The usual spring surge in the housing market has failed to arrive this year, with sales volumes falling rather than rising although prices are holding up reasonably well.
The Real Estate Institute of NZ says it recorded 6727 residential property sales in October, down 9% compared to September and down 14% compared to October last year.
The national median selling price was $510,000 in October, down $5000 compared to September, although record high median median prices were set in Auckland, Northland, Waikato/Bay of Plenty and Southland.
In the Auckland region the median selling price was $868,000 in October, up 5.2% compared to September and up 16% compared to October last year.
The North Shore was only part of Auckland where the median price declined, dropping to exactly $1 million which was down 2% compared to September.
The monthly median price increases throughout the rest of the region ranged from 2% in Papakura/Franklin to 10.4% in central Auckland.
However sales volumes throughout the region were down 11.9% in October compared to September, and down 16.1% compared to October last year.
The biggest decline in sales numbers within the Auckland region occurred in Waitakere, where volumes were down 21.3% compared to September, and down 22.2% compared to October last year.
In the Waikato/Bay of Plenty median selling prices declined in Tauranga (-0.5%) and Mt Maunganui/Papamoa (-1.1%) and Taupo (-2.5%) compared to September but were up 1.4% in Hamilton.
However the number of residential properties sold in the Waikato Bay of Plenty in October was down 9.3% compared to September and down 25.4% compared to October last year.
In the Wellington region the median price was down 0.6% compared to September while sales volumes dropped 8%.
In Christchurch the median selling price dropped by $10,000 (-2.2%) compared to September while the volumes of sales fell 11.5% and was 23.8% lower than October last year.
REINZ spokesman Bryan Thompson said the latest loan to valuation ratio mortgage lending restrictions imposed by the Reserve Bank appeared to be mainly affecting sales of lower priced properties homes.
"Our data suggests that the impact of the revised LVR rules is having more of an effect on lower priced sales compared to higher priced sales, with a surge in the percentage of sales over $1 million and a noticeable decline in the number of sales below $400,000 compared to a year ago," he said.
"The market for lower priced properties is becoming more difficult for both buyers and sellers."
Click on the link below for the REINZ's full regional sales statistics for October:
Volumes sold - REINZ
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59 Comments
Can this now be confirmed as a trend? I'm on the North Shore of Auckland and I have never seen so many houses for sale with a price against them for YEARS - some with "discounted to meet market" headers....went to 3 open homes in the weekend and they were dead -("affordable" homes too - not mansions..)
Can anyone else share from other parts of Auckland as the Shore has def changed
Been to a handful of open homes in Mt Albert/Sandringham/Waterview over the past couple of months. Completely dead. In some cases we have been the only people there.
Got an email last week from a real estate agent who I met briefly, well over a month ago, asking if we are still looking. Smells like desperation.
The way I see it :
1/ First sign is volume of sales declines..... sellers still think they can get top dollar... no distressed sales..
2/ Inventory builds... (This is the biggest clue)... Sellers start to realize that they need to lower prices.
3/ Trend changes... !!
4/ Start to get "distressed sellers"....
When an external event happens... ( eg..LVR )... my view is that one needs to give the mkt TIME to see whether the impact is just a "one off" , short term thing, or whether it becomes a fundamental factor that has a long terrm impact..
eg...Vancouver is a great example.... In my view we still dont know if the 15% foreign tax results in a fundamental shift in long term supply/demand.... etc....etc..
Wot..nobody buying things sight un-seen anymore?
A pretty picture tells a thousand words.
Otherwise, why would they advertise...it at all.
Prices too high even for the average New Zealand punter.
http://www.stuff.co.nz/national/politics/85413428/Auckland-businessman-…
It is all a gamble, life is a gamble. Wot ever next.
Especially when buying New Zealand citizen ship, at any cost to others involved.
Does no one else besides me, see this as a very strange article, linked to above.
5th most wanted man. Name changes to protect the deeds??
There could be between 30 to 60 such economic fugitives living in New Zealand??
etc...etc.
Just asking.
The market is so volatile here. It may not crash as badly as other countries but the tide suddenly turns just like that, doesn't it?. North Shore agent telling me buyers are spoilt for choice and that they can now be aggressive with offers. Nov sales prices will be lower I expect although sellers still being unrealistic.
We need to help each of our three children own their own homes in Auckland , the first needs a home now and they all do within the next 5 years ( at the most) , so I am also hoping prices collapse .
Somehow I just don't see a collapse anytime soon , so we just wait .
I wonder what happened to the Labor Party's plan to build houses for under $300,000 .
Is it still on?
Not how the market works unfortunately.
recent sales end up revaluing all land to be developed, and even if you build a house for 300k you're still looking at 650k plus for a semi detached town house in a greenfield development.
Apartments could be in around 350k prehaps, maybe your children will need to accept that if they want to live in auckland. Or buy some stand a lones on quarter acre in Palmy today to 300k and rent them out as they double in value and use them to get back into auckland in 5 years or so (auckland will be flat for a while much like mid late 2000s.
All want to pay best part of a mill to live in South auckland slums? Nz exists beyond the Bombay hills, and having lived both sides I can tell you more are choosing the south side..
86k and growing want to live in Palmy. Best schooling in n.z.(Joe Schmidt would agree) but happy to hear you won't be making it down 'bro'
... what bothers me , is that the $ Million cost of houses in Auckland may encourage them to begin leaving that place , and to take up residence elsewhere ... amongst us normal Kiwis ...
I'm OK with having refugees as neighbours , Muslims , Hindus , Aborigines , Syrians , Lebanesians , Ukrainians , Afghans and Pakistanis ... all goody good as far as I am concerned .... nay bother there , Jimmy ... even Scots ...
... but not Aucklanders ... that is the giddy limit , is it not !
I've bitten Gordon.
Values are not falling at all.
Earthquake last night has done next to no damage to Christchurch whatsoever as far as I am aware.
Yes Gordon of course everyone in Chch wil want to move closer to Wellington and Auckland lol.
Classic!
Just resigned up 3 lots of existing tenants for another year at same rent.
With fixed rates down there is plenty of room for existing landlords to drop rents if they need to!
If you were fixed at say 5.5 per cent and fixed rate loan term ending you can fix at a bit over 4 per cent so effectively you will being paying roughly 25 to 33 per cent less interest than previously so yes your yield will be well up.Not sure what you mean by risk propensity you are on about?
Yes.
I was more curious about how dropping rent relates to your asset yield. It should be greater than unity - i.e. a 5% drop in weekly rent should result in a greater than 5% drop in yield.
Doesn't sound like a good idea to me, if avoidable..
If you are an investor, you should really know how much of your return is made up from risk premium. i.e if nominal prices don't change, and implied risk increase (say, an earthquake occurs), the real value of the asset must decrease to compensate...
How so?
I'm intrigued..
From my perspectiv:
I've just told you, your investment yield is universally worse off when you drop the rent by any amount. Thus, the only reason to do so would to be if the market demanded it. i.e. you, as a landlord, has little market power.
Costs of capital cannot be a factor in rent value decisions, in a competitive market with imperfect information, so this alone is not a basis for dropping price. i.e. rent should not fluctuate relative to an owner's (aggregate owner's weighted) cost of capital where there are a greater number of renters than landlords. Recent Christchurch data shows that prices have been flat, so this is a fair assumption, in this case. Further i.e; you have no market power..
The only way you could be improving your position by dropping rents is to be gaming the market to sign forward contracts (1/2 year tenancies) at marginally lower rates in order to maximise your profit in the short/medium term. If you are doing this, unwillingly or not, you are essentially admitting that long run prices are expected to be declining..
My thoughts, anyway.
Nymad.
Example. For every million borrowed for rentals previously some were fixed @5.59 say so interest $$55,900 p.a.
Now for every million borrowed interest is only say $41,900 on new fixed rates.
So a saving of approx $14,000 on every million borrowed.
So let's say 3 properties for every million means a saving of $100 per week on each property.
I know other investors who are fixed at just over 6 per cent and fixed rate nearly up,so their interest cost saving will be huge.
Depends really on what you have paid for your rental and amount of rent being received as to what your yield is!
Returns of 6 per cent are easily obtained in Chch with mortgage money at about 4 per cent.
Returns of 15 per cent can be obtained on some uninsured property in Chch with next to no downside really.
I think you miss my points.
Sure, you can reduce your borrowing cost, but you only save this if you don't change the rent. Lowering your rent by any amount universally lowers your yield by a greater than unity amount regardless of what you cost of capital is.
I know the argument you are making in nominal terms.
In real terms, though, you are not managing your investments well, at all, if you are only thinking in nominal terms and dropping price without the downward pressure to do so..
As I mentioned, cost of capital should not factor into rental prices in a competitive market. You are a price taker, not a setter. So, regardless what the cost of capital is, this is irrelevant in the short/medium term lag period.
Therefore, the only reason you would drop prices is if there was downward pressure on prices. An admission of this would then be an admission that medium term expectations of value are lowering; something that you vehemently disagree with.
The fact you highlighted the difference between 6% for a 'safe' property and 15% for an uninsured property highlights my point about risk premium that you didn't comprehend earlier. If we were to use arbitrary numbers of 4% as a rf rate, 2% of the 6% return would represent the market risk. In the case of the 15% return, 11% of the return would represent the risk premium. So, now that another significant earthquake has occurred in the Canterbury region, how much more risk premium needs to be attached to the value of both of those properties? Again, being a price taker, you cannot adjust for this in rents so your real value must decrease accordingly as your risk premium increases.
God that is long winded.
Firstly if you have enough positively geared properties they will give a great lifestyle.
Secondly, if purchased well they will be worth more In Years to come, not that we need to or intend to sell.
Thirdly, not sure what you mean by safe property. 6. Per cent return minimum is an insured property the 15 per cent is an"as is where is" property that you can buy for less than land value and don't generally have insurance when you buy but you can get insurance under certain circumstances.
I don't look at any of our properties as being a risk, never have and never will unless you know differently.
Our debt load is not that heavy to worry about it.
The earthquake today hasn't affected anything as no damage and mostly insured anyway and people have done very well since the quakes.
If you are worried about an investment that you have then maybe you shouldn't be invested in that investment.
"Firstly if you have enough positively geared properties they will give a great lifestyle." Yes, well as anything tends to infinity, the benefits also do.
What I am saying, because you consistently miss the point, is that your investment strategy is definitely not returning even close to optimal profit if you do half the things you advocate. I'm sorry if I sound like I am dragging this out, but on multiple occasions you have advocated your property investment prowess and every time the logic just does not stack up.
Gordon, yes I do know the Christchurch market very well, and what is good buying and what is not.
The Christchurch real estate values from what Im seeing is not dropping at all.
Do some vendors sell their property for less than what it is worth? Yes they do.
Do some landlords underrent their property and get very poor returns? Yes they do.
Can professional landlords make an excellent living from property,in Chch? Yes they can.
Gordon, this gets tedious you trying to put "The Man" down.
It gets very hurtful, but that offer is still on the table if you are "man enough" to take the challenge, otherwise give it a break!
Auckland up 16% or on dollar terms over 100k.
2 times more than the average wage
It would take 5 to 7 years of savings if earning the average wage of 50k to save that
Bring in debt to income... put the investor interests aside
National have failed to listen to the people and will suffer the same fate as the Democrats
Joe, let's hope that Kiwis have more brains than to think that a Labour/ Greens etc. would have enough ability to run the country.
Personally think that wouldbe the biggest stuff up in history.
How on earth do you think that the Greens could possibly grow the country financially, grow and legalise grass like they wanted to do when Nando was around
Legalising "grass" would - bring in a lot of tax dollars, free up Police, create an industry and jobs around it.
Alcohol is the drug that causes so many of this countries problems.
I don't see how you think National have grown the country Financially apart from creating a massive debt bubble.
Strange thing is I was against grass (and don't use) however look at Colorado and California legalising it. This takes the crime element away so the police can focus on other drugs such as P. Not sure what the long term effects will be on those states.
Labour have run the country before and can do so again... not sure why you believe National is any better considering what is happening to the middle class in NZ at the moment. They are getting squeezed just like in the US and UK.
When people can't afford to live in their own cities because the investors are allowed free reign to buy up all the property ... the future does not look too bright....
The Establishment (National) have looked after their own (the rich investors)
Labour are pure and simple a dreamers party.
They come up with ideas such as building affordable houses in Auckland.
They really had no idea as to how they were going to do this but they think it is a great idea.
Labour would need the Greens as they wouldn't get close by themselves, and that would be so conflicting and how the hell is the Greens going to be,productive?
Finally, the average Kiwi has down very well since National has been in power and our standard of living is far superior to most countries in the world.
Labour will always appeal to certain types of people which I am not able to label on here!
Yes I agree that housing is far too dear in Auckland and I have been saying this for along time, but it is not NZ investors that is forcing the prices up to the unrealistic levels.
DTIs is certainly not the answer as all it will do,is shut out first home buyers from buying forever.
Platitudinous nonsense
On "average" there are a lot more homeless, a lot more living in garages, a lot more living in cars, there are a lot more people living at home with their parents, unable to afford the cost of leaving the nest, there are a lot more FHB's unable to get on the property ladder ..... &cetera
Many people have seen their equity in their houses go up
Many people on the lower tungs of society have seen their positions deteriorate
However it is now said the "average Kiwi" has done very well since National has been in power
Which contradicts the view the "middle class" has been hollowed out
"Tonight, Helen Clark should look in the bathroom mirror and ask: "What have I done for housing affordability in the past eight years?" She'll have answered before she's squeezed out the toothpaste. Nothing.
2007
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10455931
That's the epitome of hypocrisy from the National party isn't it! Here from the same article...
International surveys rank New Zealand as having the second worst housing affordability problem in the world. Auckland is one of the 25 least affordable cities on the planet. But it's not just a problem in Auckland. You can buy a condo on the Miami waterfront for less than the price of the latest beachfront apartment on the Kapiti Coast.
The latest earthquakes are a serious reminder of just much risk is associated with having a lot of residential and commercial investments in the South Island and Wellington. Anyone who is in that position and has half a brain would have to be thinking about joining Simon in Palmy.
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