By Bernard Hickey
The Real Estate Institute of New Zealand (REINZ) has reported the median house price and the less volatile stratified house price index both rose to record highs in June, while sales volumes for the month rose 17.3% from a year ago.
Meanwhile, state-owned valuer QV said later on Tuesday that nationwide residential property values had risen again in June according to its latest index. Values were up 1.8% over the past three months, 4.2% up over the past year, and were now only 1.3% below the previous market peak of late 2007.
“Buyers and sellers lost confidence during the global financial crisis and in that context the current the market should be seen as recovering rather than ‘booming’,” REINZ Chief Executive Helen O’Sullivan said.
QV's Jonno Ingerson said: “Despite the number of sales being up on recent years, and values increasing, we are not experiencing a boom.
"Nationwide, the current number of sales is still around one third below peak levels, and over the past year values have increased only one third as quickly as they did in the boom years 2003 to 2007. Even in Auckland the rapid increase in values over the past few months is less than the rate seen in the boom years," Ingerson said.
Prices hit records
The median price in June was NZ$372,000, up NZ$2,000 from the previous record of NZ$370,000 set in March this year and up from NZ$369,000 in May. The national median was up 3.2% from June 2011 and the stratified median house price index, which adjusts for the mix in the types of houses sold, was up 5.3% from a year ago at a record high.
There were 6,135 houses sold in June, which was down 14.5% from May, but this was in line with seasonal patterns which see sales slide off during winter. This was the strongest June sales month since 2007. There was NZ$2.8 billion worth of property sold in the month.
The REINZ Housing Price Index also recorded new record highs in Auckland and Christchurch. Other South Island and Sections were the only two to record falls in June. Compared to June 2011, the REINZ Housing Price Index rose 5.3%, Auckland rose 7.0% and Christchurch 8.8%.
“Keen buyer interest in Auckland and Christchurch – which together make up about half of national activity – drove the New Zealand real estate market to new highs in June and a new record median price,” said O’Sullivan.
"The overall pattern for the rest of New Zealand shows improvement in sales volumes, with prices on the whole steady rather than up," she said.
"The constraint across the country appears to be shortage of properties available to meet buyer demand. This is most acute in Auckland, where new home building is still sluggish, and in Christchurch where the earthquake recovery is slowly getting under way.”
The average number of days to sell per listing fell to 37 in June from 38 in May and was down from 44 a year ago. It was also below the long term average of 41 days.
See the full REINZ statistics for June here.
See the full REINZ commentary on regional sales figures for June here.
Values up in June, but no boom
Nationwide residential property values had risen again in June according to its latest index. Values were up 1.8% over the past three months, 4.2% up over the past year, and were now only 1.3% below the previous market peak of late 2007, QV said on Tuesday.
"All the main centres have increased in value over the past year, and all apart from Wellington have increased over the past three months. The fastest increasing areas are Auckland and Christchurch. There is more variability in the provincial centres and smaller towns across the country, as values in those areas respond to local economic influences," QV.co.nz Research Director Jonno Ingerson said.
Sales activity had been significantly higher in the last few months than it had been for several years, with Auckland again stronger than most other areas.
"In contrast, the number of new listings coming onto the market has slowed considerably in recent months meaning reduced choice for potential purchasers. As a result sales activity is likely to slow in the coming months until the number of properties for sale once again increases, which typically will occur in spring," Ingerson said.
“Despite the number of sales being up on recent years, and values increasing, we are not experiencing a boom," he said.
"Nationwide, the current number of sales is still around one third below peak levels, and over the past year values have increased only one third as quickly as they did in the boom years 2003 to 2007. Even in Auckland the rapid increase in values over the past few months is less than the rate seen in the boom years.
"Overall, New Zealanders remain cautious around house buying and selling decisions," Ingerson said.
Median price - REINZ
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82 Comments
I dont think this is a boom in the bubble sense. Its simple economic fundamentals at work and part of the adjustment process the government had in mind in 2008/9 when they removed the depreciation allowances for speculators, with the knock-on effect in rental supply stock as small investors exited. My take is that there are many factors at play here , namely
1) The lowest interest rates in about 60 years which had made buying cheaper than renting
2) Net immigration , and remember the recent migrants are not your huddled masses and boat people with no money, those types cant get in here anymore , they need money or skills or both
3) Auckland has a lot of vacant land that could be subdivided , but there are severe land supply constraints due to Auckland Council's rorting of the subdivision process with extremely high fees and levies
4) The removal of the depreciation allowance for residential property speculators has reduced the stock of rental houses as the investors have been selling up between 2009 and 2011 . This aggravates the 2012 supply contraints. This seemed like a small tweek of the tax laws at the time but they are having a negative effect on small investors cashflows and many have sold up.
5) Central Government needs to address the laws around land supply constraints, its one of the unintended consequences of the onerous provisions in the Resource Management Act
6) Local Government need to realise that once a subdivision has been created, its will receive the RATES INCOME in perpetuity , so they should not be so bloody minded about taking everything upfront
Can you please explain how speculators selling houses due to the removal of the depreciation allowance has resulted in prices going up. Where I'm from it's buyers not sellers who push property prices up...
Property investors love to imagine they are offering a wonderful service to the community while also making money. The reality however is that if the government taxed rental property more many would sell up and house prices would come down. The houses sold at reduced prices would be purchased by an owner occupier who can now afford it or another investor with an improved return who can afford the new taxes.
The way the baby boomer generation did it is a lot different to the way my generation will have to do it. I was having a conversation with a 90 year old man, who went through the great depression. He told me that his father was on an average wage through the great depression and somehow his mother made that one income stretch for 8 people. That included mortgage etc and they never went hungry. I explained to him that a 1 income family 40 years ago was better off than a 2 income family was today. I asked him because that is the case, were we now in a depression, to which he replied "yes". We're in a depression folks, taking on gross amounts of debt is not advisable.
Everyone can't "climb the property ladder" in the way our current "realestate riches" crowd have done, because asset inflation isn't wealth creation. It simply creates a charge elswhere in the economy. So it is the tenant or first home owner paying exoorbotant prices who pays and the real estate investor who is the leach.
Jules ......simply when a house is sold by an investor / speculator the tenant has 2 options , 1 is to go elsehwere or, 2, buy a house. This, coupled to migration form overseas and Chch stimulates demand and there is limited supply .
By January last year people were queing to rent empty houses becasue there were none .
What I said was that some of the property investors were being forced to sell since the changes to Depreciation allowances . This put presure on tenants to move if the house was sold and put pressure on rental stocks. You now have many of the renters buying houses , along with the availability of cheap money ,plus migrants pushing up demand , Christchurch, and land supply constriantsin places like Auckland.
Its a cocktail of stuff , not one particualr factor
Appreciate your other points and that it is cocktail of factors. Just not at all convinced that this is one of those factors since at the same time as kicking a tenant out you are also supplying a house to the market so on net this has no impact as far as I can see.
(M.V)+i=P.Q is my rework of the quantity theory of money to accomodate interest. It predicts interest rates will continue towards zero and money will have to be printed in ever increasing amounts leading to eventual hyperinflation. You will notice interest rates have actually gone negative in some places. While the impact on housing may temporarily hold prices, eventually the cumulative interest percentage of the money supply will deflate assets and inflate consumables as the remaining money gets directed towards essentials.
Setting aside any debate about velocity or quantity theory models (I'm with von Mises - macro-level theories are well and good, but often fail to account for the human behaviour which actually determines market activity - think of the vast EMH anomaly literature), don't you think it's a bit self-indulgent to think you can just slap a '+i' onto a formula and say you've uncovered some hitherto unseen economic principal? What journal was your finding published in? (Has the Nobel committee been in touch yet?) Reading a few leftist, conspiracy-theory websites doesn't make you a subject matter expert, despite what your audience at whatever Occupy 'open university' you spoke at might have said.
So you attack me instead of the theory? Good on you, classic fallacious tactic which demostrates your lack of intellect or ability to actually have a reasonable discussion. The theory is actually irrelevant, it is the outcome that is important so we shall be in a situation to judge that eventually eh?
I ask again, where have your findings been published? Talk is cheap, and it's easy to claim you've discovered some wonderful new theory, but until such time as it has been peer-reviewed by other experts in the field, your conjecture is worth no more than anyone elses. Moreover, it strikes me as unlikely that you've discovered anything new or valid, given the original formula has evolved over nearly a century (as I'd understand it), and interest is hardly new. And now you're saying the theory is irrelevant....
scarfie your "+i" theorey is absolute nonsense. Interest isn't money that's been created it is simply a transaction with a price ie part of the P.Q
If the price of one transaction (ie interest) falls then the price of the remaining transactions increase hence there is inflation. That's what MV=PQ tells us.
ie Scarfie theory is a piece of garbage!
The world is staggering under its debt burden and the equation explains how that happens, but we know you have a vested interested in hoping the status quo continues. It won't because once a debt is created it has to be paid from somewhere. It doesn't matter where you try to put it into the equation, it will unbalance it.
Try this http://sustento.org.nz/wp-content/uploads/2007/05/The-Ripple-Effect.pdf for another method of explaining the debt issues.
There is no need for the money supply to be increased to accommodate interest rates at any level. Interest rates are determined on aggregate by people's time preference and therefore the savings rate.
If more people are foregoing immediate consumption this leaves more money (and real resources) available to be lent to those who produce capital goods, the accumulation of which drives increases in real wealth.
However, increasing the money supply allows interest rates to be driven below their natural market level, which distorts the structure of production by providing misleading "price signals". This leads to "malinvestment" of capital, largely in early-stage goods that are sensitive to changes in the interest rate.
I wonder how Temuera Morrison feels about this booming real estate market.
When the wheels come off this joy ride it's going to be really bad. The higher it goes up compared to average incomes the worse it's going to be. Why the government doesn't jump on board now and do one of many solutions to increase supply I don't know. (Do they not want to due to the fact that they own a bunch of property themselves???)
People working in banks are telling me that mortage applications / approvals have gone totally crazy. So do not hope for any turn-around soon. In any way, this bubble is generally greeted as a major achievement of fine economic policy :-)
Personally, only thing that would annoy me about all this would be if people behave as if they were victims of predatory banks or something, once the bubble bursts. But I think it will come that way, and the RBNZ will print money if required to keep the bubble from ever bursting. At the moment the ECB and Fed are printing enough to cover credit craziness in NZ, too.
Faint hope: Germany's constitutional court may strike down the EU's bail-out-the-banks-everywhere-and-forever policies today. But even if so, the Italian money printer at the ECB will more than likely take up the slack.
Only way I see out of the situation is significant inflation in wages. Hope none of you here has been stupid enough to put money into KiwiSaver, or similar rorts (?) For Gods sake, do not save money, or it will be taken ...
I think you are right - the RBNZ triggered this situation in NZ. An emergency level OCR allowed banks to borrow at well below the risk levels implied, by the central bank push for the introduction of Open Bank Resolution.
Depositors and everybody else figured it was better to be in debt to the banks than to be an at risk unsecured creditor.
Looking at the graphs it's only Auckland and Christchurch that are increasing (both for obvious reasons). Everywhere else looks flat as. As they account for half of total that's probably only reason the NZ price appears to have increased - it hasn't, just Auckland and Christchurch have.
yeah I think you did.
It's looking good now, but I wouldn't bet against another slump
anyway, I'm buying a house in a Grey Lynn equivalent suburb in Adelaide, still negotiating but hoping to get a 3 bedroom cottage for circa 400K in Magill
What would the equivalent be in Grey Lynn?800K?
Hard to compare cities, Matt.
The Grey Lynn equivalent (like for like distance and type of dwellings) in ChCh is Linwood and you could pick up a villa there for $150k at present. Grey Lynn is a hotspot for the wealthy, Linwood certainly isn't.
You may struggle at $800k in Grey Lynn now. Perhaps you can buy a smaller total do-up or a house on the outskirts of Grey Lynn for $800k, but you probably need to spend $1.05m for a do-up in a good street or $1.2m+ for something tidy.
Kate - sorry?
"going by population (and hence work prospects)" -
Work prospects in terms of getting food/water to them, maintaining their shelter and infrastructure, sure.
All of which needs resources (materials, land, machinery) and energy available.
But you're suggesting income and profit, yes? That's a different thing. Population is not the driver, energy-availability is.
How much work (her words) happens without energy being used, CJ?
All else is virtual - Soddys 'Negative Pigs'. Most CBD interaction is in that category. Good luck if you rely on that when you come to cash your pigs in.....
steadystate.org/wp-content/uploads/Daly_the_crisis.pdf
I'd have been one-track-minded about the sinking, too. Probably would have cut short those who discussed the probable return from tomorrows deck-chair hire......
Chris_J, he can afford to have one as the OH does the income earning, energy consuming "work" (a teacher) AND gets to this "work" in ... yes, you heard it here .. a car :-).
Transport is an issue, living so far out of town, but the bus service has improved and they can text when they need to be picked up.
Ms Upton drives into town, where she joins a car pool to get to school in Port Chalmers.
http://www.odt.co.nz/your-town/dunedin/41143/life-grid-one-pioneering-family039s-experience
Kate - nobody said I'm not on the Titanic deck too, and be careful of the date - my OH hasn't worked there for a long time, nor full-time for a long time, nor used the car for some time. Among the reasons for that, were to 'impact less'.
This isn't a matter of 'I'm alright, you lot aren't'. What IS sobering, is that having pushed self-sufficiency to a fair degree (within our current regulatory limits) is that we are not.
Society as a whole has to go there en masse, or Jevons steps in.
There is a strong case (Kim Hill / Guy McPherson, Saturday Nat Radio, 11.05) for using up the oil/coal/gas fast, so the crash will happen early and there will be more to work (ha) with post crash. I acknowledge that, but we're still going to need to live with less afterwards, and 'how to' is what we attempt to demonstrate.
Are you Labour (economic growth, just for the workers not the bosses)?
What IS sobering, is that having pushed self-sufficiency to a fair degree (within our current regulatory limits) is that we are not.
The problem I have is this "look-at-me-and-learn" missive you are running in an attempt to demonstrate your path toward a strongly implied altruistic lifestyle of self-suffciency. And its that attitude of implied altruism of yours which grates - not unlike Hugh's - but he's going to save us all from planners - whereas you're hoping to save us all from ourselves. With him it's "Dallas" - with you it's "Titanic".
How often have your pointed out that you never seek to draw a wage from any of your current effort in educating others (e.g. "look-at-me-I-give-away-my-knowledge") - and all the while you are (or have been) the beneficiary of someone else who draws a wage from educating others. See the problem?
You come across as intentionally portraying those who "work" (i.e. prostrate themselves)for income/profit as a bunch of energy-sapping-physics-deniers - hell bent on committing exponential planetary suicide in the pursuit of the impossible.
Don't get me wrong - I've got a bigger carbon sink than yours, intend to grid-tie soon, grow veggies year round in a tunnel house, reuse/recycle everything we can, buy most of the stuff we want/need second-hand, have ample pasture to self-raise more food than the family could eat... etc. - but I live this way because I enjoy it !!!!!
I suspect you live where you do and like you do for similar self-serving reasons - you like your life. And at the end of the day, pdk, who wouldn't rather be sailing?
Interesting comment.
It's not the 'working' is the problem. It's the expectation that the reward can purchase part of the planet. As I said, we have tried as much as you can, this side of 'illegal', and we aren't sustainable. Much of what we have purchased, can be called 'expended oil', in essence storing it for when it isn't around. I'm well aware that what we store, someone else won't, and well aware that it's an individual, not a societal, solution.
Doesn't mean that sustainablity isn't the only valid target though. The species is stuffed very quickly if we don't (of course, if a majority agree that the species is doomed anyway, and that it doesn't matter when that happens, then maybe sustainability is an invalid target).
As stated, the OH has reduced her take, and by a large amount - voluntarily. Most of the 'money' around has to be worthless anyway, when the bidding starts - so either we accept a steady-state economy (which will ensure inequality, we'll have to live with that) or we move to voluntary work and barter (think Greece) which is a physical version of steady-state..
As I have been a'thirst
I have dug a well
That others may drink.
I enjoy it too, but isn't that part of the message? :)
Grey Lynn is exactly the same character as West End in Brisbane - very hip, great shops and plenty of good eating places. few years ago you could pick up an old Queenslander home for about 400k - Now, you'd be lucky to get one under 800-900K..
Personally, you couldn't go wrong when buying inner city suburbs - I just bought one, moving in 2 weeks, can't wait..
Buy now in Remuera!! House prices are in the decline...a Seaview Rd ex-state semi on a good size land only went for 650k!! ...and that's the same street new Telecom CEO Simon Moutter lives (refer last edition of NZ House & Garden for a glimpse of his house)!! Good bargains are here in Remmers if you are quick enuff~
Ohhhhhh what delightful news ol' chaps and chapesses .... I only stepped off the plane this morning in little ol' Auks and I am greeted with this wonderful headline, it is truly music to my aristocratic ears .... so much so, I feel like bursting into song !
I've got ninety thousand pounds in my pyjamas,
I've got forty thousand french francs in my fridge.
I've got lost of lovely lire,
Now the Deutschemark's getting dearer,
And my dollar bills would buy the Brooklyn Bridge etc etc
Kudus to Monty et al and not forgetting (would like to though) all you plebs out there putting 65% of your disposable income into paying these lovely mortgages for a damp. cold leaky, shoe box ...haw haw
But wait, even better news for mmwaah ! .... mortgages are being snapped up like a 3 bdm villa in Westmere !! ....oohhhh just think of the cash flow flowing into yours truly's pockets ...it is just brimming over with CASH, all falling out over the shiny marble floor of the Auks Ol' Boys Club !! ....haw haw
Only, in this outpost of the financial world are such gains possible .... a heart felt thanks to our beloved Leader, the Rt Hon. John Key for just sitting on his hands and "smiling and waving" ... a great friend of our ilk. BTW he is also a nieghbour of mine on the tropical paradise of Maui ... however little Johnny just has not quite reached the highest societal echelon of the vacation isle, not anywhere near my league anyway ... haw haw
Well, orf to S&C to buy another Brioni Vanquish II suit .... goes well with my Luigi Borelli collection of shirts.... if you have to ask how much they cost, you can't afford it ...haw haw
Now back to the grindstone plebs, your lunch break of cheap, processed heavily salted and sugared food is over ..... and get back to earning those wonderful $$$$$ for mmwwahh !! .... haw haw
Chairman: Do you consider your experience to be representative of the whole? It is suspected that Asian buyers are area specific and dont seem to be targetting Grey Lynn and Westmere. If you read yesterdays article by Michael Coote and follow the link to "Stable Population" and read those articles you will see it stated that Asians re-locating to Sydney tend to congregate within their own demographics. That same phenomena is happening in Auckland. ie Enclaves. That's the issue. Lack of assimilation.
That's exactly what I'm try to say (ijn an ironic sense). Often people see Asians buying into Howick/Botany and think that the whole Auckland/NZ is being targeted.. They read the property press in those area and automatically make the asumption that all or most RE agents are asians...
Yeah, it was in an article a couple of months ago re RE agents. But I think you will find that the article was referring to the TOP 10 agents in AKL. Of the TOP 10, 8 of them were asian. That's simply telling you where the greatest volume and value of activity is going on. And it (probably) isn't Westmere or Grey Lynn. Or the agencies are "profiling" their prospects and selecting the "most suitable" agents to deal with that demographic.
Olly Newland hs proven to be a better predictor of the property market than all the "experts" that ever posted on this site.
He was on TV 3 this morning telling viewers what was in store before the latest statistics were
announced.
See it here:
http://www.3news.co.nz/Property-boom-on-horizon---expert/tabid/421/arti…
and:
http://www.ollynewland.co.nz/house-prices-continue-to-rise-gloom-mercha…
Reading his website should be compulsory reading for anyone serious about understanding real estate and to take the opportunity to make a profit.
To make a profit on real estate you are reliant on those coming on after you paying ever increasing sums to buy the same thing.
This is all well and good when you're buying into areas that are developing or being the next big thing (suburbs like Grey Lynn, Glendowie etc over the last decade)... but when it spills over into the debt-fuelled hysteria we're seeing now, and it's widespread it's unsustainable. Auckland workers can't afford their mortgages as they are. Won't be long before Aucklanders begin demanding more money from their employers to keep a roof over their head.... which leads to Auckland being an unattractive place to do business.
The Savings Working Group said that immigration has worked against the betterment of our economy as our low paid workforce has to pay for more and more infrastructure out of our taxes. This is a subsidy to developers who moan about development contributions. Population growth has become a subsidised export industry*.
*80% net from offshore
Bear in mind that QV is State owned and its comments should be read that way.
It is simply playing politics. They know only too well that if they admitted there was any sort of boom(let) it would set off a frenzy.
They have one eye on the RB and politicians and one eye on the market.
They tell these half-truths so as to avoid being blamed should the market really take off.
Study the statistics, attend open homes, and go to auctions and find out the real facts rather than believing QV's spin.
Yes! A decade ago, a lot of my Brit ex-pat friends used to come here and be amazed at how cheap it was to set up here with their Brit Pounds.... these days they're finding that they sell up in the UK and get bugger all, get even less when converted to dollars, and have to really scrimp and mortgage to the hilt to afford a humble place here in NZ. We are bad value.
Does that mean when we were *cheap* that the UK was unaffordable? or could it be that now the UK is seriously in the crap, corrupt bankers, austerity measures, the unwashed rioting only offset by Kate banging Wills and Queenies jubilee that the old empire is losing its gloss?
No, it just means that the old argument the property spruikers spouted back in 2006-2007 that "our property market is still brilliant value compared to the US, UK, and Europe" no longer holds true.
The UK housing market has receded terribly, and it was overvalued, now not so much. Ours had a brief fall<10% then has bounced like a dead cat surrounded by helium balloons... it won't last.
Things ye've gotta remember aboot this sort of article boils down to two bullet points:
- Any seller organisation is 'talking their book' at every opportunity. Buy from Meeeee! Please. (sob). Pleeeeeease.
- Fish and water syndrome: no-one in the working environment of a 'boom' can see it at the time.
Whereas, anyone with a sense of economic history and a set of peepers open, can see the following:
- Chronic undersupply of new stock
- Low interest rates
- Land banked up the wazoo
- Planneristas lock-up of land supply (the aider/abetter of land-banking)
- Building is STILL a craft occupation with little QC, less coordination and woeful throughput (read the Productivity Commish...)
- Building is now a Guild - you have to jump through many hoops, per trade, to swing dat hammer.
Which all adds up to a sweet Cartel fer those involved.
Aided and abetted by the spruikers, which IIRC is where we came in, thus making a Perfect Circle.
Of unaffordability....
Sadly, I'm inclined to agree with you.
I'm not a homeowner because I acknowledge that it has to fail at some point, but I think that the government will just keep pumping funds in when it does through housing grants, WFF etc to keep the charade going. I won't own a house, but as a taxpayer I'll be paying a chunk of every mortgage in NZ.... or rather I won't because I'll up sticks and leave.
I have heard this many times before mist42nz ... never going to happen. No way in hell any government will have the courage to do this... Bach Tax maybe, but the loopholes there are too many to count, so maybe some people will cop a tax for a short time but revenue will quickly dry up - John Key knows this and already said as much, this is just No-Integrity-Dunne playing to the, what does Wolly call them, PEASANTS. When the mainstay of the NZ economy is people buying and selling houses to each other at ever increasing prices, it would be insane to muck with it. I believe Bernard is correct in his assertions that the Nats will crank up inflation... and the savers and the already struggling middle-class will suffer. Now is the time to get in at ANY COST, because in 5 years time a 600k median house price will an "oh my goodness, I wish I listened to Olly and got in 21012" time. Over a million at least will be the median. Do you remember what happened in Zimbabwe a few years ago when the Bill English equivalent there honestly believed he was doing the right thing for his rich cronies...
Maybe portbability is a good idea, as long as it comes in gold coins and gun metal blue... if you know what I'm saying... Barbwire and high fences will be the order of the day, circa Harare, Johannesberg and Kinshasa...
Have a nice day... ;-)
I watched Q&A this morning with B. Hickey (well done) about the housing problem.
As long as “Key’s greedy slave driver Club” is dominating the property scene, nothing is going to change.
Riots in the streets will finally make some impact for changes, when it is almost too late. Inequality is divorcing the nation leading to severe consequences.
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