The residential property market is showing signs of stabilising as it slogs through the winter months, although it's still far too fragile to call it a recovery.
At the end of June property website Realestate.co.nz had a total of 24,676 residential properties available for sale. That number has declined for three consecutive months and is now at its lowest level since February last year. That means the total number of homes on the market is now back up to where it was prior to the outbreak of the Covid-19 pandemic in 2019.
The recent decline in stock on the market has been caused by two things.
Firstly, there has been a slight improvement in sales, with the Real Estate Institute of New Zealand recording 5629 sales in June, up by 719 (+14.6%) compared to June last year.
But the biggest impact on stock has come from a reduction in the number of properties being newly listed for sale each month, which has declined form 7893 in June last year to 6218 in June this year. That's a reduction of 1675 properties (-21.2%).
That means the number of sales recorded by the REINZ each month expressed as a percentage of the new listings received by Realestate.co.nz the previous month, has increased from 61% in June last year to 77% in June this year. Meanwhile sales expressed as a percentage of total stock on the market at the end of the previous month has increased from 18% to 21% over the same period.
A clue to what's driving those trends can be found in the comparison of asking prices with selling prices.
Since the beginning of this year, the REINZ's median selling price has increased by $17,500 (+2.3%), rising from $762,500 in January to $780,000 in June, although it has been flat for the last three months.
Over the same period, the average asking price of properties available for sale on Realestate.co.nz has declined by $40,698 (-4.6%), from $882,386 in January to $841,688 in June.
That suggests a major driver of sales has been a reduction in asking prices.
All of the above figures sit well with the feedback interest.co.nz is currently receiving from the coalface of the residential property market. This is that the main driver of market activity is vendors who are becoming more realistic in their price expectations, whether they have a property that has already been on the market for some time, or are bringing a new listing to the market. And that is stimulating sales.
Those vendors unwilling to accept current pricing are increasingly sitting on the sidelines, hence the decline in new listings.
Another factor to consider when looking ahead to next spring, is that there is a significant amount of latency in the market from both buyers and vendors who have held off from making a sale or purchase.
The degree to which new listings come to market in spring and how well that matches up with demand form buyers will obviously have a big impact on how the market performs.
While mortgage interest rates are usually top of mind when trying to predict market trends, an even more important factor in the current market is how well the economy performs over the next few months.
Given current property prices even after allowing for recent price falls, buyers need have a good measure of confidence in the economy and in their own employment prospects in particular, if they are to commit to the huge amount of debt that they need to take on to make a purchase.
And confidence and certainty are two things that are in short supply at the moment.
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73 Comments
It's hit the bottom guys, up from here...
Any data to support this, or is it just a case of your income tied to house prices or sales?
Thanks hARveY!
Are you looking at aussie data...
I think he is talking about Interest Rates.
🤣 He'd have to be - surely! Spruikers avoid the glaring fact that when adjusted for inflation they're still falling heavily anyway. Those who were around in the 70s will understand what this means and that there's considerable potential for further value erosion going forward.
Good point. At the moment unless houses are going up at 7% PA then they are going down.
Jimbo, that is one of the reasons house prices are going to start rising. 10-20% by the end of 2025
The DGM consistently forget or ignore the glaring fact that property investment is NOT just about capital appreciation....... It's also about rental return - the "liquid" part of ROI.
In fact, for many property investors the rental income is much more important than capital appreciation. In particular, this applies to older investors, for whom rental income becomes an important component of their retirement income - together with things like NZ Superannuation, KiwiSaver, managed funds, equities, private superannuation and savings/term deposits.
Many older people have no intention of selling their investment properties because they purchased them as a relatively secure long-term investment - which their descendants will one day inherit.
Historically, property investment (such as good, old-fashioned rental housing) has comfortably outperformed bank term deposits and, with rents continuing to increase, its popularity is destined to continue.
TTP
rents continuing to increase
Sacrebleu non !!!
If it was an ROI decision, you'd be better off with the money in a term deposit. Your comment has a few leaks in it.
While I'm at it, I predict in the next 12 months commercial will take a bath. Inventories heading west, businesses heading under, massive growth in floor space available over the last 2 years...
Lol Sluggy, my houses are all in Auckland and all are returning 5%+ ROI. And rents go up with inflation. So, I'd be dumb to be selling and putting money in term deposits at 6% (if you can get it) when inflation is at 7%.
Future is bleak..with rates rising..
There was a bit of activity recently, only because of rates dropped after the previous mpc and the spruiking that followed
Rising rates? The swap rates have shaken off the spike after the last MPC meeting and have basically gone sideways for the last two months. https://www.interest.co.nz/charts/interest-rates/swap-rates
Or if you are talking retail mortgage rates, only the 6month and 1 year have risen, the 2yr has gone sideways, and the rest have been coasting downhill since December. see https://www.interest.co.nz/charts/interest-rates/fixed-mortgage-rates
We've put in an offer on a house, also I'm expecting to lose equity over the coming months if the offer is accepted. I think the bottom, particularly in real terms is a long way off. It's a shame I'd love to sit it out and wait.
Who is making you buy ? TTP ? Yvil ? The Police ?
NO ONE NEEDS TO BUY ! BUT MANY NEED TO SELL !
SPOT ON
NO ONE NEEDS TO BUY ! BUT MANY NEED TO SELL !
The figures show the inverse is true, more properties selling and less coming to market.
Still waiting for this veritable tsunami of rentals from overleveraged investors to flood the market at bargain basement prices.
Ya lied to us Poster Formerly Known as Prophet, ya lied to us all!
They'll come once their Brightline period has expired (which has now started from April 2023) and their tenants 12 month leases expire.
I think you're confusing brightline with interest deductibility, and you can sell a house that's on a 12 month lease whenever you want so long as you give notice.
Not that either are a Suplex from the top rope scenario.
They are waiting for their Brightline period to expire so they don't have to pay tax on the capital gains. Nothing to do with interest deductibilitiy. The 5 year Brightline came into effect in March 2018 so as of April this year people are free to sell without paying 39% of their gains to the Labour Govt. And those who had bought in 2018 are still sitting on sizeable gains so its worth holding until the expiry period.
In this market you want to sell a house with vacant possession, not with tenant insitu, as not much interest in buying a tenanted property that has zero interest deducibility. So you will need to wait for the fixed tenancy to roll over onto a periodic, so you can give notice to the tenants. A quick cosmetic reno, some staging furniture, and then its sold to a FHB.
many people need to buy, many of them just cannot afford to buy.
People need to buy a house like they need a cigarette.
Honestly, I can't find a rental property big enough for our family close to the kid's schools. If we miss out on this one we'll be going for a holiday to Australia for a look at jobs and houses.
Rent 2, still cheaper than buying 1. Put the wife and kids down the road somewhere and have yourself a bachelor pad.
Some of us like to be with our families JJ
I could rent 3 for what mortgage and rates will be
Good luck either way Juzz, I hope you find what will make you and your family happy 😊
People can't put their lives on hold forever and if they can afford the mortgage repayments and are in the house for the long term, it's the right thing to do, IMO. You shouldn't look at a family home as an investment but a good place to live and bring up a family.
It depends where you are buying. The headlines focus on Auckland Wellington and other poor performers for click bait. If you look at other areas, prices have leveled out eg price fall of just 0.2% over a 3 month period in Hamilton.
The regions were always going to do better, things have changed post Covid.
I hope it was a silly offer you made? We did that once and the offer was accepted, much to our surprise! Good luck and hope you'll be happy in your new home.
I've been in this position recently and it's not easy. We considered renting for a couple of years after selling mid-2021, knowing that this would've been the financially sensible move with rental cost more than covered by TD interest. Basically we knew we were giving away equity over the coming months/years, but this was outweighed by the need to reestablish an an area we wanted to put down roots, having been well and truly upheaved by Covid and with our eldest about to start school. I think you'll be OK though as it seems unlikely to me that things will go much lower in nominal terms. Pricing in real terms is a double edged sword - if you've got significant debt, a bit of inflation is your friend (provided you can command reasonable pay-rises to match). Having said that, the days of high inflation (and interest rates) are almost certainly coming to an end.
Not sure how this can be seen as anything but speculation since many agencies are no longer seeing value in REINZ membership, and many are now only using trademe, not Realestate.co.nz Also, this doesn't take into account the rising volume of private sales occurring on various other platforms.
Actually, Victoria Govt has just given up on Common Wealth Game hosting right for 2026. Auckland or Wellington can take this as a sure boost to our slippery housing market!
Interesting this is already happening as plenty of new houses have been delivered to the market over the past few months. However, things turned sour around about 12 months ago now. I would say the average project timeframe for a residential build is 12 - 18 months, and with next to no sales over the past 12 months that leaves another 6 months (max) of new builds coming to the market, adding to the rising stock. From there I envision there will be almost no new dwellings on the market and builders will start to see more interest from purchasers looking to build.
Could be dead wrong but hey, my guess (and anyone else's) is as good as any economists.
Prices can't drop if nobody sells.
In the U.S., housing stock on market is plummeting. For those on fixed-, long-term mortgages, selling existing homes and buying a new home means higher debt-serving costs.
https://twitter.com/Callum_Thomas/status/1681129059185725440/photo/1
In its fight against Inflation, the last thing the RBNZ wants to read is "It's hit the bottom guys, up from here...".
And that's why prices have a long way yet to fall. Until no one dares write about The Bottom being anything, it isn't anywhere near 'in'.
It is precisely because Inflation gets up off its Death Bed at each certainty that "It's over!" that it has to be fought not one or twice but 3 time and more, each time with added monetary gusto, and we are only into the first effort.
Countdown have $400 mil to spend on a rebrand. Maybe they should lower prices instead?
https://www.nzherald.co.nz/nz/final-countdown-supermarket-giant-spendin…
$400m. More than last years annual "profit" in New Zealand.
The Commerce Commission used different metrics to assess the profitability of the supermarket industry earlier this year.
It concluded that Woolworths NZ and Foodstuffs were between them making “excess returns” over their cost of capital of about $430m a year and that their prices appeared “relatively high by international standards”.
Interesting.
https://www.stuff.co.nz/business/129681016/countdown-profit-falls-but-c…
Complete rebrand just as ComCom seem to be taking more action to investigate the level of profit across the supermarket chains and ensure there isn't cartel like activity. What a perfect way to refresh for them and suddenly no longer have the sales and profit data from the old company to open up their books for when made to.
I still reckon, and it's just a reckon at that, rebates and other creative accounting methods will disguise a lot of this profit data when the books are opened.
If I were an aspiring supplier to a big supermarket, and they said to me: "Invoice us 20% more, and then give us that back as a cash rebate at the end of the year" then what a pleasure. The supermarket wins, because a cash rebate doesn't need to show up on the books does it? Doesn't even need to go into their trading bank account.
"cash rebate doesn't need to show up on the books does it? Doesn't even need to go into their trading bank account". Conspiracy theory much Dan? No business with the size and reach of Woolworths or Foodstuffs would dream of doing anything like that. No least that it couldn't be kept quiet. And by the way, which "creative accounting methods" are you referring to? Woolworths is Australian and is therefore audited (as legislated under the Companies Act). It's unlikely that anything of the size you seem to be suggesting would make it past an auditor and a tagged set of financials. Foodstuffs is made up of a group of shop owners. Whether they are audited or not is a different kettle of fish. However, I'd suggest they are, as there are mechanisms to value each store when the owner decides he wants out, and the numbers would have to be clean.
Since the beginning of this year, the REINZ's median selling price has increased by $17,500 (+2.3%), rising from $762,500 in January to $780,000 in June
??? Really ???
That's what the graph section on here says, so it must be right!
https://www.interest.co.nz/charts/real-estate/median-price-reinz
Without wanting to dig into the REINZ reports just now to check, I believe the HPI has been falling while the median has been rising. Read in to that what you will. Personally, I tend to trust the HPI more but it isn't graphed so conveniently.
Here you go - slightly up in June, much like a few months back.
For future reference, from the menu, "Data & products" -> "Property reports" -> scroll to the bottom of the page for HPI.
They've redone their website and IA recently, and I find it less intuitive but I am overly opinionated on these things.
Thanks - January national HPI 3582, June 3518. About 1.8% down - not much over 5 months. About 1.5% down in Auckland, 2% ex-Auckland.
OK, so if we take the HPI for reference, it's down 1.8% over the last 5 months. That's a very small percentage, and certainly not in line with talks of a "massive crash of values"
Yes, the tempo of the fall has certainly slowed. Bit of a breather in the crash, or are we getting close to the bottom?
Nominal prices. When inflation is running at +6% then any fall no matter how small, any levelling off, or even small rises are actually still a fall.
Yeah nah. Unless your salary is rising at +6%
There is still a massive part of the economy still going flat out building that’s about to hit the wall.
GFC 2.0, here we come.
Sometimes it feels like half the posters on here think they're auditioning for a Big Short sequel.
Audition? It’s not the actors that made the money.
So many wannabe Mark Baums (Steve Eisman) on here. Except some on here are straying from the facts into real tinfoil hat territory.
"But the biggest impact on stock has come from a reduction in the number of properties being newly listed for sale each month,"
So people are not listing because they know they won't achieve the price they asking? This to me is a classic case that they don't really need to sell unless they can't get the price they want, not reduce the price to actually sell the property.
but if many become sellers one expects prices to leg down another 15%
Metrics are important
One that is not mentioned is amount of stock in total. That is how many dwellings are there? Count is not v accurate
But it undoubtedly goes up annually and is far higher, like pop, than 15 years ago. So, for market sales to be consistent with that they should be an equivalent % of stock that is standing.
Average pcm sales in last 15 years in Auckland is 3300. But stock of dwellings has gone up a lot. In 2020-21 this pcm sale total went to 5600 for 9 months. To return to mean, therefore, sales have to fall well below 3300 for a long period.
We have to ask why, at current rates, people will be looking to buy and at falling prices why sellers want to sell. Apart from those who have to move, discretionary sales of lots of people who wanted best price, have gone for a few years.
None of this is mentioned when ref to state of market
(Slightly) More sales. Less supply and less stock
By definition leads to more competition and higher prices.
I dont believe it but we will see
"More sales. Less supply and less stock
By definition leads to more competition and higher prices."
Only if demand stays constant. If demand falls (due to, say, less access to credit) then prices can fall. Basic supply and demand.
The speculative are blind to logic not in their favor.
I think the problem is that people cannot qualify for a new mortgage so cant sell their existing house and buy a new one, especially if they are substantially upgrading. They have no option but to stay put. I'm hearing of people with 50% equity who cant even get a mortgage top up to pay for renovations so they can sell a house either.
Interesting point. I’d say that banks are becoming more aware of DTI and probably starting to manage themselves before the RBNZ does.
Cash is king and you need to be earning it. A good asset base and a low LVR does not help like it did 3 years ago.
Its a good time to buy and sell if you are opportunistic.
We just sold a house cv 0.995m and bought one with a cv of 1.2m in a much better location.. we paid all oùr costs and walked away with some cash. Property we bought has potential to add value.
Some people have to sell - and their REAs arent good at selling in a hard market... others can wait and bother to find REAs that can sell in current conditions.
We did the same miv in 2011 coming out of the GFC. Imo it is much better to move and make gains when the market is 'confused'.
Probably would take us 5-8 years working to squirrel away the $200kish we made... whereas those that bought in the boom have probably lost $200k.. so we are net $400k better off and shaved 10yrs+ off the need to work hard just by doing a deal when everyone else is sitting tight.
Lifes kinda funny. Just wish there was some surf.
Anecdotally what I've seen through the year is those wishing to sell and buy another place will offer on it (often too much) ands then fail to sell their own as they have too higher expectations of what they will get, or they won't accept the lower offers for their own house because the high offer they putt on the place they want is dependent on them getting the price they expect for their own house. Hence they don't sell a they see taking a lower price for their own place as a double whammy of failed expectations coupled with high interest rates for the extra mortgage they would need, or someone else comes in with a better offer and takes the place out from under them for which they offered on.
The entire market is still in "wait and see" mode. Most people can't believe that the values have crashed 20% and they think this is a small blip and next year the market will shoot to the moon.... if they can just hold on for another 6 to 12 months they will.
There will be others this spring, who understand that interest rates are never dropping below 4% again, and being savvy they will list for sale with an asking price and meet the market.
The savvy vendors will list early and price sharply, as there are buyers out there, so they won't be left holding the bag.
I agree, Starrider. Where we are at is unprecedented. The increased cost of money is going to weigh heavily on house prices for a long time yet.
This is EXACTLY what is happening to my father's house sale. Its been in a chain of sales for seven weeks, now up to 4 contracts, everyone dependent on selling another house. Fortunately he just got a second offer on the place, so he can step out of the chain. It was a lower price offer, but cash and unconditional wins every time these days.
Was chatting with a friend from Wellington a few weeks back. The bank had called and said that unless they buy now that their pre-approved amount is going to be dropped 25% (due to interest rate risk - their income hasn't changed from the original pre-approval).
Haven't caught up with them since but don't believe they have purchased, so their buying power has likely dropped 25% now.
If this is true across the market, then I don't see prices rebouding in a hurry.
Any other buyers hearing the same from the banks?
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