Auckland's biggest real estate firm saw sales volumes drop to a three year low in February, while the median price is now some $62,000 below that seen in December.
Barfoot & Thompson reported today that the median price last month was $738,000, down 2.9% on the figure for January - but still 7.5% ahead of February 2015.
However, the median price has now dropped 7.75% from the $800,000 seen at the end of 2015.
In addition, sales in the latest month dropped to their lowest level in any month for three years, with just 698 sold, compared with 843 for the same month a year ago - that's a 17.2% fall. The company's reporting that new listings have now surged.
The was a big disparity between the median and reported 'average' sales price, which was $822,024 in February, up 1.3% on the average price for January and up 10% on February last year.
New rules for Auckland housing investors, aimed at dampening the Auckland market, were introduced by the Reserve Bank in November.
Barfoot & Thompson managing director Peter Thompson explained the low number of sales in the month by saying that at the start of February the number of properties on the market was at its lowest number for 20 years, "and buyers had limited choice".
“However, as the month progressed more properties were listed, and we finished the month with 2060 new listings, the highest number in the past six months. There are currently an extremely high number of properties in the pipeline for settlement in March and April.
“At month end we had 3318 properties on our books, the highest since March last year, and we anticipate an extremely busy period through autumn.
“Another factor that affects the average and median sales price in the early part of the year is the summer break results in a relatively low number of sales in the $1 million plus price category. Throughout last year on average we sold 332 properties a month in the $1 million plus price category but in February the sales in this price category numbered 187.
“Sales of properties for under $500,000 in February made up 20.6% of all sales, whereas throughout last year they averaged 14.9% of sales.”
Thompson said while prices were down from their record highs, "based on past trends prices in coming months are most likely to build modestly".
“This trend has occurred over the past nine years where Auckland house prices have followed a cycle of falling in the first quarter of the year and then rising from autumn on."
Barfoot Auckland
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64 Comments
Sales down, median down and average up as selling more "expensive" houses than "cheaper" houses. Not looking good. The REINZ this month should confirm that the strata index data is showing a 10% drop in Auckland house prices since October last year. On a house of $1 million that is $100,000.00. On a house of $2 million that is $200,000.00. These figures are not modest when you annualise them. I am not surprised B&T have more listings. I am sure more and more home owners in Auckland are looking to lock in some past capital gains. Not all will achieve the returns they once thought they would as the market is clearly going against them. The current momentum seems to be gaining steam. I am not surprised that the usual spruikers are very quiet this morning. I can only presume they are busy listing some of their stock as it is not looking great for them.
Statistics don't guarantee the future M. Markets are very fickle. IRD are now involved, 30 per cent equity required by investors, harder to get devaluing money out of China and the first time for some years the momentum is down. My niece saw it on the wall, listed in November and still not sold.
Stats don't guarantee the future but they do provide an insight. Next 3 months will be telling. But prices had to come off the boil. Personally, for the greater good, I'd like to see prices in Auckland stagnate where they are now for the rest of this year. I'm excited to see what will really happen. It won't change a thing in terms of my personal plans which will be the same for the majority of genuine investors (as opposed to flippers/ speculators).
"Why do you not take profits"
My objective is to have a portfolio of rental properties generating passive income. Trying to time the market is not my game. I knew when I started out some years I'd record on-paper capital gains and some years losses. I'm not increasing my lending on properties as they increase in value and my cashflow is about neutral (at 6% interest rates) so my risk is very low.
Not worried at all. I expect prices will actually rise overall this year and I haven't bought anything in Auckland for over a year anyway... If prices decline 40% I'll be upset. But personally I think there is more chance of the ALCP winning the next election.
We will all have to wait and see. I'm putting my money on the real possibility that the Chinese are still in love with property after what happened with their share market and what is happening to property prices in their major cities. The Chinese pay remarkably high salaries to a lot of the city high level workers.
Wish me luck!
Zach you will need all the luck you can get. Even Happy 123 can see the momentum is down. The IRD is the last institution the Chinese want to deal with . Being on their books and paying tax is not on the radar screen. When was the last time you handed cash to a dairy owner or baker and it was rung on the till as it should be.
To be fair billions have been moved out of China over the last few so money is sitting in bank accounts somewhere.
Anyone who knows about money laundering knows it is then about "lairing" the money into a legitimate asset(eg property). Now there is tracibility Including the homeland governments they now need to find another asset to use as a vehicle.
The most obvious one would be to buy physical gold.
I don't live in Auckland and make no claims to any expertise in property. However,I would suggest that some caution might be in order re potential Chinese buyers.
It is my understanding that the authorities are beginning to clamp down hard on money above a certain figure going overseas and this is starting to bite hard in the Sydney property market.
Zachary,
Good luck. The most important thing it not to be over leveraged a falling market. The main reason I don't think the Asian investors will return is due to tracibility. That is the main reason the top end London market has dried up...not the stamp duty change.
The Hong Kong and Singapore investors vanished from the Auckland market half way through last year. There was some backlog of desperate FHBs to keep sales going a few months but now the full effect of the foreign buyers (or lack there of) will be felt. I don't know anyone buying and plenty of panic selling.
In my opinion price falls will continue through 2016 with all of the last two years gains wiped out, the average Auckland property will likely lose 200k of it's value.
I respectfully disagree. Still plenty of irrational buyers out there, looking at the past as a prediction of future prices. The belief is still strong that Auckland is the new Hong Kong. On a daily basis I hear from the herald, QV, radio ads, B&T, the bloke at the pub, my next door neighbour, bank economists, JK that things will be great with Auckland property! THE BELIEF IS STRONG. Only an interest rate shock will have the impact you describe.
Nah, the music is still playing, my shoes are not wet, this titanic housing market will never go down - cant possibly ........ everybody can be a winner...... the real measure is when those "wanna be landlord" radio adverts disappear....... then you know the music has stoppped - kinda like those gold adverts two years back.
I agree Serious - this time its different. No Sub Prime here. Yes we have had some issues with Finance companies, plantations, dairy conversions, plaster houses, emu farming, PONZI immigration and we are being led by a Forex gambler. And indeed yes, we didn't look too smart in '87 but Kiwi investors are clever - we are. No reverting to the mean for us.
we sold in june last year in auckland and tripled the money we put in to the house five years earlier, took this profit out of the nz market and put it in to a place in the uk where we now live mortgage free. felt a little odd effectively downsizing in our mid forties but wanted to be freed up of debt and overhead to take some risks career-wise and expand our family's life through experiences and living. we now look outwards from our home, rather than looking in wondering about renovations, upgrades etc. life is simpler. and who gives a sh*t about a super nice kitchen and bathroom, really?
thanks. maybe smart, probably just lucky. i mean, who really knows? but we did live in los angeles from 2004-2010 and the feeling in l.a. pre 2008 and in auckland the last few years re houses and everyone appearing and acting richer than they possibly could have been seemed to us spookily similiar. anyway, we'll see how it pans out and whether or not we ever move back to auckland and can afford to buy again if we do. but the best thing is we just don't really think about the place in which we live anymore we just are lucky enough to have a home and get on with having a life.
Anyone that has tabled Barfoots churn rate over the past year and its constant drivel about available month end listings would understand that the consistently quoted pent up demand is so far out of whack with reality. Actually when will those Offshore buyer numbers be released.
Get ready for the "now it's the best time to buy, prices have reached bottom, buy now or miss out, if you missed out before you're still on time to be rich now.."
Panic is here. Sell now or regret later. We'll see herd mentality in action and how quickly correction hits
I think there are a number of factors in favour of buying or retaining property in Auckland. No particular order and maybe repeating myself:
Continuing high levels of immigration and not just from China
A big chunk of buyers are from the UK - bigger than Chinese I heard
Immigrants can do well especially if they work hard and have a trade.
Chinese and Indians have an established society here .
Tourism is booming and Auckland is the hub.
More tourists are family members coming over to visit.
Developing infrastructure of Auckland - eg Avondale Interchange
Auckland is growing
Stand alone houses are desirable and still affordable and Auckland has many ($2m in Vancouver)
NZ has a reputation like Iceland as a great NW European style social package and has a temperate climate.
NZ is effectively walled off so we can control quality of migrants.
Low interest rates look to continue.
Good medical facilities
Good educational facilities
Auckland is perceived to be in the same league as Melbourne, Sydney, Toronto, Vancouver…
Auckland is highly rated in International surveys
Europeans will look to come here to escape to a safe place for families
Selling a house is easy…as is buying
Primary industries are still good
Anecdotally I have personally seen the fear in some peoples faces when they are threatened with the prospect of having PR refused. Auckland must be good.
Pray tell what criminal acts are these NZ bank heads undertaking? Could be a good scoop for interest.co.nz. Iceland bankers committed criminal acts and got cuffed. The US real estate financial crowd on the other hand were plain dumb and you don't get jailed for that.
"We find little evidence of them timing the bubble or exercising cautious behavior in purchasing homes on average, relative to two uninformed control groups: one composed of non-real estate lawyers and the other of non-housing equity analysts. Our findings cast doubt on the popular “inside job” view of the recent financial crisis that Wall Street
employees knowingly ignored warning signs of the housing bubble."
Treason. Acting in such a manner that endangers the nation, its economy and well being of the NZ people in order to make personal profit.
;-^]
BTW ignorance is I believe no defence under the law especially as Wall Street "professionals" they should have been competent and taken due care.
Wow! That is a sensational story - treason by banking CEO's. When are you going to release it to the media? Or is Nicky writing it up now for release before the next election? Can I get an advance copy?
They didn't take due care and lost their houses like many others (try reading the link before commenting thing) - perhaps they just got caught up in the excitement like therest of the wisdomful crowd. It is not as if it is without precedent in history.
Cowpat
According to the 2013 census there was 473,451 Occupied dwellings and 33,360 unoccupied = 506,811.....so take your figure of $150 billion and divide that into the number of homes and I think you might be pleasantly surprised at the lower than expected level of debt across all houses in Auckland.
Notaneconomist Thanks for response. I'll use the numbers in a slightly different manner. (I have included student debt in the above, something the RBNZ should do in the household debt numbers). Just concentrating on the mortgage debt Remember by simply using the average debt when divided across the number of households (including the vacant) can be misleading as it is assuming every mortgage holder is committed to the same time frame which obviously is not the case. I calculate at present 43 percent of households in Auckland are rented. Of the 57 percent that own their own home about 22 percent(of total) are mortgage free. That leaves 35%( 143000 2013) of households that have a mortgage. I have not adjusted the numbers(downwards) for state owned rental properties and obviously a large proportion of the rental property carries a mortgage. At worst 35 percent of Auckland households carry 138 Billion in mortgage debt at the very best 57 percent of households.Not worried.
a real danger is the removal of the best performing residential mortgages from the NZ banks domestic operations - via covered bonds - which by design are not in any danger of defaulting. If they become troubled mortgages they are replaced by a better performing mortgage. And none of this activity is subject to OBR. It's the leftovers that NZ depositors will be holding if a bank gets into difficulty. The overseas covered bond holders are by definition guaranteed.
Is that you Dr N. Smith? Are you still ineffectually wandering the back blocks of AKL? Deck chairs / Titanic.
http://www.stuff.co.nz/business/industries/75365336/Rising-housing-pric…
Hummm Zachary.... I don't think you can bank on the Brits buying up houses in Auckland. Speaking as a Brit, who emigrated to NZ during the 2008 global crash. NZ isn't that appealing now as it was then (A few years ago).
The reasons to consider : -
* You're half a world away. Trust me it takes a lot of commitment to take the plunge a relocate that far away. I wouldn't have done it if it hadn't been for my other half being a Kiwi.
* NZD is way too high in value at the moment and has been for quite some time. So not enough bang for your buck when converting your capital and venturing on to the AKL property market.
When I emigrated it was $2.5 NZD to the Pound.
* Most UK property had to recover to its previous 2008 level due to the global economic crash. The only reason why NZ and Oz wasn't affected by the Global recession was due to being part of the Asia market place.
* NZ housing build quality is generally poor, most Brits are other Europeans are use to brick and tile builds. Batton and board property builds with a tin roof is considered by most Brits to be a glorified shed!
* And mortgage interest rates here, are exceedingly high in comparison to the very low rates that you can get in the UK at 1 or 2% Here's an example from a lend you'll probably recognise: .https://www.hsbc.co.uk/1/2/mortgages/products?pcode=A004042587000000000…
* Education - Well most UK education facilities are on a par with NZ. Plus most UK Universities are more recognised globally than NZ Universities so not much incentive there to relocate to NZ.
* Climate - Auckland's climate is a bit warmer than most of the UK and is just as unpredictable.
Well some stats came out last year or maybe the year before debunking the belief that the Chinese were the major buyers by a long shot that showed folk from the UK slightly exceeded them. I'm also seeing a lot of UK people working here now as I travel around. The accents from the British Isles are more apparent.
NZ is also a very small country population-wise so we don't need that many people to come here from Europe for them to make a big difference in the market.
Zachary you just keep trying to keep it all going. Your fellow spruikers must love you at the moment. As hard as you try I think you will find that the February report from the REINZ next week will confirm the inevitable. That the momentum in Auckland is down and accelerating down and this is in the times of historically low interest rates which are only there because we are in emergency times. At some time the RB will be able to reverse the current trend as dairy and oil improves and then you will see some real action down. Rising interest rates never encourage housing price growth. I have a brother holding reasonable funds in the UK. At 47p he is certainly not bringing them home. I think your fellow Brits will be doing the same.
Yes I totally agree with you Gordon. And you won't see more Brits wanting to emigrate that have capital until the NZD drops to at least $2.5 to the £.
What you might be seeing is people from Europe or else where in the world that has settled in the UK for a few years and then have decided to move on. A lot of those are likely to be Kiwi's returning home and have picked up a British accent, like my other half did.
Confusion in the ranks, consider this garbage which caught my eye.
"The price of a house in Auckland has hit an annual record.
Data from realestate.co.nz shows the average asking price in the country's biggest city jumped 13.3 percent, or $101,656, to $866,080 in the year to February.
The previous record was set in September last year."
http://www.msn.com/en-nz/money/news/average-auckland-asking-price-up-do…
I find that when people get some data that conflicts with a core belief, they start spouting garbage.
The article states the increase of 13.3% relates to year to growth in the "average asking price".
The average asking price is about as useful a a flag referendum:)
Year to growth in medium sales from Feb 15 to Jan 16 is 6.66% (I kid you not...).
See https://www.reinz.co.nz/Media/Default/Statistic%20Documents/Market%20Fa…
Some discussion here on new restrictions on Chinese capital flight.
There was an interesting article in the FT yesterday on this -
see http://ftalphaville.ft.com/2016/03/03/2155170/so-you-want-to-get-your-m…
If you can't open it, the article basically provides 12 different ways to get your money out still ranging from physically carrying it in a bag out of the country, junkets to Macau, family group transfers of $50k per each member to Bitcoin and Pay Pal use. Costs range from very little to up to 20%.
The one that seemed faultless was called "Matchmaking" where a (shall we call it an underground) bank matches up two Chinese groups, one being a Chinese resident requiring say a lump sum to buy a street in Herne Bay and the other a NZ resident perhaps to buy up a Ghost City in China. Dashed clever those Chinese.
There was a subtle intro to the article as below:
"You’re a rich Party official go-getter on the Chinese mainland, with an eye on how muc
h the renminbi might fall over the next year." (The"Party Official" part was crossed out in the FT)
If FT keeps up that type of advice they definitely will get banned in China.
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