although yields aren't great, they are better than yields in Aus
It would be interesting to know to what extent foreigners are buying less here now. With the kiwi $ weak against the Aussie $ maybe Aussies are still buying. The Chinese probably are too. It they had any sense though they would look to buy in the States - bargains to be had there, and a weak US$
US housing slide worse than Great Depression
From peak to trough, the fall in average single-family home values since 2007 has hit 33%, surpassing the 31% drop in housing prices during the Great Depression:
Its is time that people realize that a house is now more as owning a car than what we have been told for decades. Between property rates, maintenance and inflation the costs of 'owning' a home are now greater than ever.
Those that see it as an investment for either short term profits or even down the road massive capital gains are going to be seriously disappointed than those that view it as a necessary expense, as a car.
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