The outlook for Auckland's residential property market over summer is not looking good, with Barfoot & Thompson's sales hitting their lowest point for the month of November since 2010.
Conversely there was a rush of new listings at the agency with 1955 properties newly listed for sale with Barfoot last month, the highest number in the month of November for 10 years.
That combination of rising listings and sluggish sales pushed out inventory levels (the total number of homes the agency has listed on its books as available for sale) to 4838, the highest number in the month of November since 2011.
The only good news in the latest figures is that selling prices have stabilised, with November's median price of $830,000 almost unchanged from September's median of $830,500, but still well down from the peak $900,000 set in March and also below the November 2016 median of $850,000.
Barfoot's average selling price was $913,244 in November which was up from September's average of $910,537 but still well below the March peak of $968,570 and below the November 2016 average of $933,130, meaning selling prices remain below where they were 12 months ago.
The combination of rising listings and sluggish sales is not a good omen for Auckland's property market, as there are only two weeks left before the market all but shuts shop for the Christmas/New Year break.
Unless there there is a dramatic pick up in sales over the next couple of weeks, the market could start next year with a stockpile of unsold homes.
That could worsen the gap that appears to opening up between the price buyers expect to pay and the price vendors expect to receive, which could weigh heavily on sales activity over the summer months when the market is usually at its most buoyant.
However Barfoot & Thompson director Kiri Barfoot said there was no sign of a general market retreat.
"Both the average price at $933,244 and the median price at $830,000, were right in line with what we have been achieving over the previous three months," she said.
"While those numbers are down on their equivalents in November last year, that was a time when the market was close to reaching its peak.
"This November's trading is a sure sign that at current values buyers are returning to the market," she said.
And they would have plenty to choose from.
"There is now a quarter more properties on the market than at the same time last year," Kiri Barfoot said.
Barfoot Auckland
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157 Comments
Breaking news, Barfoots leases additional window space to advertise pent up listings. 18 consecutive y/y monthly declines in sales, 37 months excluding June 16. With 4.5 Billion in real estate on its stated books, the most ever in $ value Barfoots looks forward to 2018. Where is Ted.
Took me a while to find that. So you find the graph, use the box to top right to select "Number Sold" then scroll along to Nov 2010, then hover mouse above line, and there we go, there's the number. Do the same for 2017.
OR the writer could have just said that in the first couple of sentences, given that is what the article is about.
Gosh if only they would change their name to Bayleys!
Sellers are not being realistic with expectations. As prices continue to head south, more and more will be left holding the baby because they are holding onto "yesterday's" prices.
Sellers can't hold out for long. Saying there is no sign of a general market retreat is total Spruiker BS. If the buyers are retreating and its a buyers market then the market has retreated. Deepening declines to come.
What she is saying is that prices are not retreating from the numbers, and we can all see that.
I am sure that she is aware of what high listing and low sales will eventually equate to but she is unlikely to announce that if she wants to keep customers coming through the door
Given the strength of the upswing in 2014-16, it's hardly surprising that the market is relatively quiet 12 months later.
But the situation is far from dire. Just yesterday, a relatively good outcome was reported from Bailey's Real Estate.
In fact, the Auckland market has proven remarkably resilient through 2017 and moving into 2018 - despite the fervent attempts of certain people here to induce a crash.
Long term property investors will continue to do well.
Same old, same old...... enjoy the day!
TTP
Well... the Barfoots data says prices are falling. No attempt made as far as I can see for seasonal adjustment, so the year on year stats are the interesting ones. ~2% fall in mean and median prices across Auckland, so approx 4% drop in prices in real terms. Will be interesting to see where it goes from here.
Hi Averageman,
"Grabs popcorn."
You'd be much better off grabbing a property.
Wasting your money on popcorn won't help you build a property portfolio....... but will rot your teeth and make you fat.
Why be an "Averageman" when with a little bit of effort you could do so much better.
TTP
Just to be clear TTP
What you're saying is that with these measures in play:
1) increased listings
2) 'stale' listings
3) reduced demand
4) historically high rates of affordability
5) uncertainty around impact of Government policies designed to bring overall house prices and immigration down
your advice is to grab a property?
Do you mean grab as a squatter or to actually commit to buy at sellers expected price (evidently, no one else does). Hmm.
Rhetoric aside, you genuinely think now is a good time to BUY as an investor?
I've seen a property bust, close up and personal, and with all due respect, it's no popcorn type matter. People kill themselves; families and finances get destroyed and lives irreparably damaged. I understand why 'they' don't want to have that happens in New Zealand. But neither did 'they' elsewhere, and yet it still happened....
Yup it's not pretty in the slightest, which is why if possible they're best avoided by prudent lending, something that in the last 30 years or so seems to have gone out of fashion.
Debt to Income could have prevented all this - property investors who simply do not have the money, never had the money and never will have the money should not have been allowed to buy additional houses, and should have been prevented from doing so - selling houses to people who don't live here, have no interest in living here should never have been allowed to buy.
The asset bubble is offensively large (in shares as well), we'll very likely never see my Grandfather's rule of thumb for a mortgage 3 x times your income or 2.5 times your joint income ever again, but 5x and 4x should be the goal.
When it does hit, I hope the govt has the fortitude to "do an Iceland" and fix the fallout properly..
I'm hoping they are thinking of options now about what they might do if faced with the kind of massive foreclosure situation as per the US. One of the biggest failings of the US administration was that they rescued/recapitalised banks, as opposed to families. Last thing NZ needs is a more rapidly growing social housing waiting list.
It's becoming more clear by the day that we're in for an external shock - and Labour's fiscal responsibility rules will have to go out the window.
Labours fiscal responsibility rules were abrogated at the outset. Their assumptions in their budget plans regarding future tax take, as well as GDP growth, over the next three years were rather dubious at the time, and is now clearly wildly optimistic. Let me know when they decide to commence a policy of fiscal responsibility.
My understanding is their forecast wrt revenue and GDP growth were TSY's as per PREFU. And having taken over the reigns they are now coming to grips with under-funding and unallocated capital across many portfolios.
This example from yesterday;
https://www.newsroom.co.nz/2017/12/03/64690/immigrants-like-slaves-unde…
No money for compliance.
The tax take estimate was considerably higher than the PREFU estimate. In addition, the GDP predictions were also considerably higher than the PREFU estimates. In fact, the GDP estimates were higher than the heady days prior to 2007. BTW, not sure what TSY is...
Look at: http://www.labour.org.nz/fiscalplans-forecasts
Note that 2018 GDP growth estimate is 4.9%, 2019 is 4.7%, 2020 is down to 4.1%, 2021 is 4.3% growth. The odds of these occurring is rather low. Their budget estimates assume this growth rate. The average PREFU growth rate for these same four years is 53% of the growth estimated by Labour. Remember, current estimates are now lower than the optimistic values that are in the PREFU.
For reference, compare to: http://www.treasury.govt.nz/budget/forecasts/prefu2017
Note that one has to do maths as Labour is putting forward some numbers in a different format than the PREFU. For example, the GDP %gain/year estimate is not explicit, one has to do elementary analysis.
Labours values assume more than half again higher than the GDP growth that is shown in the PREFU. Achieving this level of GDP growth (NOT GDP/capita, but raw GDP) while reducing immigration is highly unlikely. Even with assuming existing immigration, their assumptions were laughably optimistic.
BTW, I'm in agreement with Bobster above.
Kate & Bobster
Agreed the crash won’t be pretty
Up here the DOW at historic highs and yet it’s all sentiment
Today it could only rise a mere 1/2 percent on news of the passed corporate tax cuts
This is underwhelming considering it dropped a full 1% on news of Flynn pleading guilty.
40 to 50% more world debt than at peak of pre GFC will make GFC2 a bigger disaster
On the other hand war in Korea could start again
Well, I don’t want to be negative, but sheesh, we are at 170% household debt to income, we’ve got a massive credit and property bubble, confidence is disappearing from the property market, OCR is already rock bottom @ 1.75% and the Aussie property markets AND BANKS look very vulnerable.. We’ve got ourselves to the top of a very high and wobbly precipice. I am struggling to see how this ends well. The “good news” scenarios from here seem so implausible as to be completely discounted. The economy has been massively puffed up by crazy mortgage credit. If there’s a material increase in unemployment we are in deep trouble. The last thing we need is a fall in aggregate incomes. Rents will fall, borrowers will default.
Iceland is basically a capital with the economic model of Queenstown, and a bit of farmland and some tourist excursions. The whole place is running off tourism and it's destroying the locals' quality of life. A necessary evil if you will. Huge living costs, low wages, with all the residents having to move into apartments on the outskirts due to all the homes being airbnb'd out. The construction sector can't keep up with the demand and more and more tourists continue to flood in each year.
That's true, but did the property investors have any concern as to what they have done to the lives of the non property owning people, their tenants and would be FHB. It seems to me that the property speculation activities have cruelly removed any hope of home ownership from a large group of people and consigned their lives to something pretty similar to the fate that you describe. All for greed. Our actions always have consequences.
The ones that I really feel sorry for are the young FHBs who have scrimped and saved and recently bought homes at these ridiculous prices. They risk loosing their equity and facing a life of extortionate mortgage repayments.
You're more of a developer, but you can join the queue if you like, I can save some pitch, might only be enough to cover an arm...
I've helped build a few, used to help out on building sites in the holidays, did my gopher bit when my old man, grandad and uncle were building.
I don't think that vengeance is the answer. These are just ordinary people who got swept up in a frenzy of greed, not stopping to think of the real consequences for others and ultimately themselves. Their actions will carry there own consequences and I don't think it will do us or them any good to think vindictively. "Vengeance is mine sayeth ....." and all that. It is a bit like kids who get themselves into trouble. You don't rejoice in it, you just feel a bit sad and try to help them get over it, but do not prevent them from experiencing the consequences of their actions.
My anger is reserved for the past National government who encouraged this situation for a handful of cynical and selfish reasons. John Key in particular, who skated away from the scene just before the chickens inevitably came home to roost. There are very few cold calculating evil people in this world, and even fewer who do this while feigning a jovial good natured veneer. Remember, he came with the reputation of being the smiling assassin.
A knighthood; what a blight on that honour.
One of the governments prime responsibilities is to ensure that we have free and fair markets in which everybody has a fair go. National stacked the deck in just about every way that it could to keep the property/population growth ponzie based economy going. That pretty much sums up their economic plan. And now we have to unwind all that and live with the consequences.
I guess the reason “there was a rush of new listings at the agency with 1955 properties newly listed for sale with Barfoot last month” except for expectations of lower house prices in the coming years, the vendors might think the overseas buyers would rush in to buy before the door closes at end of this year or at latest next February according to government’s plan. But I don’t think there will be many overseas buyers come to grab the properties before the policy change.
"The only good news is that prices have stabilised". I guess so, but prices are only measured on succeeding to sell.
Okay, so you have a spread of properties from $300k to $2 mill which gives you an average house price of lets say $1 million. In 6 months time the market changes, and anything under $1 million consistently fails to sell. You could say that the average house price has stabilized or even increased?
The other BIG unknown is what a house could have sold for in the market 6 months prior. Those $1 million houses that are keeping the average pinned upwards might be selling well above the old RV, but for all we know they are $200k to $300k down from their potential sell price 6 months prior.
Yep keep an eye on those paper Millionaires certainly in the New Year and watch them slowly deflate. Some may hang in there for a year or two thinking their AKL central location can never go down but we can all see that there's not much selling there especially at auction.
That's when you need to grab the popcorn. ;)
Thousands of vendors coming out of long term mortgages, now freehold, entering this market will be winners for whatever price they settle with. Unconditional at 20% plus less in price than their July '17 RV's, all good.This market is heading fast to the downside. If FHB's can maintain discipline, the future of our Auckland market will be good for them.
As I'm sure you know, the next Cycle could be down again; and the one after that, and the one after that. Depending one who's theorem you believe in ( Elliot Wave, for instance) there can be a meaty 3 down waves after 5 up ones.....And I reckon...we've had 5 up....
Noite that in a bull market it is 5 down for 3 up. Also, be aware of which cycle you are looking at and how they superimpose - is this a change in the supercycle or cycle?
https://en.wikipedia.org/wiki/Elliott_wave_principle
Somewhere along the line household debt might need to come down. Or...next cycle, let's just blow up a bigger debt bubble again?
We're basically at an all time high: https://tradingeconomics.com/new-zealand/households-debt-to-income
How will people pay this off if there's no other inflation, and we haven't got growth? How will they sustain even bigger debt loads relative to income?
As the IMF notes:
Household debt soared in the years leading up to the Great Recession. In advanced economies, during the five years preceding 2007, the ratio of household debt to income rose by an average of 39 percentage points, to 138 percent. In Denmark, Iceland, Ireland, the Netherlands, and Norway, debt peaked at more than 200 percent of household income. A surge in household debt to historic highs also occurred in emerging economies such as Estonia, Hungary, Latvia, and Lithuania. This occurred largely because the central banks implemented a prolonged period of artificially low policy interest rates, temporarily increasing the amount of debt that could be serviced with a given income. The leveraging up fueled a consumption boom that, ironically, boosted GDP in the countries in question, but represented not a sustainable 'boost to aggregate demand' but instead a mere pulling forward of consumption, as people took on new 30-40 year debt to pay for current year expenditures.
The predictable fallout of this policy is the slow growth that these countries are experiencing today.
Borrowing from the future to temporarily bump up the present.
If the older folk do that again today, doesn't that just suggest a ridiculously high level of self-absorption, to be willing to sacrifice folk in the future for their own ends today? And they try to call Millenials the Me Generation...
How do these articles reconcile
NBR - No signs of residential property retreat https://www.nbr.co.nz/article/no-signs-residential-property-market-retr… Barfoot & Thompson
Where is the Crash people? where is the cliff everyone was talking about? ... Still few months away? ..Ok !!
Look at the graph of both the average and median prices --- JULY was the first LOW after Feb 17 dip and still is for Now .... since July 17 prices have been stable and steady ( if not rising a bit) - that is not my opinion, It is in the Graph - ...Sales volumes are almost the same ....Having more listings does not mean that people will sell at a discount or sell more !!
- if there is lack of buyers ( for all sorts of reasons) then this market might continue as it is regardless of the inventory .... { this is a housing market not a commercial outlet to discount surplus inventories to make space for new ones} ... I take all the moaning of RE agents with a pinch of salt.
July 2017 has been the Low point so far and the market has respected that price support level. We could have a lower point in March/April 18 but we don't know that yet ( and no one knows)
It is wise to be patient and watch as things unfold , there are many unknowns ahead ....and we are getting few bad economic news at the moment which is not helping ..
I think that owner occupiers may well seize this opportunity and buy within the next 6 months if they find a suitable place ( buying is not only about price) .... Why? because:
- they have more choices and less competition now than ever.
- take advantage of the low interest rates and lock them for few years ahead.
- they will be able to negotiate a good price at present as it is a strong buyers market and they could even come across a desperate seller who wants to move on fast and maybe sell for a discounted price .
Stats and Opinion surveys of Auckland Landlords are showing pessimism and very little interest in buying investment properties in the near future - and that is quite normal in a low yield and dismal property capital gain environment mainly because of the uncertainty of what this Gov will do in future.
All the rest is just noise -- doomers can drum and shout as loud as they like ( maybe that just makes them feel good !!) and can pick and compare price as much as they please .... after all, its the silly season !
The market is behaving well so far and within the rules of supply and demand ... Have fun
where is the cliff everyone was talking about?
As I said elsewhere, I'm guessing we have passed the edge of that cliff and are presently in free fall.
The last of the disbelievers will 'get it' when they hit the bottom.
I suspect the next report will be that rentals are taking more days on the market to rent too and price pressure will come on there soon. Hang onto your good tenants folks - and if they ask for a rent decrease once the data starts flowing, grant it.
The Graphs and info does not show a cliff Kate ... the Feb dip was a bump ... NO guesswork here !
A cliff is when you make lower lows and lower highs as you go - simple and basic.
The shortage in rental properties is increasing by the hour and rents will eventually rise ... By how much? that depends on what the Gov will legislate !
Well said Kate. Labour markets are more casualized than ever. The coming downturn will hit the labour markets hard flowing into the rentals, leading to price pressures. NZ imported a lot of young workers that will simply jump on the first plane outback home or to where there are viable employment opportunities.
In Ireland, what did young people do post 2008? - 10% of them left the country:
http://www.irishexaminer.com/ireland/almost-10-of-irish-young-people-em…
The time is not far off when Landlords either compete to keep good tenants or suffer financially.
Hi TTP,
You are mumbo jumbo and don't you dare take that high and mighty attitude because you're nothing, you provide nothing, except mumbo jumbo in a pathetic attempt to get people to take high risk in a very obviously declining market. :)
Present some counter evidence before you criticize!
I think you just have to make your own mind up based on your personal situation. If you buy before the bottom as long as you income is secure and you pay the bank, they will probably leave you alone. Have to say i like the US model of send the keys to the bank and walk away,, only to sign up a cheaper house a month later.
There is nothing better about the USA, we don't want anything to do with their systems, or rather the complete lack of. The reason they got in a mess in the first place was their stupid banking practices. A nation that votes for Trump is either stupid or desperate or both. Not to worry though cos Trump is gone pretty soon, the hope is the ripples it causes don't reach our shores.
Indeed, because the purpose for buying is totally different...
When and if prices fall a bit and/or properties become attractive again, investors will compete with FHB and snitch the discounted priced houses smart fast. .... it is the uncertainty that is holding most investors back.
I agree with you on one pointy ecobird, the investors are currently conspicuous by their absence at the moment as I'm sure they are aware that is is a bad time to buy.
When the market drops and there are bargains to be had investors will be back in the market... but only those who still have equity
And we haven't considered the bulk of pent up stock investors had which are locked in by HNZ due to expire en mass in 2 years time when housing supply would probably catch up. The government of the day may then choose not to renew their contracts and absorb any excesses that they had built (new houses) during this time of knee jerk reaction to housing. This period of plateau is a slippery one, traction is anyone's guess.
Don't listen to what I say, these comments are for the wise.
Others should see a financial adviser ...
Here is some bedtime reading:
https://www.crockers.co.nz/research-hub/auckland-property-market-resear…
Nice article Eco Bird!
Some nice information there...
Meanwhile, sales volume has increased from 1,679 to 1,775 this month – approximately 17% lower than October 2016. This could indicate an increase in people looking to capitalise on their properties before prices fall too much, contributing towards a price-quashing supply-and-demand imbalance
Before you all get too far ahead of yourselves predicting the biggest crash ever, don't forget the RBNZ may yet gallop to the rescue. They've already loosened LVR restrictions and now there's rumblings of rate cuts. It's all going to come down to far the decline will go v how long the RB will hold out before pushing the panic button. Barfoots and banks will be sending them all kinds of persuasive commentary I'm sure; not to mention Christmas gifts, bouquets of flowers and chocolates.
I am not sure rate cuts will matter. We are already at 1.75% OCR, we are running out of road. And if prices are falling people will think “why buy now, why not wait”. I don’t think it would incentivise people to buy an asset that was thought to be significantly overvalued and would in all likelihood be cheaper in the future. It would be like pushing on a piece of string.
This bubble is well beyond the control of a mere political party. What do you expect them to do, create price controls? They have no significant levers to make banks lend money which they no longer wish to lend, nor to make borrowers borrow money they no longer wish to borrow.
They could, but for either of those things to work you would have to be convinced that they were primary causes of the price ramp in the first place. I’m not convinced either were the primary causes. And if prices are falling will Chinese money be really rushing in prop up a falling market? Mmmm not sure of that either.
And really, if you subscribe to the notion that prices are simply reverting to the long term average and are based on New Zealand wages and salaries, along with supply and demand reaching a balanced equilibrium (not too cold, not too hot) – then why on earth should there be the need for a degree of intervention that actually threw the “average” or equilibrium out in the first place.
@Bobster, I agree with you that the foreign buyers or Chinese buyers(who are not citizens or residents) is not primary cause of the price ramp. I mentioned this above because I feel many people think overseas buyers is a main cause. But I think the immigration is one of the main reasons to push house price up especially in Auckland.
Yes, its odd the immigration thing. Yes the numbers look big, but rentals haven’t increased proportionately to house prices. For auckland, rental increases are about 3% annual. People say there is much increased demand for accomodation due to migration but these migrants are “tapped out” and can’t pay higher rent. Well, if that’s true how on earth can they afford the much higher cost of a mortgage? My sense is that the much greater part of the immigration figures represent low skilled fodder churned through the language schools. If this low value immigration isn’t driving up rentals, how can it drive up prices? Don’t get it.
That doesnt make sense either. So you saying Chinese people dont want a bargain and are willing to pay top dollar. Why pay so much when they can just wait until prices drop, even if they have high a lot of money from Apartment in China.
If this is true why has the market stalled in NZ and Australia, if immigration is the main catalyst. The market has seemed to stall in the UK at the very same stage as these other markets.
There are obviously many reasons but the coincidence has been Chinese not being allowed to move money out of China. Whats the point of having lots of money and wanting to invest it, if you cant move the money out.
By my understanding of the investment category visa, the investors are supposed to come here and put at least $1m in to a kiwi business, the aim is not to get in and start buying up houses because they're "cheap". It would be interesting to find out if the investment criteria of the visa has actually been fulfilled, maybe something for immigration and the IRD to look into?
Yeah we imported a bunch of foreign landlords while screwing all of our own scientists and engineers who live in Auckland. The Canadian data shows wealthy migrants declare less tax than refugees. The NZ IRD doesnt collect data on wealthy migrants tax behavior because it's "not part of their core business".
They don’t claim much income tax because they don’t work (certainly not in beneficiaries), it’s fine if they pay taxes for their investment income including rentals. So I think land tax and capital gain tax may help, it won’t help too much for preventing houses prices going up in the long term but at least government can have some revenue from these wealthy families and use the money to build affordable home for young kiwis.
In specific suburbs of Vancouver that have been investigated, it appears quite a few have dropped their families in Vancouver to enjoy the free education, healthcare etc. then headed off overseas to run their businesses. Essentially benefiting from free services on the back of Canadian taxpayers, while not contributing their fair share of tax.
Agree that the best way to address this is likely via rebalancing tax away from its too great reliance on income tax and back onto a mix of land/cg tax and income tax.
114 comments and counting - property investment can be one hell of a ride – up and down.
Rising market, what a rush – easy money (ok, not quite that easy, you’ve still had to take a risk in purchasing), climbing rents and nil vacancy – life is good or very good indeed.
Stagnant market – ughh – bit of a chore getting through it but the belief that it’ll pick up in the next few years so soldier on.
Declining market – stagnant or falling rents – possible weeks / months of vacancy unless you drop to market or loosen tenant requirements. Even if comfortably geared – it’s still basically miserable but you’ll probably survive. If highly geared – it’s gut wrenchingly miserable – now the lenders are starting to call – and where did your job go?
I ultimately don’t know which way the market will go over the short to medium term – but would suggest this forum may well have a more singular tone to it in a year or so – positive or negative – for by then the verdict should be in.
By mid next year the verdict will be in and the after shock of this: Reuters article; Gravity-defying property prices in China have spawned widespread home-loan fraud as buyers fear missing out on what seems like a sure bet. Real estate agents, valuation companies and banks themselves are party to the scam.
https://www.reuters.com/investigates/special-report/china-risk-mortgage…
This will spill out globally.
you are on the money there, the verdict will be in within the next 6 months to a year or so.
Cant see how we are going to get out of this one without a miracle
too much debt, not enough income
If it all falls apart it will effect every single one of us one way or another
When it goes..........
I just happened to be in UK May 1999.
In the side bar of an inside page of the Telegraph was a small paragraph that commented that
" The average sales price for residential houses in outer London had just equaled the price in May 1989 exactly 10 years before"
On another note in comparing house prices in Auckland what was the size and configuration of the two ' average ' properties being compared?
I find the wide polarity of market views quite interesting in these forums.
On it goes - will we get away with business as usual – a bit of a slowdown, then sitting idle for a few years and ultimately general wage, inflation and population growth leading the next upturn and subsequent spurt in the market?
Or is it different this time – I don’t recall such an unusual and powerful confluence of market factors that have played out over the last 5 years or so. This appears to have changed over the last few months. Some remain, but to a diminished effect and others may well have been purged altogether.
Barring some particularly unforeseen extraneous event, I believe the overall market will move – and move to the downside. Just how dramatic and rapid a move is puzzling – perhaps the answer lies in the various motives of all those that participated in the buying “frenzy” of the last few years – so just what was that all about anyway??
It may be that in the not too distant future, we will all find out.
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