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Housing report: REINZ’s raw figures suggest boom is back, but fairer measure shows market subdued
January 18th, 2010Bernard Hickey delivers another housing report in association with BNZ, including new REINZ figures showing the raw median house price rose to a record NZ$360,000 in December from NZ$355,000 in November.
This median is up 9.6% from a year ago, but is the market really that strong? The REINZ’s stratified measure of house prices shows that prices fell 0.9% in December and are still 3.8% below their peak.
More pricey sales going through at the top end are skewing that raw figure upwards. About 42% of the sales in December were above NZ$400,000, while near the peak of the boom that number was closer to 35%. That suggests many of the deals are being done by existing home owners with plenty of equity who are borrowing less. That matches with the low growth in lending by banks.
Section prices also remain weak, suggesting the speculative fervor is not there. They fell 3.8% in December and remain 18% below their peak in the stratified measure.
Tags: Bernard Hickey, House prices, house sales, Housing report, REINZ
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January 18th, 2010 at 1:48 pm
“More pricey sales going through at the top end are skewing that raw figure upwards. About 42% of the sales in December were above NZ$400,000, while near the peak of the boom that number was closer to 35%”
sorry, but that sounds like garbage to me. If prices increase, then so does the number of sales in higher price brackets.
Taken to the extreme, in the 60s 99% of sales were below $20,000. Today, 99% of sales are above $20,000 – but using the above logic we could say houses are still only worth $20,000 but the median price is being skewed upwards by all the sales above $20,000 !!
January 18th, 2010 at 1:57 pm
Look at the stratified measure methodology – it does what it needs to by working off deciles (and what you describe isn’t a problem).
January 18th, 2010 at 2:00 pm
How does more pricey houses , in the > $ 400 000 bracket , raise the median figure ?
If you were presenting the findings as ” average ” figures , I would readily concur with skewering upwards of the figures . A blip , rather than a trend .
January 18th, 2010 at 2:09 pm
Median can be skewed by a change in composition. If a greater than usual **number** of higher quality houses were sold, this would increase the median, even if all houses sold at unchanged values.
January 18th, 2010 at 2:17 pm
IanC – I agree with what you are saying about composition being able to skew medians, but it usually has to be very small volumes involved. This can be seen in areas where the sales are maybe around 100 in a month and there can be quite wild swings in value from month to month. However, I don’t believe the mid-point sale of 5,000 sales nationally in a month is quite as adversely affected….
January 18th, 2010 at 2:28 pm
Absolutely. However, the stratified measure is potentially showing that there may have been a significant change in composition between the months in question (and if you look at the data, this happens quite often).
Also looking at it, it seems the stratified measure will show larger rises and falls compared to the NZ-wide median (which is consistent with what I’ve observed in Auckland).
January 18th, 2010 at 3:34 pm
Interesting stats on the section prices. From my regular viewing of Trademe sections are not shifting much at all, and prices still DO seem down. I don’t think this reflects low demand for housing, porbably more likely it recognises the hassles involved in actually getting a house built these days.
I’ll see what comes out on land tax in the next few months.
January 18th, 2010 at 3:54 pm
Matt – “prices still DO seem down” – yes, I think it will be quite some time before land gets back to 2007 prices, unlike houses. Prices are still well down, but not down as far as they were 12 – 15 months ago.
)
My personal experience, which may not necessarily reflect national trends! – we bought a section in 2007 which we later changed our minds on. Put it back to market late 2008 and had zero offers. Beginning of 2009 had offers 35% below what we paid, but they kept falling through on finance. Mid 2009 sold for about 30% below what we paid. Sections in that particular subdivision are now selling about 25% below 2007.
We weren’t too worried about the loss since we sold and bought in the same market (bought existing on a bigger section at 25% below it’s original list price and less than replacement cost
January 18th, 2010 at 4:00 pm
Agree Matt about the land values. I picked up a section 20% below peak 6 months ago. Yes, there are lots of unseen fees to pay the council for consents and developmment fees, but still cheaper than buying existing comparable house by 20%.
I guess most people currently can’t afford to build while renting or owning an existing house because there are good bargins to be had.
January 18th, 2010 at 4:24 pm
Murray and matt,
i wonder to what extent higher build costs impact on land prices. Rather than raising total purchase costs, maybe it pushes down land prices so the house will still be in the budget of buyers??
January 18th, 2010 at 4:29 pm
If one looks at houses with subdivisable section during the boom, they pulled premium prices
After the Boom, the section size has very little or no value over the same house next door…
And BH is right on about the skewed aves price…hell I have been saying this near for couple yrs now…
Take a skew out and real comparison prices are still down 15 to 18%.
And we have a shortage of the house types sold during the boom because so many cant afford to carry the loss buyers are asking and sitting it ourt till the next cycle in 2014/15 and the few that do go on the market and sell cant afford to hold onto them…therefore listings are down.
January 18th, 2010 at 4:39 pm
Does it mean during 2008 house prices haven’t actually droped, just more houses sold in lower bracket?
January 18th, 2010 at 5:22 pm
Andy M – yes I ‘ve done the sums and building still seems to work out better value provided you know what you are doing
January 18th, 2010 at 9:30 pm
Barry – no, look at the stratified measure.
January 18th, 2010 at 9:32 pm
With less sales but an increase in the med price one question needs to asked, are those properties selling over $400k in fact worth more. If several $700k properties sells for $600k because of circumstances the market is actually down but the figures will still show are medium rise, this also work in reverse, when the number of sales return a reasonable level or another indicator is used then we will know the real market.
January 19th, 2010 at 4:12 am
Front page of today’s PRESS , Chch house prices at an all time record . 500+ houses sold in the city in December , a similar number to December 2008 . Median house price was $ 347 250 . This is 12 % up , on a year earlier . And an improvement on the November 2007 peak , of $ 340 000 , which was the previous greatest median figure . Tony Alexander expects house prices to increase by 5-10 % across much of NZ , over the next 12 months .
All of those bloggers , who disparaged TA and his professional ability , last year ……..Where are you all now ? He took alot of stick on ” interest.co.nz ” …….. And all who joined the Hickey chorus , hallelujah , don’t you look like silly asses ! ……….. As someone noted , maybe Bernard meant up 30 % , not down …………Yeah , right .