Harcourts says the house prices that were being achieved at the height of the market are no longer realistic

The country's largest real estate agency says average house prices are starting to fall, and the inflated prices that were achievable last year are no longer realistic.

Harcourts chief executive Chris Kennedy said the agency sold almost 15% fewer homes in May than it did in May last year, and average prices are being affected by declining sales.

That is particularly noticeable in Auckland where the average price in May was below the average in May 2016, for the first time since sales started declining late last year.

The average price of Auckland homes sold by Harcourts in May was $947,809 which was well below the $1,024,317 benchmark set in April this year, and down 0.7% compared to May last year.

In Christchurch the slide in price has been even more severe, with May's average sale price of $498,370 down 10% compared to the average price of $553,114 in May last year.

"Vendors are starting to adjust their expectations when it comes to prices," Kennedy said.

"The inflated prices that were achievable at the very height of the market are no longer realistic."

And he expects that the fall in prices evident in Auckland and Christchurch will start to spread to other regions, although he doesn't expect a big decline.

"The new normal means that selling for top dollar is not as simple as listing your property any more," Kennedy said.

"Vendors need to work with expert sales consultants, be creative when looking at marketing platforms and realistic when it comes to price.

"Rejecting a good offer in the hope of a better one coming along is not a great strategy."

Click on the link below for Harcourts full sales report for May, with average selling prices and the number of homes sold in the major sales districts throughout the country:

PDF iconNational Market Watch May 2017-3.pdf

 

 

 

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140 Comments

.. Not sure if Harcourts is the country's largest agency as far as I know !! .... However, when it comes to talking about Auckland, you should ask the largest there B&T !!
This statement is very bold and wild ... It is wrong to generalize ...house prices vary from one area, suburb, and street to another ... and I don't think that it is true for houses in DGZ, central Auckland ,West Auckland or the North shore ....
These Bold headlines are not going to boost their sales !!!

From what I've seen in Auckland its especially true in West Auckland and the Shore. DGZ has just slowed not in negative territory yet.

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Eco Bird, sounds like you are clutching at straws here or wishful thinking.
REINZ figures should be out shortly which will provide a more sound position, but the Harcourt figures are consistent with the trends over the past six months. The first indications of the market having peaked last October had some bloggers claiming that it was a temporary clitch and prices would rise in the new year - that is not going to happen.
Regards the Auckland market; the main positive for house prices is the shortage of houses but this is outweighed by the negatives - LVR, likely increase in interest rates, uncertainty related to the September elections, onset of winter, and a more widely held perception that Auckland is over-priced and increases are not sustainable.
As a homeowner, don't go out and put an overseas winter break on tick in the assumption that the house is increasing your wealth - rather hunker down for an increase in mortgage repayments when the term rolls over (and especially if you are currently on interest only payments).
If you are looking to buy - well in the next six months that dream house is probably going to be $50,000 cheaper so don't hurry. Take your time, buy a little cheaper, save a little more, and have to borrow less.

No straws here mate, houses I am looking at have gone up by over 9% in the last 12 months and Yes the market did peak in October , However, they are still 4-5% higher than last year ATM ( 80-120 K) over last year. I would be happy if they can go further - that will present great opportunities .. :) Wonder what it would be like come next October ...

QV prices in Auckland have flatlined or fallen in all Auckland regions with the exception of Waiheke Island since December 2016.

Don't forget that this is Harcourts snapshot of the market - and that is all these "market" summaries are.

"However, they are still 4-5% higher than last year ATM ( 80-120 K) over last year" ... in what metric? Possibly still in the asking price metric, as they are slow to respond.

But in actual sales, values are down YoY... that's a lead indicator to asking price reduction, which are both direct inputs into valuation models.

Well now that everyone has realized that the top end Chinese buyers are not coming back and there's no one else to keep pumping up Auckland's property prices by +20% a year, looks like people are scrabbling around desperately wondering what the property is worth???

Even if the immigration floodgates were left open, I doubt the Auckland market would be able to stave off a price correction.

Hi CJ099

You write, "..... I doubt the Auckland market would be able to stave off a price correction."

There may well be a (downward) price correction - but it is unlikely to be large.

A plateauing off (stagnation) in prices over the short term is what's in prospect. That's what this article points to - and what the leading-edge analysts are telling us.

Underlying unmet demand is too strong to permit a sizeable fall in nominal prices. Property in NZ has a growing international profile and is now keenly sought-after.

Ahh well we will see won't we. I know that it's highly likely due to Auckland's prices have become decoupled from wages and the numbers simply don't add up. I know so many professional couples that would love to buy a home in a decent commuting distance but you know what they're simply priced out.

I'm sure many an RE will try to protest and say yes that can afford this $800k+ moldy shack but you know what, they now know to wait until prices come down and down they go. I will take a while as I've said before, it can take around two years for a correction to take full effect and then several times that to recover. (Sometimes recover).

Ok CJ099 - so you've now postponed the correction for "around two years".......

A few months ago you (and others here) were saying that house prices would be massacred this winter...... then you postponed the carnage until spring!

No doubt, in two years time - by which time prices are likely to have risen a little - you'll be telling us the correction will happen in another 3 years time (or whatever).

Anyway, you provide a bit of amusement.

CJ099 has made a coherent argument based on published data points - flagging sales, correlation of wages and house prices, debt inflated boom... all precursors to every correction ever.

What are your data points, other than 'because it can't' and 'we're different to every other housing market that has grown at this speed this quick in history'

@ tothepoint: No I've outlined how the last property correction that I experienced in 2008 played out over two years in the UK, I have said this on many, many occasions on this site. It took five years for my area in the UK to recover though some area haven't recovered at all. That could so easily happen here.

Nice try RE! Keep pushing the ponzi scheme you need to keep your sales figures up!

And thank you MisterB. I just feel the need to keep everyone informed about what is happening in the wider world and how it effects our economy and whether we all get to keep our homes. I saw enough friends and family lose their homes in the last crash, I do not want to see that happen again.

To be fair, house sales HAVE been massacred. RBNZ data also shows new commitments massacred YoY -- 40% down or something.

Hi MisterB,

You write: "To be fair, house sales HAVE been massacred."

That is delusional.

@Tothepoint; No it very real that NZ house are falling and it's the RE's that are delusional!

The jig is up, we all know what happened. You should read a bit more about what is happening in the world.

Business Insider article: China’s international real estate shopping spree is officially dead
http://www.businessinsider.com/chinas-international-real-estate-shopping...

Quote: Mainland Chinese buyers were buying a lot of international real estate, but over excited locals bought into the narrative way too much. Countries that are nice, but not global leaders got way too excited that they were the next “New York.”

Wait, what?

Do you not think that having the lowest sales figures, in numbers, since 2007 is "massacred"? It's a simple, published data point.

None of this makes any sense. I understand what you are saying, but logically speaking, for the average man/woman to save a deposit and buy a house in Ak, they are simply unaffordable and unattainable. It really is that simple.

If the basic need of having a roof over your head is now being treated like a commodities marketplace, then it should be controlled as such. Free market my a**e, the banks are donkey deep in this mess, we all know how well they behave when left unregulated, the roof over your head is their toy.

Sit back and take a good hard look at yourself New Zealand. All this crap is greed driven - need a new car, need an overseas holiday blah blah blah. And the winner is - The Bank !!

Tothepoint

You have only been a member for a little over 3 months. CJ099 has been suggesting that a housing price crash was pending for a lot longer than that. And he has always had clear rationale.... house prices are divorced from median income, bubbles always pop in any market, periods of neck breaking speed leveraging, are always followed by periods of deleveraging often painful deleveraging.

However, I have only noticed CJ099 saying that the crash has begun since the inventory in Auckland started rising dramatically and open homes and auction rooms died a death. I think that is fair enough. Quiet open homes and auction rooms is not indicative of a hot market, and rising inventory, rising time on the market, are clear early signs of a market slowing. You can believe something different to CJ099, belief can be utterly devoid of facts, however, in this instance, CJ099 has the facts on his side. House prices are divorced from median incomes, household debt is through the roof, China has put the breaks on capital flight, and all indicators show the housing market in NZ cooling. I'm not really sure what there is to argue about other than, will house prices go down in real terms (adjusted for inflation) and by how much, will they stagnate while wages catch up etc, or will something occur to provoke a systemic financial crash, housing crash and possible recession?

@ Eco Bird: Oh it will be much lower next October, still RE's could do their bit and drop their commission rates. You know if 1% commission is good enough for a London Estate Agent, I'm sure it would be good enough for an Auckland RE.

Just think it's win win for the Seller and the Buyer, and I know you've really been encouraging people to buy property Eco Bird, so there is your solution; drop your commission rates.

lol, So we are either on your side or Real Estate agents, darklords, or Money launderers eh ?? :)

You and I agreed to discuss the housing issue again after elections, right? so until then , do me and everyone a favour and revisit comparing your UK experience with what is happening or happened in NZ -- and using that as evidence or indicator... I guess the differences are very obvious to all ....and hardly comparable, Oh same goes for vancouver and Toronto ATM, they are different animals altogether.

I am not encouraging people to buy willy nilly !! I said that if you are to buy a home to live in for long term , like 5+ years and you find what suits you and your family then buy it and don't worry about small value fluctuations over the years - you should worry more about important things like securing a mortgage and the ability to service a loan when interest rates go up to 6% ...No one will have negative equity when they pay 10-20% deposit.
If someone is so afraid of that - then keep renting and you will be happy as larry, pay only half of what a home ownership would cost per week and enjoy your holidays...
waiting for the crash or another 50K cheaper house is exactly like catching falling knives ( your expression) ... then you will buy the wrong house at the wrong price out of desperation. But that is just My Opinion !!

Re data points etc.... everyone can pick and chose selective data which suits him/her to prove a point .... I said before and will say it again .. I am not here to make a point like trying to smart out a stranger at the bar ... it is an expression of thoughts and viewpoints, a mix of various experiences, readings, and analysis of the same data available to all ... it is not a political contest or pushing an agenda to prove a prophecy or a wish list like some do ....!

Oh,.... and I am not a RE agent, lol

Nahh... Eco Bird I feel everyone has a right to know. :)

And I'll keep posting the evidence and relate my experiences as a Landlord because that's what professional business people do. Whether you like it or not!

But thank you for your patronizing message. I'll be sure to ignore it, as the other commenters have also mentioned that they find you quite patronizing, do you get that regularly?

Funny how some feel patronized when basic facts are mentioned ... !! keep up the good work

Eco Bird, one of the interesting aspects of various bubbles I've experienced is the prevalent usage of the "it's different this time" justification. This was widely used in the lead up to the popping of the dot Com bubble back in 2000. It was also used a half decade later in the start of the popping of the US housing market bubble, which led to the GFC. History may not repeat but it does frequently rhyme. You do not think these similar events are applicable as "it is different here". Others including myself see it differently, and we have the same right of expression as you do.

I'd suggest that if you do not want to hear different views to stick with social media for your news so that FB and the like places you in the appropriate echo chamber.

To be fair to Eco Bird he did write "keep up the good work" so he is not trying to deny CJ's right to an opinion. I think he just pointing out how tiresome it is to read the same comment over and over is. It would be good to get CJ's opinion on something else for a change

Agreed, it can be annoying to hear the same positions stated over and over. I read the "keep up the good work" in context as being rather sarcastic, otherwise it would be in opposition to her previously stated viewpoints.

As to requesting someone else to drop their tiresome repetition of viewpoint while repeating their own viewpoint in opposition, well...

To note a statement Eco Bird made about going on and rent to "save" and then regret missing out on capital gains and being forced to buy at a higher price... I have to LOL at this. I was a happy homeowner for 20 years, sold up in 2006, and then rented for 10 years. Finally took the money out of term deposits and bought a home last year, when it finally became cheaper to own rather than rent (see home price vs time for US and then Hawke's Bay to understand the benefits of the strategy). I was quite happy for the landlords to be subsidizing my home costs during this decade of renting. This saved me more than $100k during this decade of renting, not including the huge capital loss that I averted by selling at the peak.

Yankiwi, your last paragraph should be read and understood by many of the readers here. If the potential for capital gain has diminished in the Auckland housing market and speculators are actually losing money through negative gearing and their is a surplus of rental properties available then this is a situation where renters can significantly gain. Tenants can embrace being tenants and enjoy the many advantages - greater freedom, fewer ownership worries, opportunities to invest elsewhere for good returns.

Also commenters need to stay reasonably on message otherwise we see a ripping of the space time continuum starkly illustrated by Doube-GZ's recent foray into the Light side. I like to think I am more than a one trick pony and often try to introduce obscure philosophical concepts into my observations. Who else will include references to Heidegger, Nietzsche, Evola, popular entertainment, memes, Greek myths and the connection between language and human consciousness and much more into the discussion?

Thanks for the rational response. I'm not sure negative gearing is a requirement for the if-then statement to be true. For me, if the after tax yield on term deposits are greater than the landlord yield, then it is a good time to rent. In 2006-2007 the ratio for what I rented was 3:1, and it slowly tapered down to 1:1 in late 2015. Hence my purchase in the beginning of '16. Of course, I'm not including capital losses in these ratios (for where I lived in my rental decade the prices either declined significantly or stayed flat with no real capital gains seen).

Add: in actuality, we sold a few months post peak in 2006, and purchased a few months after capital valus started rising in Hawkes Bay so no capital gains claim isn't strictly true.

Zachary we're you banned from commenting on this website for controversial philosophical views not so long ago?

You are like the John Mauldin of NZ Property.
True, you introduce the concepts. However, seldom are they understood adequately by yourself, easily rebutted, and ultimately seek to serve some egotistical validation as opposed to coherent wisdom.

If things get ugly and a lot of late-to-the-game nouveau landlords start to feel the squeeze a lot of renters will be feeling insecure and finding themselves tipped out as their landlord seeks to lighten their load

Hi Yankiwi. Im going to point out the obvious im afraid. In Jan 2006 the median Auckland home was $370,000 and then in Jan 2016 it was $720,000. If you had $370,000 and invested it in term deposits at 5% then you would have only $603,000 in 2016. Compounding this dramatic comparative loss the average person following your advice also paid rent every single year which means over all they would have made a catastrophic error and that is ecobirds point.

Hi Laminar, I'll point out the obvious in return that I was using my personal situation, which as I noted had me living in USA and then Hawkes Bay, rather than Auckland. If I were to be living in Auckland, then it would have made sense to buy instead of rent.

For the locations I noted, it was the best financial decision to rent. I kinda liked knowing that the landlord was subsidizing my home costs, although I felt a bit sorry about her poor investment returns in that she was a really nice person. According to the graphs on this website, the median home price in HB was $270k back in late 2007, and was $300k in late 2015 (when we signed the purchase contract). A 10% gain in capital value over 8 years works out to be just over 1% annualized. My annual rent was about 4.5% of the annual property value. Her annual return after expenses (rates, insurance, maintenance, etc.) was likely on the order of 3.5% or so. The nice part about term deposits back in 2007 was that one could get about 9% for a 5 year term deposit. I still have active term deposits paying almost 6%, although the current available rate is just under 4.5% (there are discretionary rates available, I recommend inquiring). Yes, I came out ahead.

The house that I rented right after I sold up in 2006 had a rent of about 2.5% of the property value (in rough terms I was paying the equivalent of the rates only on the property). My calculations had the owner losing an additional $4 for every dollar received in rent due to the cost of money at the time (and in addition to the negative cash flow, the capital value was decreasing as well). Worked for me!

BTW, I was renting properties that were considerably above the median value, so my corresponding benefits were larger than what one would calculate via using the median values... As per always, YMMV, perform your own due diligence, etc.

Hi Yankiwi. It looks as though you adjusted your post and im thankful as it did appear to be in relation to NZ, and in general if you were in a major city in NZ and sold in 2006 and bought in 2016 you committed financial suicide. More generally however you should be weary of encouraging such dangerous behaviors in others without the necessary specifics as many kiwis held off buying for years around 2008 as everyone was talking about how far it should drop and such, as a consequence many have been able to buy back in, funny how they would have been better off buying at a 'peak'. Good luck to you and I hope you like your new home.

I'm going with the usual Buffett quote, "Be Fearful When Others Are Greedy and Greedy When Others Are Fearful". At present it seems that most people are rather greedy... which aligns with my view in terms of the AKL market position. My view is that it is better to be out of the market and wishing you were in, instead of being in the market and wishing you were out. I've provided a lot of specifics in regards to the reasons why I expect at best a flat market, with my median outcome having a 20-30% decline in the next few years.

As to adjusting my post, umm no, there was no adjusting involved, at least not yet... reading the post that I made a few above this, it appears that I did use '05 and '06 instead of the intended '15 and '16. I'll correct that error now.

I'm happy to apologize for the comment but it does seem this was added "(see home price vs time for US and then Hawke's Bay to understand the benefits of the strategy)"

"My view is that it is better to be out of the market and wishing you were in, instead of being in the market and wishing you were out"
This is what is so dangerous about your post. Those who have stayed on renting since 2007 have been left behind in the dust by those who bought at the very peak in 2007. For young people it is typically more important to consider the length of time you will be in the market rather than to try and time the market. Always pay a fair price and dont get carried away but the talk 'the market is too expensive' is both discouraging to the youth in a way that has many not trying and dangerous in that unless they are experts they can get left behind.
People like you and I can have a play, make some guesses and hope for the best, wrong or right we will be fine, however the youth who wait too long can be left in very bad shape. The youth who bought in 2007 are absolutely sitting wonderfully, those who waited have been destroyed. The market is down perhaps 1% to 10% depending on how you measure it, if people wait for some 20% or 30% general decline they may be too late. Its also not a discount but a decline in average sale prices, many quality homes are simply not available in down markets or are happy to wait for a fair price. A lot of the change in sales prices can come from a change in the mix of properties been sold. I would personally be very happy to bid in this market, many quality homes are still available to be bought at what are likely very realistic prices.

I wish that there was a way to view the edit history on posts. In the case that you mention, I hate to say it, but the quote you claim was added was in fact typed in with the initial post. One thing I've learned is when adding additional points or comments via edit is to use the "add:" preface, and to put the addition at the bottom so that it is very clear that I have amended the post. You pointed out a typo in regards to dates mentioned earlier so I amended the date without annotation, but that I think is appropriate (any diligent person would have read my post downstream that stated that I was going to amend the dates). Adding additional facts and amending a central point should be noted as an amendment.

As to your worries about the danger of missing out on gains. I have a close family relative that is still in the position of throwing good money after bad because he bought in the US in 2007. He went the route of renting it out instead of cutting his losses when prices started declining, because it was obviously just a "small decline"... Well, ten years later, he is still putting funds into the house as the rent has yet to cover the mortgage payment (getting close now...). And, the home price has yet to reach the price he paid when buying a decade ago (nominal $, NOT real $). On the other hand, he has done quite well in equities. Hindsight suggests (quite loudly) that he would have been far better to have not bothered with the property get rich quick scheme and instead focused on equity investment (okay, I see that as also a bit of casino, especially now...).

Back in 2008 (add: in NZ), the view was very negative in regards to property investment. If you bought at that time in Auckland, you made out like a bandit. If you bought in Hawkes Bay, you subsidized your tenants so that they had a nice and inexpensive place to live...

We can all find examples that buttress our viewpoint. I remain of the opinion that one should look for a favorable time to buy, and IMO (for Auckland) that time is not now as based on the objective data (inventory, sales, interest, funding restrictions, etc.). A confounding point is the new construction, or lack thereof. So it isn't a certainty. If I were to be in the market in Auckland at this point, I'd be looking for a nice rental, as based on my experience and the data that I have at hand.

time stamp test (hypothesis is that time stamp marks time of last edit, not time of original post).

add: first post time stamp is: Thu, 15/06/2017 - 20:01

add2: edited time is 20:03 as per my laptop

add3: now, current time is 20:16, later than the reply below.

Based on comment time stamp data, it appears Laminar owes me an apology in regards to a claim of editing a post after the fact. The time stamp of the post is based on the time of last edit, not the original post time. (I now understand how an initial post can have a time stamp later than a post that responds to the initial post)

Looking at the time stamp for the post that Laminar claims that I have edited is not in agreement if I had gone back and edited after the fact (unless I had edited it in the first few minutes after posting).

Sorry Yankiwi and good research on time stamps there, id have taken you at your word regardless.

More generally its worth noting that the USA had an oversupply and weak economic prospects where as Auckland has a modest under supply and moderate economic prospects. The dramatic failure of the US market is a bit of a special case and speaks more to systemic economic malaise. Never the less even in the USA if you bought in quality areas like the nice areas of San Fran you would have done very well. Which is to say that if you pay a fair price, for a quality home in a quality location, well then you probably come out looking very well positioned over time. It sounds like your friend didnt do his homework.

Ecobird,

Sorry but that is terrible advise. I am looking to buy a family home 5+ (more like 20+) years of ownership but buying now is a bad idea. If houses go down $50k, $100k adjusted for inflation, that will make a huge difference to the average young family like mine!!!

$50000 at 6% over 30 years costs nearly $108000 including interest!!!!
$100000 at 6% over 30 years costs nearly $216000 including interest!!!!

These are life changing amounts of money. This is paying for your kids university or family holidays or new roof on your house and more.

What kind of callous person suggests that a young family buying a home shouldn't worry about these kind of amounts of money? Of course they should. Of course they would regret buying at peak, regardless of how long they stay in that home, or how much the home is worth in 10 or 20 years time. It doesn't change that fact that they would have ended up losing vast sums of money from household wealth. A whole years salary or more.

Hi Gingerninja. Your maths is incomplete because you have not accounted for inflation which is a non trivial component. The actual nature of a correction is complex with most quality properties been withheld from sale in slow markets. The major declines are typically marked by distressed sales of marginal properties. Markets are just aggregated data and a 10% decline does not mean that houses are actually selling at a 10% discount but rather the the average sales price is down 10% which can be in part a change of the mix of properties selling.
Ecobird is correct in that buying at a so called 'peak' is absolutely fine provided you dont over pay for the specific property you are buying. The concept of market timing is what results in a lot of people delaying home purchasing for much too long or not trying hard enough to save the depsoit. An over reliance on non-causal metrics like income to house price multiples can drive poor logic and is why they call Japan the widow maker. Generally home buyers are best served by purchasing sooner than later but employing patience and seeking a quality home at a fair price; picking up garbage at a discount isnt the steller deal you may think. Id also note that the value of a home that drops in value is not a loss until its sold, much like long term bonds on a banks balance sheet the asset has an internal value based on its long term expected value, not its value on any one day. A trader values his positions daily, an investor values his holdings based on the expectation of future prices. Buy a quality, fair value home that meets your needs, dont over reach and save diligently to purchase more assets in the future. Insure cash flows are monitored and dont sweat the small stuff like whats going on day to day with house prices. Funny how a lot of people harp on about a 5% or 15% decline in sales prices but dont save enough to ever build substantial wealth. They cant see the forest for the trees. If your home drops in value, buy more assets. If your home goes up in value, buy more assets. If your home stays at the same price, buy more assets. As long as you are always buying more assets and as long as those assets are high quality then you will die wealthy and leave a proud legacy for your children to follow.

Laminar, I have not discounted inflation at all. What a strange assumption to make. If I chose to do something else with the money that I otherwise would have spent on mortgage debt, for instance, something that offered an actual return, why would that be negated by inflation?

I have bought in crashes and sold in booms, two previous times, which is why, unlike many of my generation, I am cashed up and debt free. Not only this but I never ever buy premium properties. I have always bought trashed properties and turned them into quality properties, therefore always also yielding the value added capital. I have my own specific style and tastes, I don't like to pay for someone else's taste, I like to buy "garbage" where not not only can I get a good piece of land with potential at a good price, but I can negotiate good prices on the renovation and materials.

You also assume that I don't have assets, which is incorrect, I do have assets, I just am not prepared to spend the particular amount of cash that I currently have set aside to buy a house, in an over inflated housing market, especially when the signs are that the market is turning. I never have and I have never had regrets. The same can't be said of those that buy at peak.

I also think you might be confusing assets with liabilities. My goal is always to maximise assets and minimise liabilities, regardless of the short term fad for negative gearing and house hoarding based on extracting equity.

"Sorry but that is terrible advise. I am looking to buy a family home 5+ (more like 20+) years of ownership but buying now is a bad idea. If houses go down $50k, $100k adjusted for inflation, that will make a huge difference to the average young family like mine!!!

$50000 at 6% over 30 years costs nearly $108000 including interest!!!!
$100000 at 6% over 30 years costs nearly $216000 including interest!!!!

These are life changing amounts of money. This is paying for your kids university or family holidays or new roof on your house and more."

Hi gingernija
Yes im saying you should discount the future payments by inflation, you didnt discount anything and thats why your numbers are misleading. The numbers you post only look so large because you are using the future value. The present value of the total cost of the loan would be $73,011 not $108,000. That ignores the change in income and the consequential acceleration of repayment meaning it wont take 30 years.

I only assumed you are the 'average young family' because that is what you said you were. People who bought in 2007 are much better off than people who rented. If you had bought in a quality neighborhood in a city like Auckland in 2007 then today you would be sitting on a very handsome home with modest debt. Your comments are completely untrue that people who buy at peaks have regrets. People who bought in 2007 have made a fortune. Thats not saying that people should buy without care, its saying that people should buy houses at fair prices which can be done in any market. You have admitted you buy and sell houses to trade in on the capital gain, so id further ask how much tax you paid :-)
Your goal of maximizing assets and minimizing debt doesn't make sense either. Maximizing assets in a sensible but effective manor often requires an increase in debt.
Looking to buy now is an absolutely fine idea, but pay a fair price as should be the case in any market.

Wow, that's going to make a few people happy

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Buyers yes, but not so much the sellers.

I did tell you the crash is here. First sales fall and then prices follow. Let's just hope it's not too bad over the next 2-3 years.

Yes, a soft landing would be best for all. But I truly don't think anyone knows where this will go.

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No one does. There's no comparable time in history to where we are now.

You seem to know Dictator, you just said above "the crash is here"

It's here and no one knows how far it will go. The RE agents say prices will pick up again in Spring.

Yup and they said that about March and April. Tomorrow always tomorrow.

So you call a dip of 0.7% yoy in Auckland a crash, what will you call it when/if values drop by 10% in Auckland yoy ?

You seem upset by the property crash. If you think it's the right time to buy property then buy property.

LOL you mean when all that extra stock gets dumped on to the market already saturated with unsold listings? Spring is when I expect the crash to really get underway.

RE agents love saying buyers will come back in Chinese New Year, then they curse Easter for slow sales even though that's been insignificant. Who knows what the next excuse from them will be?

TradeMe listings down to 10,500 for Auckland this morning which is about 500 fewer than at the beginning of the year.

I tiny percentage when you consider the time when listings were around 3000 properties or less.

Nevertheless currently trending down rather than trending up. Just reporting the facts.

Debt in New Zealand for the year to date is increasing at 3 times the rate of GDP growth. Almost 59% of that is owner occupier mortgages. There seems to be a large problem brewing.

Zachary, best to use either seasonally adjusted values or else only compare to annual values in order to get accurate conclusions. The seasonal nature of listing (winter has considerably less listing than summer, maybe a factor of two??). If the latest listing count is only 5% lower than summer peak listing count, well, in my view that is suggestive of a rather large relative increase in listing count when seasonality is taken into account.

Check the REINZ figures released today. Listings increased 43% year on year in Auckland, confirming the error in comparing high season to low season listing counts

A couple of people I know who have been in the flipping game are holding stock right now, apparently its the election uncertainty driving prices, so they are gambling on status quo. Personally I dont think it has anything to do with it.
Heres my prediction - A lot more people will vote for Winston than the polls predict, they wont tell the pollsters because there is an element of shame in that decision for some, he will force nationals hand, it will negatively affect specuvestors. Ouch time.
Or Labour / Greens get their collective shit together - same result.

Japan is where we are now, well, on our way.

"The new normal means that selling for top dollar is not as simple as listing your property any more," Kennedy said.

The phrase "the new normal" is usually reserved for when prices are on their way up.

Maybe its not a case of vendors adjusting their expectations but buyers refusing to pay over the top prices.

If I was in the market to buy I would be going around with low ball offers.

And perhaps put them in under multiple fake names. #Ronovationz

0.7% down in Auckland is a tiny drop (although it could decrease more) but 10% down in Chch is a BIG drop

Firstly, it's a drop in the 'average' price, so the drop in median is more likely to be at least 2-3 %.
Secondly, it's a comparison against May last year, not against the peak. Remember prices went up quite a lot between May 2016 to October 2016. That implies there has been a significant drop from peak prices

The Christchurch market fell over in January, so arguably Dec was the top. But 10% is not unrealistic due to the amount of unsold stock on the market. I am seeing listing prices being cut by 5% as properties sit on the market, and assuming any offers come in 5% under that, then a 10% drop is to be expected.

It would be interesting to get "median" figures rather than "average" values, as most on this site would agree

I think most on this site would want both! As well as the upper and lower quartiles for sales volume and price. Any single metric by itself only tell a small picture that can be interpreted incorrectly.

Agreed. The 5-number summary is perhaps the most useful, with minimum, lower quartile, median, upper quartile, and maximum. A standard deviation served up along with the quoted averages would also be useful, but a little harder to interpret.

"Vendors need to work with expert sales consultants, be creative when looking at marketing platforms and realistic when it comes to price. "Rejecting a good offer in the hope of a better one coming along is not a great strategy."
Wow, that to me sounds like RE agents are really hurting ... !

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Of course their hurting, there's no market for houses anymore =)

My neighbour put his house on the market last week, was worth 1.1- 1.15M last May, will be auctioned in few weeks, hoping for possible sale of 1.2-1.25M ....many potential buyers attending open home ..... I shall keep you posted when it sells.

What is the address Eco

Yes! Address please!

http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

and
http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

houses in this neighbourhood never failed to sell .... but will be interesting to see how much !!

Thank you Eco Bird.

you mis-spelled "if it sells"

Real estate agents are generally a pretty fluid bunch. There is always the option that they can exit the industry and find employment elsewhere when the going gets tougher.

The wise ones might save money through property market upswings when their incomes are relatively high.

Don't make me laugh... RE's are the lowest of the low, that's why they're RE's. They can't get a job doing much else apart from perhaps being a shoe seller or check out assistant since the don't have any skills. Lets face it, showing someone around a house and taking their contact details isn't exactly a skill now is it.

Not surprising that no one wants to admit that they're a Real Estate Agent, when the only skill they have is being a professional liar.

Hi CJ999

You are entitle to your prejudices - but there are some real estate agents who do have marketable skills/abilities and go on to productive careers beyond real estate.

Personally, I don't find stereotyping to be helpful.

I've found some real estate agents to be honest, helpful and competent. But I've found various others to be somewhat lacking in these qualities. I expect there are other people who would report a broadly similar experience to me.

Finally, your expression "professional liar" is meaningless. There is no way that lying can ever be construed as professional. You should know better.

I agree. It's "funny" how people like to stereotype. As with any lucrative job, there are fly by nighters, but it doesnt mean they're all dodgy. Probably just the super successful ones ;)

The fact is, it's still a sales job, love it or leave it, and people will have strong view on salesmen or bankers or any other profession that they aren't (damn you, you professional toothpick wrestlers!) ... just get over it.

It's a valid point that it's a low barrier to entry - just a couple of weeks of study, an open book test & a cheque. Literally anyone could do it. Of course, with so many of them (I heard over 5,000 in Auckland) and dwindling sales, it will take care of itself. It's also a valid point that the industry is due for some disruption, and may not even exist as a job in 15-20yrs when everything is 100% self service online. Open home professionals and marketers will exist, but RE agents as we know it? They'll go the way of cheque cashers.

Just my 2 cents

Ohhhh.... tothepoint, Now you have simply revealed yourself to be a Real Estate Agent why else would you try to defend such a world wide detested profession. :P

And yes I do know better, then to trust the likes of you for any property advice! :)

Pretty harsh call mate... he might just know some. I know some, they aren't terrible people. I am not a fan of the massive clipping of the ticket and the impact that's had on house prices through property churning... but then again, Kiwisaver and Homegrants have also had an affect and I can't hate them :)

I don't mean to be harsh. Well 'tothepoint' needs to prove and counter the data that we can all see. Sales and prices are down significantly. RE's are the only ones that consistently push people in to very large financial commitments that frequently leave them in over their heads based on that the property market always goes up.

Yet they give no validation as to why, what trend, what data backs their claims that prices will increase even in the next few years? And I have challenged RE's on this subject before yet, they provide no evidence.

I however do provide evidence as to what is really happening and base my prediction on current data, plus what I've experienced having been a Landlord not that long ago.

As for being harsh to RE's; Well you don't hear about other professionals such a Teachers ripping off old folks to get their home cheaply so they can flip it at a huge profit or Teachers helping to facilitate drug money launders to stash their cash in buying real estate. But yet we read about RE's doing this type of rotten and damaging behaviour all the time.

Hi CJ099

You write, "Now you have simply revealed yourself to be a Real Estate Agent..."

In fact, you have a very short memory. I recently disclosed that I am not (and never have been) a real estate agent.

In any case, in no way does what I have written infer that I am a real estate agent.

You are clutching at straws.

@tothepoint: Yep you're a true RE, professional liar and all! :P

>"I've found some real estate agents to be honest, helpful and competent."

Which one? Put their name out there and there'll be a rush for them.

tothepoint,

In any business,there are some true professionals-people who are just very good at what they do and I have no doubt that a few RE agents fit that description.
However,the great majority of agents are ordinary people with very average skills who live or die on commission.That promotes a certain mentality anyone who believes that the agent is there to achieve the Very Best Price for their property is living in a fool's paradise. It makes much more financial sense for an agent to get a sale and move on the next one as quickly as possible.
I have only lived here since 2003 and simply cannot understand why so many Kiwis are seemingly happy to pay the obscenely high commissions charged here. As I have posted here before,in the UK, the RE agent received 1% -the standard amount- on our last 2 sales-2003 and 2010.

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Y/Y sales in Auckland are down 37 percent.that's over 1 percent stripped out of GDP in commission alone. How many ducks do people need lined up in a row to understand that New Zealand has one unsolvable debt problem. Build new homes , who is going to buy them.

Auckland yoy sales are down 28.8% (just mentioning a fact from the attachment above)

Cowpat is talking about everyone not just Harcourts

Indeed, I was using REINZ April figures as noted in tools section. Barfoots were down 32.2 percent for May .

Meanwhile over at the property press... sorry NZ Herald...

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=1187...

What the hell happened to the Herald? It was always a brainless propaganda rag, but now the website has been taken over by maniacs.

"..... but now the website has been taken over by maniacs."

And depressives.

It once, a long time ago in a galaxy far far away, had some good writers, at least in the music space...
It's long been a big pile of poop

Ahhh good old Anne Gibson, she really is a pathetic "journalist". Funny how NZ Herald never opens the comments section on these kinds of articles. I wonder why?

After the lengthy upswing of 2014-2016, the housing market inevitably needs bit of a shake-out - especially to purge itself of those misguided individuals who got themselves donkey-deep in debt.

I note Harcourts doesn't expect big price declines - and expect it's correct about that.

Probably a good time to think about buying, assuming the current weakness in prices continues through winter.

My view is that the best time to buy is when one finds that elusive property that's "right"! One can spend a huge amount of time looking at houses that don't suit one's needs - and incur transaction costs in terms of time and frustration. But nobody ever regretted buying (and enjoying) the "right" house.

Remember, the odds are that in 5-10 years time, today's house prices will look incredibly cheap.

I feel like this is where the usual "Don't Catch a falling knife" comment goes.

But let me be more specific. Sales are the lowest in 5 years and as you said prices are declining. Labour is trying slow immigration and the Nats are saying they will do anything to improve supply..... So why is it a good time to buy?

Beside its only rubbish or overpriced houses out at the moment. Save a bit more money over winter and wait till spring.

Smaller Debt and cheaper houses win win.

Hi M.Aurelius

Waiting until spring is not unreasonable.

But one can't discount that post-winter and post-election, prices will strengthen a bit - especially if National gets back in.

I redirect you to my thoughts above: buy when you find the right house. It's better to buy the right house in winter than the wrong house in spring.

Remember, buying a house is not only about money/price: there's the wider issue of overall satisfaction from on-going ownership.

Oh sorry tothepoint! I misread your comment!

I agree, It is a good time to buy if you happen to find something you are absolutely in love with and something you can comfortably afford.

[edited for grammar]

No problem, M.Aurelius,

I enjoy your contributions, which are well-considered and well written.

The best time to buy is when sellers are desperate and have been waiting a year or so without a sale.

I bought a house in 2011 in this situation, vendor had to drop the price from 400k to 300k that's a 25% discount.

Not long before we will be in the same market. Its a shame so many gullible NZ'ers are going to lose their shirts...

"Its a shame so many gullible NZ'ers are going to lose their shirts..."

That's most unlikely to happen, because the chances of a "crash" are very small. (Similarly, the chances of another property "boom" in the short/medium term are also small.)

Who says the chances of a crash are small?
Also... define Crash?
Look at household indebtedness... and RBNZ research... that reasonably small movements in interest rates upwards can have a big impact on those with very big debt-to-income (DTI) ratios... especially on interest only and especially if something happens to their I.

Clearly there's no crash when this fine Ranui Palace is going for $600k looking for cash buyers. Last year this could have been listed for $800k or more even though it doesn't have a code compliance certificate and it was built in the peak era for leaky buildings.
http://www.trademe.co.nz/property/residential-property-for-sale/auction-...

I agree, this is not a crash. There is still a lot of demand for houses, but after LVR and Capital Flight regulation changes no actual people living and working in Auckland can afford the last years house prices. That's why we have this weird (and it is wired!) situation of an undersupply and high demand for houses at the same time.

Houses will sell again as soon as the vendors realise that the party is over and we all need to go back to building a proper economy.

Looks like monolithic cladding to me. $600k buys you a tear down property and a rebuild. It is still a rip off.

sold for 525k in 2015. Not much capital gains is there after rates/insurance/interest/commission.

Classic listing!

Ran it through google translate...

"Do your due-diligence and explore the options of buying a great home in a fantastic developed area of Ranui." = "we told you to check, b/c we know something we're supposed to tell you but won't"

"There is also the bonus of an addition sleep out to act as a fourth bedroom for the extended family or extra rental income, market rent for four bedrooms in this area is $636 per week" = "Will you pay more if we pretend it's legal to rent out a garage as a separate dwelling, don't worry about the tenancy tribunal, they'll just take all the rent back"

..."however it never received its final CCC" :( ouch!

Hi Mister B,

A crash is when there is a major "downward correction" in price levels - over a relatively short time period.

Putting a (percentage) figure on it is pointless - because any figure would be arbitrary. (If two people came up with the same figure, that would be purely coincidental.)

Hypothetically, if there was a crash, I'd be happy because I could go out and buy a "cheap" house (or two). Privately, I'd be better off! But I'm not fooling myself that a crash is going to happen. It ain't.

So you still contend the chances of a major downward correction in price levels is very unlikely?

That's a bold call. For what fundamental reasons?
In the absence of wage correction, there will be price correction. The two are historically inextricably linked.

You contend that NZers wont lose their shirts... I think that's a very real risk. Now is the time to de-leverage.

Hi MisterB

You'll grow a very long, grey beard waiting for your much-yearned-for crash.

Suggest you buy some slippers and a rocking chair, so you're comfortable in your long wait. (-;

In not one single place have I commented or implied I YEARN for a crash. I am purely talking about observable and quantifiable market risks.

I am approaching my comments from a purely analytical POV based on fundamental correlated data points while you counter with "just because" line of reasoning.

I hear Trump is hiring....

moneyphobe, with your name I would expect you to pay $100k extra to rid yourself of the money that you have a phobia about. Or if you really don't like money, I'm very happy to relieve you of some of it : )

Well if Labour gets in in September it will get even more interesting ! Don't even say they won't have a chance judging by the recent voting trend in the USA and UK..

National will win the elections. Winston won't be needed. National will see the victory as a mandate to open the immigration flood gates... nay, they will blow up the whole dam wall! You all ain't seen nothing yet.

I like National but they will not win this next election without Winston Peters because a great number of National Voters are turning to NZ First in droves. Labour means high taxes again in an already overleveraged society. Labour will bring on the mother of all corrections and most likely will put NZ back into a deep dark recession that will make the 80's seem like a walk in the park. Just my opinion anyway.

I hear Tainui Babe, but the polls aren't wrong on this one.

You might be right, but the polls can change a lot in the lead up to the election. You watch public sentiment change if little gets enough media attention and if he can do a good job of bagging national.

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the last labour government ran a pretty tight ship. They had good growth, paid down government debt, saved towards the Cullen fund. I'm not sure this next lot will be as good, but looking back throughout history I think we have normally had better economic fortunes under labour than National.

Hi Tainui Babe

Especially the oldies - many of whom are happy to be bribed by Winston's gold card, free bus travel etc.

Winston's the most cunning (sorry, strategic!) politician NZ has had the last 3-4 decades. But likeable with it - and always very well dressed too. He can't help but pull in the votes!

But Stephen Joyce's 2017 budget will seal the deal for National. The Nats will be in with a grin - just wait and see.

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"Labour will bring on the mother of all corrections" Really? rather than focusing what you think Labour might do let's look at what National have actually done. Brought about the mother of all increases in inequality, throwing not just the lower and middle class under the bus, but well to do working professionals. Sold their houses and futures out from under their feet, and dangerously destabilized the housing market in the process. Stopped payments to the Cullen fund (during the greatest stock market rally in the last 50 years). If there is a huge recession in NZ it will be Nationals fault for treating the economy like a rented Mule for the last 8 years.

You mean they were realistic last year?

Ok if Nat did get in without peters which I doubt , he could even go with labour to piss everyone off, but bill English is no key on housing , he,d try slowing getting housing down anyway, and the big over sea,s money is what started all this and China would never switch that back on, no way in hell, and migration isn't the big pushes of higher house prices, they have the same problems as everyone else here, 1, big over sea,s money, 2, mum and dad investors. 3 flippers, 2 & 3 went for the ride, 2 hopefully will carry on on a downward market . Which hopefully is only 2 to 5 % per year for 3 to 5 years but the flipper houses and hopefully the greedy 3,4,5 x houses go back to the fhb and low income, no more supply problem, ya

China might not be able to combat cryptocurrency in the longer term, and given National's reluctance to increase transparency around financial matters, trusts and the like, there's a chance money could start flowing in again.

Who gives a, crash correction, someone's idea of a crash might b 20% over the next 5 years, the thing is prices over shot big time, there'll b winners and losers, things have been done to fix the problem, out of Aucklanders can't compete with Aucklanders money and Aucklanders can't compete with over seas money, it's over , wages matter big time to house prices, if the masses cant afford these prices which they havent for years now, its over, and already started since last October, i,d guess a big drop in prices over the first year then a bit of I'm not dropping I'm not buying for 2 or 3 years , someone always sells in the end to RV will go down then if wages catch up again we have hit the wright number, which will also b more home owners less renters ya, let's start making shit

Pity the builders.
They are in a hopeless position trying to build "affordable" houses against rising costs and falling prices.
Hundreds of builders have gone broke over the past few years.
Hundreds more will go the wall in the near future.
The whole housing scene will become a lose-lose scenario.

Agree. There's much commentary around the need for more labour in the building industry. But unless the never ending boom/bust condition in the property market is addressed there will continue to be instability in the building industry. The on going hiring (boom) and then having to fire (bust) is nothing but an exercise in frustration for all concerned.

A shame builders have been pushed to think new homes are the greatest thing since sliced bread , thank the government for that , but is New Zealand in the business of building new homes to push the population up , or are homes mostly to live in and builders to fix and replace and build a reasonable amount on new homes to keep a good balance, shame we aren't at 8% interest on mortgages right now, people would have been better off, God know why we aren't, ask key, maybe the builders could b retrained to make something we could export, just a thought

"The buyer of a mansion in Toorak, Melbourne for $19.1 million – nearly $5 million over the top of the quoted price range - is yet to pay the deposit."

Nothing is sold until the cleared cash is in the bank!
http://www.afr.com/real-estate/wheres-the-deposit-down-payment-missing-o...

Certainly it shouldn't be factored in as sold until the deposit has been cleared.

So the market is adjusting back to reality ............. very slowly however .

In the same way people go bankrupt - slowly at first then all of a sudden.

Some of the comments here are trying to deny fundamental messages from the market. There has been a slowdown, prices are falling, houses are not selling and inventory is building. There is no doubt the market has changed. I am wondering if some of the people so strongly denying reality are RE agents who have more time on their hands now as they spend an hour at an open home no one attends. Maybe the new past time is to pull out the phone and use that time to blog on various sites in the hope of resurrecting a falling market. Goodluck fellas not going to happen, the penny has finally dropped and buyers are staying away so find a better way to occupy your time.