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Barfoot’s volumes down 40%, prices down 9% (Updated)
January 12th, 2009Auckland’s largest real estate agents Barfoot and Thompson reported a 4.7% decline in their average sale price over 2008, and a 40% decline in average sales per month, compared to 2007. (Updated to include December 2007 figures following comments.)
The realtor said that its average sale price in December was NZ$509,513 – up 1.7% from November, but down 9% from the month of December 2007, when its average sale price was NZ$559,803.
Barfoot’s average number of sales per month in 2008 fell to 547 from 915 in 2007, while its average sale price fell to NZ$513,597.
“This is a really good result, given all the dire predictions that have been tossed around,” Managing Director Peter Thompson said about the 4.7% average price fall.
“This should also help lend confidence to the market and reassure both vendors and prospective buyers.”
For the week ended December 19, 2008, Thompson said Barfoots recorded 227 sales, compared to a weekly average over the year of 171.
“We’ve certainly seen an improvement in the market since the Reserve Bank’s most recent move. It seems to have tipped the balance in terms of converting interested parties into committed buyers,” Thompson said.
The average weekly rent over 2008 for Barfoot’s property management division was NZ$388, compared to an average of NZ$370 in 2007.
Tags: Auckland, Barfoot and Thompson, House prices, Housing, NZD, Peter Thompson, Real Estate Agents
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January 12th, 2009 at 4:06 pm
There is more than the usual spin going on.
Note the use of the whole year comparison, and the avoidance of a comparison with average value in Dec 2007 (a year on year comparison which has typically been given in their previous missives). Want to know why?
Because Dec 2007 value was $559,803 versus 2008’s December value of $509,513 – ie a $50,000 difference, a 10% fall.
I am suprised you missed that one Alex.
As regards the use of the annualised figure – mine the data a little deeper and you get this:
Average value 1st half 2007: $528,566
Average value 2nd half 2007: $548,391 (ie the peak)
Average value 1st half 2008: $519,195
Average value 2nd half 2008: $509,513
January 12th, 2009 at 4:26 pm
Barfoots are using a PR agency “Network PR” to get their message out. It shows.
January 12th, 2009 at 4:38 pm
Indeed. The annualised figure is meaningless as the comparator (2007) includes the months leading up to the peak (the first half 2007). I must confess I have never seen the use of an annual (12 month versus 12 month) comparative figure in any of the house price surveys I cover globally.
As usual our supine and unprofessional financial press will parrot the information unquestioningly……….
January 12th, 2009 at 4:41 pm
Ah, good one Andy, I must still be in beach mode. Not like us to miss something like that.
Another good example of having a visible blog below an item, as opposed to some other internet news media I guess. (An attempt to put some positive spin on the fact I missed that).
Cheers
Alex
January 12th, 2009 at 4:46 pm
Sorry to be picky, Andy!
But can I just get a clarification on that “Average value 2nd half 2008: $509,513″.
It seems to be exactly the same number as the “2008’s December value of $509,513 “.
I would have expected a difference in the 6 month average to the monthly one? Could be coincidence, of course!
January 12th, 2009 at 5:07 pm
What a bunch of deceitful self serving pricks these agents really are
January 12th, 2009 at 5:08 pm
Well spotted Janet.
The value for mean 2H 2008 is not $509,513 (you are quite right thats the December number).
The value is in fact $507,998
The values are thus:
Average value 1st half 2007: $528,566
Average value 2nd half 2007: $548,391 (ie the peak)
Average value 1st half 2008: $519,195
Average value 2nd half 2008: $507,998
Clearly the much more meaningful figure is the comparison of 2H 2008 with 2H 2007.
Which gives a decline of $40,393, or about 7.3%.
Alternatively you could say that prices are now back where they were in 2006 – which in essence is what QV have been pointing out.
January 12th, 2009 at 5:26 pm
That should read: ‘prices are now back to where they were in the final quarter of 2006……’
January 12th, 2009 at 7:51 pm
Real estate agents putting a positive spin on things. Nothing has changed then
January 12th, 2009 at 7:58 pm
I think their PR firm is advising them all the wrong way. Surely the greater or quicker the stated decline the earlier those fence-sitting buyers will think, “well, prices can’t fall a great deal more than that..” and then they’ll jump back in.
I’d have thought a heading that said – “Current Prices Drop to 2006 Levels” – would be more encouraging to the market? The longer the REAs persist with falsely inflating the real drop in value – the longer it will take for folks to consider the bottom has already been reached.
January 12th, 2009 at 9:58 pm
mmm, nice point Kate.
Its nice to get a female’s perspective here!
Alternatively however you could argue another way. If the intensity of the downturn is downplayed then the REAs can say “oh its not a real big drop at all”. It helps to de-sensationalise the problem so as to try and convince people that there isn’t really a big downturn at all, just a small dip, and it will be “back to normal resumption” (ie. appreciating house prices) very soon!
January 13th, 2009 at 7:06 am
Matt,
“if the intensity of the downturn is downplayed”. Before the internet that was easier to do.
NZ Mainstream Media outlets are the last of the outlets I check for news about the Global Financial Crisis.
January 13th, 2009 at 8:19 am
“mmm, nice point Kate.
Its nice to get a female’s perspective here”
Looking to score matt?
January 13th, 2009 at 10:02 am
The really telling statistic for me is in the volume of sales. This must be hurting the industry very badly, and I would imagine that R.E agents across the country are struggling to make a living with very few sales to share between a large number of agents.
Playing with some numbers on the calculator it seems (to me at least) that it would be better for the industry to be in the position of a higher volume of sales with lower average sale price. For example selling 300 houses a week at an average price of $400000 is MORE profitable ($4.8m in comission at 4%) that 171 houses a week at $513k ($3.5m total comission). While the average comission drops from $20k to around $16k per sale in this example, at least more agents are getting paid, making a living and contributing back to the economy. In fact 300 sales at $300,000 average sale price still pays $3.6m in comission,.
So, if the real estate industry is in the business of “facilitating sales” why the hell are they taking actions that are detrimental to their own industry? B&T, Harcourts, et al, and especially the REINZ have only served to widen the gap between buyers and sellers, stiffle property sales, and put their OWN people out of a job.
So while the industry at large holds onto this INSANE position, then everyone will continue to suffer.
January 13th, 2009 at 10:31 am
This is second month in row that prices and sales are going up. If it continuos like this by the end of year prices will be on the same levels as on it’s peak in 2007
January 13th, 2009 at 10:33 am
You are correct Matt – we have debated this before but it seems to be beyond the ken of the RE leadership.
Meanwhile the latest NZ business confidence data is out. I doubt even B+T could make this horror story sound good for the housing market:
The overall index plunged from -19 to -64.
-A net 32% of firms intend to cut staff over the next 3 months. This figure is the highest since June 1991
-Indicators of domestic trading activity in QSBO suggest that real GDP declined again in the December 2008 quarter, implying negative economic growth over all of 2008. Real GDP and domestic trading activity tend to move together over time. (My comment – my, my Mr Bollard, you really were talking out of your backside when you claimed the recession was over – indeed, if there ‘was one at all’).
-On a seasonally adjusted basis a net 44% of firms reported a drop in their own activity in the December 2008 quarter, which is the worst result for this indicator since at least 1970.
The full piece (which IS worth a look) is here (under the press release for 13/01/09):
http://www.nzier.org.nz/Site/News/media_releases_list.aspx
January 13th, 2009 at 10:37 am
Matt,
One of the big problems with “the Banks” was that they bought their own toxic creations. I recall someone writing that it was like “a dog eating it’s own vomit”. Likewsie; Do you really think that directors/owners/staff/the office dogs of Real Estate companies don’t have an investment property portfolio? I would guess that it’s bigger than the average persons. So, therein lies the answer to your question.
January 13th, 2009 at 1:11 pm
Janet,
I thing you are bang on there.
Being in the business it made perfect sense to also invest in it.
The downside is that you have all your eggs in one basket, and when the housing market turns down, as it has, you suffer from lack of diversification.
January 13th, 2009 at 2:28 pm
Sam -there’s never any harm in buttering up the fairer sex!
For all we know Kate could be a pseudonym for a male contributor
January 13th, 2009 at 2:38 pm
Re Matt and Andy’s comments re agents accentuating the decline to make the market “bottom out” ASAP so buyers jump back in.
RE agents constantly balance buyers and sellers expectations and will manage whichever side they feel needs to be managed to achieve a sale. No sale = no cash. How would you react if your income was halved or even eliminated? If you could solve the problem by bringing sellers expectations down then that is exactly what you would do.
The problem is that sellers do not have to accept what buyers are offering if they do not have to sell. A seller will only realise a loss / decrease in value if they are “forced” to sell in a down market. As long as the sellers interest rates / financing / employment / rental income is acceptable they won’t sell until the market recovers. Buyer demands become irrelevant and unless buyers pay the sellers price no transaction occurs and the agent doesn’t get paid. Look at the low closure rate on auctions … if all those auction vendors were being “forced” to sell then we would see a much higher auction closure rate but much lower prices being realised. So far this is not the case … maybe that is what will happen this year … maybe it wont because dropping interest rates will allow more sellers to sit it out for longer. Who knows?
If agents could get sellers to drop their prices they would because they get a sale and get to keep their job. But the real problem for the RE agents is that the problem is magnified when buyers are spooked and choose to “sit it out” as well. Would you make a major purchase if everyone kept telling you it was going to be 30% cheaper soon? The result is a Mexican stand off that does not make the agent / industry any money. Because we just haven’t had the volume of “forced” sales required to drive values down the only way RE agents can get turnover again is to de-spook (technical economic term) the buyers and get them buying at the prices sellers will sell for.
This is the only explanation I can come up with for why values are still “there or there abouts” (over the longer term) even though the number of buyers in the market are significantly down, listing numbers are significantly up and transactions have halved. Perhaps the current market is a truer representation of the actual NZ market? I.e. one without the speculative transactions of recent years? Perhaps the pain of forced sales is still to come? Who knows?
January 13th, 2009 at 3:22 pm
Some good points CCC. I suspect unemployment is going to be the ‘forcing agent’ in 2009.
January 13th, 2009 at 3:33 pm
Some of the big real estate agents also own housing assets; they manage rentals well too. Their equity is much smaller than the mum & dad second home investor. So it is not surprising to see the bigger real estate agents do not want to admit the significant fall.
January 13th, 2009 at 3:38 pm
“Kate Says:
January 12th, 2009 at 7:58 pm
I think their PR firm is advising them all the wrong way. Surely the greater or quicker the stated decline the earlier those fence-sitting buyers will think, “well, prices can’t fall a great deal more than that..” and then they’ll jump back in”
Yes, but remember Real Estate agents work for the seller (thats where the contract is), and not the buyer in NZ, even though ultimately the buyer is paying the fee in the sale. This means that they have to do everything to spin up the real estate market, otherwise sellers could accuse them of trying to sell their property for less than it is really worth. However I have seen plenty of agents working for the buyer, to get the seller to lower the price, just so they can get the sale and their commission. There are still heaps of cowboys out there.
January 13th, 2009 at 6:02 pm
I have a little problem with the idea that sellers do not have to sell.
If that was true, why are there so many houses for sale, changing agent, and cutting their asking prices ?
I think there are a lot of sellers who want sold, but they are unwilling to reduce their prices to the level the buyers are generally willing to go to, given the current climate.
So yes, a Mexican stand off, with lots of sellers and lots of potential buyers, but very few meetings of mind.
January 13th, 2009 at 6:19 pm
An industry that has done itself no favours in the integrety stakes so who would beleive them now.
Give an agent a few drinks and then ask them for the truth.
falling interest rates… falling house prices ……..yippee oppurtunity presenting itself again
January 13th, 2009 at 7:00 pm
I think the strategy of the Real estate industry has been completely wrong and it has done them a lot of harm, besides the dent it’s put in their credibility as a Profession.
We’ve had a solid year of ridiculous statements from President down……..”January is a fragmented month”……..”it’s an adjustment not a trend”………”It’s levelling off”…….. “always quiet in winter”……..”not enough stock for sales”………..”it’s the credit crises”………..”it’s the election”….etc etc
And then throw in the manipulation and false representation of statistics wherever possible.
Word to the Real estate industry, you have way under estimated the intelligence of the average Kiwi and the power of using data gathering via the internet.
The major reason houses are not selling, is that they are grossly overpriced by any measure you want to use. The bubble is bursting but it ain’t there yet.
Until houses are listed at true value the stand off will continue.
January 13th, 2009 at 8:55 pm
Real estate agents get nothing for talking the market down, as in no listings. As a seller, who would you list you property with?; the agent that says “the doom and gloom is just the media hype and look at those plumeting interest rates”, or the agent that says “the major reason houses are not selling, is that they are grossly overpriced by any measure you want to use”.
Realestate agents are getting wiped out by the lack of sales, only the ones with listings will survive, then they can start talking “price adjustment” with their vendors once the competion starts to evaporate.
It takes time for vendors to go thru a few agents before they realise what is really going on in the market.
Also a question – I assume that most setlements are 4-6 weeks after the price is agreed (contract signed), do the stats reflect the date of purchase at setlement date or the date the contract is signed?
January 13th, 2009 at 10:25 pm
Nah ! I’d list with the agent that is actually SELLING properties. There are plenty of Agents with lots of listings………….some of those listings have been on the market for over a year. Something must be wrong DUh! Do you think it might be they are still expecting too much for the property….. It’s time vendors either got real or got off the pot and stopped clogging up the listings and about time that Agents facilitated the process. I think the good agents actually are doing that.
January 14th, 2009 at 5:37 am
i agree that having vendors be realistic is the only thing that will benefit both agents and vendors alike. here in los angeles there has been plenty of press about how agents refuse to take listings where the vendors’ price expectations are unrealistic. here they won’t take a listing that will not sell – and all listings will sell at the right price – as it just wastes everyone’s time and especially prevents agents from concentrating on what brings them in the money – making sales. my sister is an agent in new zealand and she is still making plenty of sales because she is firm with vendors about what prices they might get. she has to be a little bit of a psychologist/counsellor to get them out of their denial about the crash but it works. vendors come to her because she gets houses sold. also re barfoots’ risible spin on the statistics – price declines always follow increases in inventory in housing markets. it’s happening here in l.a. again. you wait, new zealand hasn’t seen nothing yet!
January 14th, 2009 at 10:26 am
People (vendors and agents) were naively hoping that the market would pick up in the summer and that the financial meltdown would miss lil ole New Zealand.
Wrong and Wrong.
I see the boomers as well as the distressed younger vendors are reluctantly dropping prices although hardly enough to stimulate demand.
Massive increase in pricey beach and lifestyle properties on the market, most at unrealstic prices still.
January 14th, 2009 at 1:33 pm
Turns out B+T qouting their last weeks sales was indeed a smokescreen. Their total sales for December 2008 were a mere 461, down from Dec 2007 figure of 495 (Dec 2007 was itself very much lower than the previous December (2006) which was over 750 sales). Granted December was a foreshortened month, but the sales total of 461 was no great shakes compared to the full month’s sales in November 2008 of 546.
January 15th, 2009 at 4:39 pm
Mike Locke……quite right its a buyers market and the agents who have not told too many porkies over the years will no doubt be the ones still selling as the vendors understand they are not trying to pull a swifty to get a commission.
January 15th, 2009 at 4:56 pm
Guys there is a big difference between sellers wanting to sell and sellers being forced to sell. Yes we currently have high listing numbers but we also have low transaction volume and low auction closure rates with prices still there or there abouts. An 8% decline in the context the past 5 to 10 years of growth does not represent blood on the floor. This current Mexican standoff will continue until buyers re-engage en-masse (not likely) OR the blood letting begins because sellers are finally FORCED to sell. The agent is largely irrelevant.
Because the predominant Kiwi mindset is to wait it out until the market returns, only a change in a properties cash position will force its sale. The thinking is “as long as the bank doesn’t change its position re my debt to equity ratio during refinancing then I am fine.” So the real question becomes what is going to change the sellers cash position and FORCE the seller to sell at whatever price the market dictates?
1. Personal income – I think Andy is right in that unemployment is going to be the number one forcing agent in 2009 but will it be high enough to drive enough forced sellers into the market to drop prices? Who knows?
2. Rental income – no real change at present. Renters improved ability to buy via lower interest rates has been canceled out by lower equity requirements. Are rental rates going to drop? Who knows?
3. Debt costs – falling interest rates will improve the cash position of those sellers re-financing this year. Many will be let off the hook and will be able to sit it out because todays rates are the best for the past 5 years. But how many sellers will not be able to make it to their next refinancing date? Who knows?
4. War – as long as NZ avoids vast quantities of oil and nationally adopted religions we should be fine on this front.
There are only two ways to end the stand-off; either buyers re-engage at current prices or something happens that drives enough forced sellers into the market to drop prices and then buyers re-engage. Which one? Who knows? Probably both.
January 16th, 2009 at 6:18 am
Nouriel Roubini believes house prices will bottom at 1999, pre-bubble levels. That seems likely to me. Given the high price levels today, those prices may not actualize until 2010 or 2011. What concerns me is the finance end of it. Lower mortgage rates today are still unreachable for first time buyers who now have to factor in a 20% down payment. The low lending rates are not likely to be sustained until 2011.
There is a 12 – 16 month time lag in comparison with the US housing market, but the same does not hold true for home financing which is directly rated to the OCR. When the global Keynesians succeed in pumping enough money into the global economy to reverse deflation there is likely to be an overcorrection with the risk of inflation, or hyper-inflation. This will mean lending rates comparable, or exceeding those in the 1980’s.
The financial time lag is only a few weeks. It may be that New Zealand buyers, especially first-time buyers, will miss out on the buying opportunity when it comes.
January 16th, 2009 at 9:33 am
Doug said “The financial time lag is only a few weeks. It may be that New Zealand buyers, especially first-time buyers, will miss out on the buying opportunity when it comes.”
That is exactly what is going to happen. Meanwhile those real property owners with a proven track record at the bank will access super cheap debt and make a killing as they’re playing a 10+ year game. I predict fewer, much richer, real property owners in 10 years time.
January 16th, 2009 at 11:45 am
Good summary CCC and I agree with all your points.
However, the nature of the end to the stand-off I think will probably more of a whimper than a sudden super nova brought about by forced sales or a capitulation of buyers leaping in at still inflated prices. The driving force for people to sell is a continuum from “it would be nice” to “having no other choice”. Same for sellers.
People sell/buy for a variety of genuine reasons………kids left, house too big…..more kids house too small ……..can’t maintain a lifestyle block……….want to live in the city……want to live in the country……..etc etc
As a result I think prices will just keep on edging down at the current rate till they reach an equilibrium that represents value based on fundamentals and affordability.