The latest set of data released by the Real Estate Institute provides a further update on the state of the property market around the country.
I have taken the details of sales volumes and prices and inputed them into charts to provide some clarity around the key trends and what that can tell us about the current market and the outlook for the next year.
Sales Trends
In terms of property sales the number of sales per month keep slipping - 5,893 properties sold in July, down 13% as compared to July last year.
This takes the total for the first 7 months of the year to 42,057 as compared to the first 7 months of last year with a total of 47,423 a decline of 11%.
The market peaked in October last year when the moving annual total hit 80,677.
The current moving annual total has slipped to 74,753 as shown in the chart below.
Property sales are the lead indicator of the market and as such tracking a trend in sales is key to the potential future outcome of the market in price movements.
As such the next chart is important as it looks at a 3 month moving average period of sales data.
This is showing a change in the trend in sales volumes as the rate of decline is reversing and potentially in a couple of months we could well be seeing year-on-year increases again.
The factors behind this reversal of the decline in sales is a shift in the balance between the positive effect of the broader economic growth pitched against the financial constraints placed upon the market by the combination of LVR and rising interest rates.
There is no doubt that the latter has had a major impact on sales coming as it did (far from coincidentally) starting in October of last year.
However I suspect that the improving sentiment around recent references to delays in future increases in interest rates and potential loosening of LVR policy may be bringing about this reversal with the underlying economic strength winning through.
Price Trends
Pricing as stated earlier is more of a lag indicator of the property market and this is seen in the latest set of statistics of the Stratified Median Price Index from REINZ.
The data is reported monthly for each of the main 3 metro areas as well as the whole of NZ and the balance of the North Island and the balance of the South Island excluding these main cities.
Detailed below are the chart for each of these 6 views of the property price trend covering the past 7 years tracking the latest data for July matched to the peak of the market pre-GFC and the bottom of the market in late 2009.
New Zealand
Auckland
Wellington
Christchurch
Other North Island (excluding Auckland / Wellington)
Other South Island (excluding Christchurch)
---------------------------------------------------------------------------------------
The above article was written by Alistair Helm, and is republished with his approval. The article was originally published on Properazzi here
12 Comments
The deterrent effect on house buying of floating interest rates of 6.8% in the post GFC low wage increase era is equivalent to a floating rate of 9 or 10% pre GFC. As well as the threat of more interest rate increases in 2015 - will see regional house price declines. Unless bank lending loosens up.
In many regions house prices are at a similar level to 2006 prices. 8 years of no price growth. Must be close to bhs 30% decline in real terms over that 8 year period. Wages and rents both up over that period too. I see value in some of these markets esp if prices fall from here.
"Property sales are the lead indicator of the market and as such tracking a trend in sales is key to the potential future outcome of the market in price movements."
is that a verifiable fact Alistair..?? Can that one thing stand on its on as a predictor..??
OR.... should volume of sales be used in a contextual sense.??? ie. depending on the stage of the mkt.
I'm not a property experrt.... but I would have thought inventory levels would be a better predictor than volume of sales..???
A mantra I have learnt is .... "Inventory is the mortal enemy of price"...
I think volume of sales as a sentiment indicator is really useful... eg... record volumes might indicate the euphoric point in the cycle.... the bubble stage.. ... like wise very low sales , in a climate of fear is indicative of a bottom....
I dont think the current volume of sales is predictive of anything.... all it is reflecting is a consolidation in the mkt, which is present tense..
just my view..
The CPI adjusted REINZ data for the regions till July. It is not supplied broken down by strata:
http://www.realestate.omo.co.nz/cpiadjregionals/
Stratified data and the better analysis possible from that (e.g. true medians, strata balanced averages) is only available at the national level.
The market in Ak has been running on borrowed time since last October. Economic growth is set to slow markedly given dairy and log prices falling, but the kiwi $ staying high. Then next year we will see usd rates rise, kiwi $ fall, term mortgage rates here rise and offshore "investors" rush for the exits as they scramble to get their cash out of NZ assets before the 20% fall in currency and rise in their domestic cost of finance bankrupts them.
The smart money is already trying to quietly liquidate their property assets here.
Online Estate Agents UK service House Tree offers a full estate agent service at a fraction of normal high street prices. We list your properties online through the internet to a number of websites including Rightmove and Zoopla, globrix and Find a property to name just a few.
http://www.stuff.co.nz/business/money/find-a-home/10385444/Buyer-confidence-at-7-year-low
House buyer confidence at 7 year low
Reserve Bank must have been under instructions to crash the NZ economy, after protecting the banks with LVR settings. 2015 looks to be interesting after the circus election distractions.
More Crash predictions
http://wakaleaks.co.nz/featured/why-property-prices-in-new-zealand-could-crash/
Although the new LVR offers some protection from declining values and home owners going under water - this won't help buyers ( or banks) from 2009 to 2012 who borrowed at 95% or similar with large mortgages relative to income.
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.