The average asking price of homes listed for sale on Trade Me Property slipped back below half a million dollars for the first time since October last year in January.
Trade Me Property measures its asking prices as a rolling three months average, and its average asking price for the three months to the end of January was $498,550, down 1.1% compared to the three months ended December, which itself was down 1% compared to the three months ended November.
Trade Me's Head of Property Nigel Jeffries said the dip in asking prices showed there had been some uncertainty about the strength of the market over the holiday period, but he did not expect that to last.
"We suspect recent reports around the outlook for lower interest rates through the remainder of 2015 will see a reversal of this softness in the market over the next few months," he said.
In the main centres, average asking prices in the three months to January were up 13% in Auckland compared to a year earlier, while in Wellington they were up 6.5%.
In Canterbury they were up 8.8% and in Otago they were up 5.2%.
Jeffries said a feature of the market was that growth in asking prices was no longer just confined to Auckland and Christchurch.
"We've become accustomed to the strength of the property market in Auckland and Christchurch, with the rest of the country languishing behind," he said.
"However recent months have seen this change and the majority of provincial regions are seeing strong year on year gains in average asking prices."
To read Trade Me Property's full report, with average asking prices for all regions and an analysis by property types, click on this link.
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34 Comments
My Grandmother had a stroke and went into care recently - we had to sell her house to pay for her care. Her 2-3 bedroom 2 level brick and tile townhouse with a small yard in Ellerslie (shared title) sold yesterday for $784,000.
It was bought a local investor, who outbid an investor from Australia. It basically cemented my opinion that the real reason for the massive cost of housing in Auckland is investors, local and foreign, being driven by tax breaks, tax free capital gain and cheap money.
Any talk about lack of supply, council regulations etc is a smokescreen - the real issue is demand.
exactly.
Demand is high due to: tax breaks, untaxed capital gains, and cheap money.
Supply: The poor don't get access to cheap sections. We are told densification is needed, as productive farm land would be wasted. But the rich get 'ultra low density lifestyle blocks'
And the whole thing is 'too big to fail'. The Govt will keep immigration and land supply settings so prices remain high. 10% increases per annum or more are welcomed, but 1-2% loses are 'alarming'. The FHB from a poor family thinks 10% increases are alarming, but the govt doesn't care about this group.
Source:
http://www.interest.co.nz/rural-news/73741/10-acre-block-worst-environm…
And the truth is investors are buying purely for capital gain. If you look at the rate of returns, that Australian buyer would be better off buying in places like Brisbane, Adelaide. He/she can buy a decent 3br town house within 10km of the CBD for about 500K and rental would easily be $500+/week; rental outgoings would also be much lower than Auckland
I went to an auction in Auckland yesterday on a house we were looking at for a family memberr. They were going to bid for it but changed their mind at the last minute. I'd done all the due diligence and thought it would sell for high $600k's. My advice to them was they'd need to be prepared to go to $720k to get it.
It was a good auction with a 6-7 parties bidding, including a couple of investors. The investors pulled out at around $700k. Two lots of First Home Buyers slogged it out to a final selling price of $768,500. CV is $550k.
I was stunned at the price, as was the agent. Investors generally won't pay above market value. FHB'ers are buying with their hearts.
It was just first home buyers bidding against each other for the last $60k or so. Not sure how the investors influenced that. I put it down to a shortage of listings and two FHB'ers going to the limits of their lending ability to try and secure the property.
Seems there could be some bias around here if you really believe the investors were somehow responsible for the final price. If the investors hadn't bid at all I don't think it would have changed the outcome.
" If the investors hadn't bid at all I don't think it would have changed the outcome." Investors helped to push the price into the 700K mark.. if they hadn't been there I can almost guarantee the price will be in the low 600K. it's the demands that drove the price up!
It was two FHB'ers who were competing... It wasn't one FHB bidding until they'd beaten an investor. If no one else bid those two FHB'ers would have gotten to that point eventually - the point at which one of them wasn't prepared to go any higher.
But yes if there were no investors in the market and no Aussies and no Chinese and no Brits and no upsizers, dowsizers or sidesizers.. then yes property prices would be lower.
"Investors generally won't pay above market value."
nonsense, in your example the market value is 768500. What you means is some investors will only purchase a bargain. Investors don't need an investement, they can always leave their money in the bank earning interest. FHB need a home, they are sick of getting kicked out and trying to find a new rental inzone for their kids schools. They have to pay full market value and that normally involves outbidding the investor who us just looking for a bargain.
To call a 1 or 2 percent a "slip" in prices is grossly misleading.
All assets go up and down and property is no exception.
Should the trend continue for at least the next six months in an unbroken straight line
then the argument can be raised again.
Until then it will be business as usual with the profits and losses of a true free market
being reflected in the statistics as they arise.
I'm sure we've been through this before BigDaddy, but we are NOT talking about a free market as supply is controlled by the government. This is a skewed market due to lack of land supply and other government intervention.
Additionally, the government is sending tax signals to discourage building (through local government fees) and to encourage speculation/investment (through tax breaks).
I find it interesting when l look back over my soon to be 60 years and think how lucky I have been. I was born in 1955 and bought my first house in 1984 for $69k. My wife virtually paid it off in 18 months as she had a great job and the loan on it was only $45k. That set us up for life. From there we have only bought two more houses (no investment properties) and I retired when 58. Now I have a nephew trying to buy his first home in Auckland around the $950k value. He has a great income but the debt he will have to pay off is extraordinary. That is after paying off his student debt first. My generation has certainly been lucky in terms of timing. Somehow I do not think he will be retiring at 58 as he has that debt to pay off then he will need to put some money aside for retirement as his house will be of no benefit for him in retirement other than being an expensive liablity that needs to be maintained,insured and rates paid for.
Hypothetical couple:
Household income = $80,000.
After tax + student loan = $60,0000
In the hand after tax / expenses = $25,000
(Expenses include rent, power, phone, clothes, car, insurance, food, medical and I have been conservative with estimating costs)
Now they are saving for an average house at $500,000. They need 4 years of basically no discretionary spending to save a deposit. But wait! In the 4 years the YoY gain of 7% means that their house now costs ~$655,000. Now they need another 2 years to save a deposit of $131,000 (this is now assuming the house stops appreciating at 7% for those 2 extra years!).
Finally, after 6 years of constant saving every spare dollar they purchase their average $655,000 house with their deposit, borrowing $469,000 to the bank. Their loan of 6% means they will be paying $28,000 / year in interest leaving them a healthy -$3000. This is with no discretionary spending, so 6 years for which they can't go to movies, can't see a sports game, can't buy an icecream etc.
TLDR:
In conclusion, if the couple had not purchased smart phones they would have been able to afford the house.
excellent write up.
I agree with it all, apart from a couple with no equity, starting out trying to buy the average house. they should try and get something much cheaper.
the rebuttal we get from the likes of Gordo et al, is that its a lack of discipline preventing FHBers. Another classicly unattractive workaround presented, is to buy an apartment or property in a cheaper city.
Gordo hasnt really done the maths, and everyone with a house (or portfolio) doesnt give a stuff about those yet to buy. unless their favourite nephews start missing out. Come on Gordo, donate a couple hundred K to help him out!!
Bob he does not need my help. What he should have done is buy a house in Auckland in his mid twenties when he had a deposit rather than spending it swanning around Europe for several years. Now in his early thirties he is facing a larger loan and much longer to pay it off. X and Y are certainly determined to travel then want it all when they get home. What is wrong with buying the home then travelling?
I disagree.
He has career income, the best place he can take advantage of that and stay in New Zealand, is a large city.
Auckland is showing excellent property growth and resilience. If cheaper housing is made available that will allow Aucklands low end (wage) population to grow - thus pushing the high end upwards as the companies can expand without too much cost. High end salaries are based on people employed and a portion of company ownership.
If he can service debt in a large place like Auckland, then the property will stay in demand.
Buying a lower value place, unless he's massively negative geared for the more expensive place, won't give much in the way of property improvement. A low end place will rent cheaply.
So it depends on if he's negative geared and for how long. If it's less than a couple of years, then paying that into a positive situation will give a good potential earner.
Of course, yes he could go cheap, pay off quickly, and think about renting out....but if he's mobile and wanting to leave the country or area then renting out is a pain in the butt and he's better off rolling his equity forward (sell up as he moves on).
Also rental properties aren't the same selection criteria for personal consumption homes, so if he's wanting a home then it will be fancier than a future rental...and if he buys intending to upgrade then he will be liable for tax on any excess over WDV (Written Down Value).
The other thing to consider is that he's in quite a low risk situation. While it's "least favourable option" his family does have resources to see him through short term personal issues. It is therefore better to take the high risk projects while that support underwrites the risk.
So think good resell capability (always handy).
Think location.
Don't negative gear (max 2 years).
Best of luck.
I dont think luck, more of your generations entiltement mentality Gordon. To prove my point just look at the Gold Card system and Waiheke Island
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10614511
I gotta agree with you frazz, the intergenerational 'theft' the is occurring at present is a disgrace. Whiilst Fullers are operating a rort, these gold card holders are also into it. How much cash is being wasted on this lot trotting off for coffees when they are at a loose end? But hey, b##ger anyone else, I've got me gold card, me rental portfolio, me super, my family trust, my rates subsidy ....and all the time in the world to keep sucking on the public teet.
A family member is a real estate agent here in north shore, auckland. yesterday one of the properties she was marketing went to auction. hoped for maximum bid 1.2m. it went for 1.35m. over the last few months this has been happening again and again to the extent that every agent she knows is now privately quite unsure as to what value to tell vendors their house may be worth. madness.
What can possibly go wrong,with too much debt.? and paying way over the odds for housing.
http://www.bloomberg.com/news/articles/2015-02-16/scandinavia-s-richest…
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