By Bernard Hickey
The Real Estate Institute of New Zealand has reported sales volumes rose 21.1% to 5,192 in August from a year ago, while the median price was NZ$355,00 up NZ$5,000 or 1.4% from a year ago.
Prices were strongest in Auckland, Christchurch and Dunedin, but were flat to lower in Wellington and Hawkes Bay.
State-owned valuer Quotable Value, which releases a monthly report on house values, reported a 0.1% rise in house values in the three months to August from the same three months a year ago.
REINZ said Northland recorded the strongest lift in prices for the month of August from July (+11.8%), followed by Southland (+7.0%), Central Otago Lakes (+6.1%) and Otago (+5.6%).
Compared to August 2010, Otago recorded the strongest lift in prices (+4.9%), followed by Canterbury/Westland (+3.2%) and Auckland and Southland (both +1.8%). Median prices fell in August from July in Hawkes Bay (-9.1%) and Auckland (-2.6%). They were flat in Wellington. Prices were down from a year in Northland (-1.9%), Waikato/Bay of Plenty (-1.0%), Manawatu/Wanganui (-4.1%), Wellington (-8.1), Nelson/Marlborough (-3%) and Central Otago Lakes (-3.3%).
“The tight supply of listings across the country is the key feature of the market currently," said REINZ Chief Executive Helen O’Sullivan.
"With the arrival of spring listings are showing signs of increase, but the impact of the Rugby World Cup and the General Election soon after makes it difficult to predict how the market will respond,” O'Sullivan said.
“The improvement in volumes over the past few months is a positive sign, however prices remain essentially steady," she said.
"One interesting aspect of the market is how well informed buyers appear to be and how focused they are on buying at what they see as their level.”
The median days to sell fell to 39 in August from 42 in July and 43 in August a year ago. Auckland improved to 33 days in August from 34 days in July and 36 a year ago. Wellington's days to sell improved to 44 from 45 in July, but is still more than 43 a year ago.
“The real estate market appears to be fairly well balanced at present”, said O’Sullivan. “Volumes are rising, listings are short and the days to sell measure is gently declining. The one piece that isn’t showing any discernable trend is prices, which continue to move sideways.”
The REINZ Housing Price Index, which is a stratified measure of prices designed with the Reserve Bank that removes the 'skewing effect' of more sales in some price brackets than others, shows prices rose 0.5% in August from July and is up 0.7% from a year ago. The index is now 4.7% below its November 2007 peak. See our interactive chart of the REINZ Stratified Price Index here.
Over that time Consumer Price Inflation has been 13%, implying real price deflation of more than 17%. See our interactive chart of Consumer Price Inflation here.
QV measures
QV said national property values continued to gradually increase in August, but remained 5% below the market peak of 2007.
QV measures sales prices in the three month period up and including August for 'like for like' properties in similar areas to see how values have changed over the last year. It measures changes in values over the year, rather than a simple median price as measured by REINZ.
“Values in the Auckland area have increased 2.8 percent since January, and are now 2.2 percent above the same time last year and only 0.3 percent below the previous market peak of late 2007," said QV spokeswoman Glenda Whitehead.
"With the exception of the Rodney area, values have grown in recent months across the Auckland Supercity. The old Auckland City has increasing the fastest – by 3.0 percent over the past year, and is now 1.5 percent above the previous market peak of 2007. North Shore has increased 2.4 percent over the past year, and Waitakere and Manukau just over one percent” said Whitehead.
“Recent trends have continued in other main centres with values in Hamilton and Tauranga remaining relatively stable, although still below last year by 1.8 percent in Hamilton and 0.5 percent in Tauranga. Dunedin has seen some volatility in values over the past year but values in general appear to be decreasing, and are now 2.9 percent below this time last year," she said.
Wellington falling, Christchurch rising and Auckland flattening
“Values in the Wellington area have continued to decline, dropping 1.9 percent since January and 2.4 percent over the past year. Unlike Auckland where values are now just below the previous market peak, Wellington is 7.7 percent below. However there are the first signs that values may be levelling off."
Christchurch values had been increasing steadily for the past few months, driven by good demand for houses in undamaged areas. Values were up 1.7% from a year ago, with most of that growth being in the past few months.
"Areas surrounding Christchurch have seen strong value growth over the past year with the Selwyn, Waimakariri and Ashburton Districts all up by around 4 percent,” said Whitehead.
Whitehead said some recent provisional data suggested values in Auckland may be levelling off a little, although it was too early to be sure.
"In Wellington there are also signs that values may be levelling. In both centres there are indications that the number of new listings may be increasing which may offer fresh choices for potential buyers. If this turns out to be the case then sales volumes should pick up in Spring following the traditional seasonal pattern which has been largely absent in recent years."
ASB said sales volumes were up 4.4% in August in seasonally-adjusted terms with Canterbury up 16.4%. ASB said house prices were up 0.1% in seasonally adjusted terms in August and were up 0.7% from a year ago.
'Gradual recovery' says ASB
"The August REINZ house sales data continue to point to a gradual pick-up in underlying housing market activity," ASB economist Christina Leung said.
"There continues to be a tightening in the housing market, as reflected in a continued decline in the median number of days taken to sell a house. Other housing reports have shown a fall in housing inventory on the market, suggesting the housing market is beginning to turn in favour of sellers," Leung said.
"The housing market is continuing to recover at a gradual pace. It is encouraging to see a continued recovery in housing demand in Canterbury following the disruptions in June. While there has been an improvement in household sector conditions in recent months, the continued high level of household debt means that households are likely to remain cautious. With the global outlook continuing to dominate market attention, we expect the RBNZ will leave the OCR on hold this Thursday," she said.
JP Morgan sees stabilisation then rise
JP Morgan economist Helen Kevans said the August report reaffirmed her view the housing market stabilized around mid-year and is poised to pick-up throughout the rest of 2011 and into 2012, although there remained regional disparities.
"While the house price index continued to edge higher in Auckland and Wellington, it fell in Christchurch (-1.4%m/m after three months of decent gains)," Kevans said.
"That said, the recent strength in housing market activity in Christchurch has surprised on the upside. We had attributed recent gains in house prices, in part, to heightened competition for undamaged houses in the area, although now it appears that property prices in Christchurch have started to fall as some residents leave the area permanently. This exodus, at least in the interim, likely will mean that existing housing shortages intensify in other areas, such as Auckland," Kevans said.
See full REINZ regional commentaries below:
REINZ Regional Commentaries – August 2011
Northland
Northland reported the 4th strongest lift in sales volumes compared to August 2010, with Whangarei City and Kerikeri showing very solid lifts in volumes. While prices rose by nearly 12% compared to July, prices fell back compared with August last year.
The days to sell for Northland improved by 10 days to 67 days for August, compared to 77 days in July and continues the trend of steady improvement over most of 2011. Compared to August 2010 the days to sell improved by 11 days.
Auckland Region
The Auckland region recorded the 3rd strongest lift in sales volumes compared to August 2010, with the lift in volumes compared to July 2011 in line with the national result. However, prices eased back across the region in August compared to July with only Manukau City showing an increase in prices. Compared to August 2010 the lift in prices was slightly stronger than the national result.
The days to sell has continued to improve with a reduction of one day to 33 days in August, compared to 34 days in July, and 36 days in August 2010. Auckland’s days to sell are now the shortest since December 2009.
The shortage of listings, rising volumes and shortening days to sell all indicate that prices in the Auckland region should be rising, however, the median house price for the region is the lowest is has been since September 2010. Anecdotal evidence suggests that there is plenty of activity in the middle of the market ($300,000 - $600,000) but above this activity is quite thin.
Waikato/Bay of Plenty/Gisborne
The Waikato/Bay of Plenty region recorded the strongest lift in volume compared to August 2010, with very strong growth in Waikato Country and Mt Maunganui/Papamoa. Sales volume growth compared to July 2011 was slightly softer than the national result, with Mt Maunganui/Papamoa also showing some strength in July, although most of this activty was concentrated in the Papamoa area.
The median sale price increased by $13,500 to $319,500 compared to July 2011, but fell $3,500 compared to August last year. The median sale price was down noticeably in Rotorua, where buyers appear to be very price sensitive.
The days to sell fell by a further two days in August to 54 days, following a fall of eight days in July. The days to sell in August 2010 was 68 days, thus a 14 day improvement in the days to sell over the past 12 months.
Hawkes Bay
Sales volumes in the Hawkes Bay region eased back in August after a strong lift in July. The Hawkes Bay region seems to be demonstrating a pattern of a strong month followed by a weak month, followed by a strong month, at present.
The median price for the Hawkes Bay region was the weakest across New Zealand compared to both July and August 2010. It is difficult to see a consistent trend in prices with a strong lift in prices being followed by weakening prices the following month
The days to sell for the Hawkes Bay region improved by 10 days from 53 days in July to 43 days in August, and by seven days compared to August 2010.
Manawatu/Wanganui
The median house price for the Manawatu/Wanganui region increased by $5,000 compared to July, but eased back by $9,500 compared to August 2010. Prices eased across the board. Volumes were also weaker compared to July with a noticeable pull back in sales in Fielding after a strong July performance, likely due to a shortage of listings. A lack of listings is also behind the weaker trend in Palmerston North City where a real shortage of listings below $300,000 is being felt.
The days to sell improved by seven days from 57 days in July to 50 in August. There was also a four day improvement compared to August 2010.
Taranaki
The Taranaki region recorded the largest fall in sales volume compared to August 2010, with a drop of 6.0% and falls in most markets, although compared to July 2011 Taranaki recorded the second strongest lift in volumes, although this was after a particularly weak July. This ‘two speed’ market is largely being blamed on a lack of listings and the time taken by buyers to commit.
A slow down in the speed of sales is clearly evident in the days to sell, which has jumped from 64 days in July to 75 days in August (+11 days) and compares with 54 days in August 2010 (+21 days).
However, prices are edging up slightly with a 3.8% lift in prices across the region compared to July and a 1.6% increase compared to August 2010.
Wellington
The Wellington region recorded a 9.2% increase in sales compared to July with noticeable strength in Upper Hutt and Eastern Wellington. Upper Hutt also displayed noticeable strength compared to August 2010. Weakness in sales volume was seen in Northern, Western and Central Wellington.
The median price was flat in August compared to July, but down 8.2% compared to August 2010. Hutt Valley and Southern Wellington recorded the largest falls in prices, with no markets showing any pricing strength.
The days to sell improved by 1 day from 45 in June to 44 in August, but eased by one day compared to August 2010.
Nelson/Marlborough
Nelson/Marlborough recorded the second strongest lift in volumes compared to August 2010, with strength in all markets, however, there was a slight fall compared to July with two fewer houses sold than in July. Most of the weakness compared to July was in the Marlborough/Kaikoura area, with the Nelson region reporting strong growth.
Prices have also firmed compared to July with a $9,000 lift in the median price compared to July, although there was a $10,000 fall in the median price compared to August 2010.
The days to sell improved by five days from 47 in July to 42 in August and by 10 days compared to August 2010.
Canterbury/Westland
The Canterbury/Westland region recorded the strongest lift in volumes in August following on from a strong lift in July. Of note is the number of sales in Christchurch City in August 2011 being two more than for August 2010, reflecting the continued recovery in the property market following the earthquakes over the past 12 months. Listings continue to be in short supply in Christchurch with well priced properties selling quickly. Towns away from central Christchurch are also experiencing strong sales growth, although listings continue to be in short supply.
Although volumes are rising, prices are remaining relatively steady with only a $10,000 (3.2%) increase in the median price across the region compared to both July and August 2010. Difficulty in obtaining insurance on newly built homes is being reported more frequently of late, as are restrictions on moving existing homes to new sections. It is not clear how long these problems are likely to persist for, however they are undoubtedly making buying decisions more complex at present.
In line with the strengthening volumes the days to sell improved by two days to 35 days from 37 in July. This compares with 38 days in August 2010.
Central Otago Lakes
The Central Otago Lakes region recorded a solid lift in volumes with noticeable strength in Queenstown and generally softer sales in Central. The median price across the region improved by $25,000 compared to July, but eased by $15,000 compared to August 2010.
The median days to sell improved by 41 days in August to 67 days, after increasing by 58 days in July. The days to sell were 71 days in August 2010.
Otago
Volumes across the Otago region rose modestly compared to August 2010, with a noticeable pull back in North Otago after a very strong lift in volumes in July, although buyer enquiry remains strong, particularly from Christchurch.
Otago recorded the strongest lift in prices compared to August 2010 with a $11,250 increase in the median price and solid price growth in both Dunedin and North Otago.
The days to sell improved by by eight days from 54 days in July to 46 days in August. The days to sell in August 2010 was 39 days.
Southland
The Southland region recorded the largest fall in volumes compared to July 2011, with falls in most markets. In contrast, the median price rose by $13,000 (+7.0%) compared to July and by $3,500 compared to August 2010.
The days to sell improved by nine days from 46 days in July to 37 days in August, although the days to sell is three days weaker than in August 2010.
(Updated with details, REINZ comments, QV comments, REINZ regional commentaries, ASB commentary, charts)
Volumes sold - REINZ
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29 Comments
Updated now with QV, REINZ comment, ASB comment, Charts.
The figures show house prices firm in Auckland (due to migration, leaky buildings and tax cuts for higher income earners) and Christchurch (due to demand from quake relocation), but flat to falling in Wellington, Waikato, Hawkes Bay and Northland.
cheers
Bernard
The supply of affordable sections (or lack of) is just one of many factors that has driven up prices. Whether there is actually a housing shortage is a moot point at the moment. The same thing is being said about the Australian housing market.
“When a credit bubble has been created, the only things that keep it growing are more credit and the belief that the commodity is in short supply,” Sayce, who has been warning of a collapse since late 2008, said. “Credit supply has grown exponentially and is starting to taper off, so all that’s left is the shortage argument.”
I think they remove the sale of leaky buildings from the stats so that it doesn't bring prices down.
Bob, if the NZ dollar unexpectedly fell 5 cents over night, then exporters would see a gain in sales revenues relative to if the currency remained at current levels. If it fell 5 cents, the NZ dollar would still be high, just not as high as it was. If it fell 5 cents we wouldnt argue nz's low dollar is proping up the economy as it would still be high.
Leaky homes have restricted supply more so than if they were all good and all fully livable. Therefore they have the effect (if taken in isolation) of putting upward pressure on prices (of all other auckland housing stock), but to say there is a 'lack of supply' is a big jump and 'supply of housing stock' is a lot more complex than that.
From a buy-sell view, we have seen over last few years a massive decline in buyers as investors flee the market, and the tax changes have just added to this decline in buyers. Supply side lower also as lower listings, but supply only matters when looked at relative to demand, and in this instance supply relative to demand is much greater so we see prices decline, or actually what we are seeing is less fools still paying yesterday prices.
Volumes lead prices and tell the true story of NZ housing market. A way to look at what fair prices could be is if we forced volumes to remain constant; if this was the case then at currently supply-demand levels we would likely see the sorts of declines some have predicted, i.e 20-30% nominal. Instead we will see low volumes acting as a shock absorber dampening the decline, and drawing it out over a much longer time period.
Why all the desprerate attempts to blame rising house costs on anything and everything other than lack of supply?
Your arguement is illogical - you say in paragraph 2 that restricted supply puts upward pressure on houses and then go on to explain that it doesn't. You say "supply only matters when looked at relative to demand" conversley demand only matters relative to supply.
The argument that increased demand pushes prices up, but decresed supply doesn't is illogical.
Your last "scenario" is wierd - as well as assuming volumes forced to stay at their highest boom levels it's simply not how a market works (other than in North Korea).
Because lack of supply isnt the key driver. Even if we had no city limits the madness of borrowing at very low interest rates to speculate on a property ponzi scheme would have happened....and like the USA we would have been left with large quantities of new houses that will never be occupied and vast estates of polts that will never be built on....and of course if the developers had their way the councils would have had to meet the services costs for these but never get the income.....
regards
And what's happened to house prices in the States? They have dropped dramatically where supply has exceeded demand. Supply does affect price.
Trying to get house prices down in Auckland without doing something about supply is pointless. Auckland City has set minimum prices for 3 bedroom CBD apartments at over $500K. This is nothing to do with cheap credit or borrowing or foreigners or investors - it's a rule in the plan. Similar rules are appearing throughout the Plan to preclude affordable housing.
"Volumes lead prices and tell the true story of NZ housing market. A way to look at what fair prices could be is if we forced volumes to remain constant; if this was the case then at currently supply-demand levels we would likely see the sorts of declines some have predicted, i.e 20-30% nominal. Instead we will see low volumes acting as a shock absorber dampening the decline, and drawing it out over a much longer time period. "
Not wierd, its by way of an explanation or model....As volumes grow this indicates that sellers prices are not being met by buyers...this is considered an early sign that the growing market is slowing and even at risk of decline. If you hold volumes constant than that means sellers would be forced to sell for less to meet the buyers offer.....this is a model of behaviour/outcome and not a wanted scenario...(at least I hope not)....
"The argument that increased demand pushes prices up, but decresed supply doesn't is illogical"
No it isnt illogical, maybe poorly worded. Increased demand means the buyers are willing and able to pay more. If the buyers are willing to pay more and there is a decrease in demand then yes prices will probably rise. If on the other hand buyers are at their limits which they are now then whether the supply increases or not does not matter....the critical factor is the buyers ability or willing to pay.
regards
its debatable how much of a shortage there really is
remember too its the interplay between supply and demand that is critical, rather than issues on one side of the equation in isolation
After all, in many places where large price drops have occured, there hasn't necessarily been any particular disturbance to the supply / demand balance - a weak economy and collapse in confidence can transcend supply / demand issues. When NZ prices dropped away in 2007 it wasn't particularly because of supply/ demand dynamics, it moslty came down to confidence.
Thats why despite the theoretical supply / demand imbalance in Auckland, we could still see price drops if the economy deteriorates further, unemployment rises, and confidence erodes
There are no supply shortages in Auckland. Go check out Albany - houses for Africa. The hills behind Long Bay Beach, ready for thousands of houses to be built, but put on hold until buyers emerge. Same with old quarry off Panama Road in Mount Wellington, just behind the Slyvia Park Shopping Mall, and the Mount Wellington quarry itself going at a snails pace.
Unless of course you mean a shortage of reasonably priced houses that are actualyl worth rasing a family in, to which I concur.
Remember the weekend before Lehman, YL ( Sept '08)? The GSE's were bailed out and the market spiked up. There is always a tick up, in any asset price, before the next leg down. As with the property market trend on the way up, there will be respites and reversals on the way down. The trend changed in 2007, and only the GFC has delayed that which started back then.
don't know if a real drop of 17% is a collapse, but its certainly very significant
I think this little upwards lift is temporary. We've got the feel good factor of the RWC and low interest rates. But both these will soon pass
The economy is stagnating and even dipping, there is very little in the Auckland economy to inspire confidence in any sustained increase in house prices
I still think its going to be sideways for years, could be decent drop if things get a bit nasty internationally (a real possibility)
Indeed. This comment on the Auckland market is very telling:
"Anecdotal evidence suggests that there is plenty of activity in the middle of the market ($300,000 - $600,000) but above this activity is quite thin."
"Quite thin" is a charitable comment. I'd love to see some analysis undertaken in the actual price bands.
As an investment, you wouldn't buy a share at its peak, so that is why this Auckland punter is sitting on the sidelines ...... and will continue to do so.
Also before I hear the screams of "if you don't get in now, you never will !!" , I already own a property (bought 1993) and rent elsewhere. So I can clearly see both sides of the fence.
IMHO prices in Auckland will just stagnate for years to come .... and that would be the 'best case scenario' in light of what is happening around the world.
Until the NZ economy/ culture has a shift away from property to more R & D, adding value to products and increasing production/productivity, therefore increasing incomes in real terms, property prices will increase ..... until then forget it.
I assume Christchurch "Red Zone" etc. sales are not included in these figures, and according to BigDaddy they won't be anyway as they are unwilling sellers, otherwise there will be a significant distortion in both the volume and price figures, and will be for some time; 2007 CV offer price etc. But here's the question:
Do those people that have to buy, because they have been turfed out of their home due to the earthquake, have their purchases discounted too? After all, I'd hardly call them 'willing buyers'. Surely their 'forced' purchases must be the counter to the forced sales ( discounted from the stats.) that they have had to make?
FYI from a reader via email:
On the same day as a panelist on the Jim Mora show was prattling on about $3000 a sq metre for flash houses an Iwi announced a cheap home model for $75000. It sunk with a murmur from the greater media or politicians.
Rising house prices are a fillip for the middle classes. ChrisSo should the headline read "House sale volumes back to long term Ave with values remaining stable" ?
Surely that is good economics right? After all the economists have been drawing up systems for centuries now , creating therories that never work, to maintain stable, no boom and bust cycles.
So everyone is happy right?
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