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NZ house price median up to record NZ$360k, but stratified index falls 0.9% in December (Update 3)
January 18th, 2010The national median house price rose to a record of NZ$360,000 in December, up 1.4% from November and 9.6% from the year before, figures released by the Real Estate Institute of New Zealand (REINZ) show. However, a new REINZ house price index designed with help from the Reserve Bank shows nationwide house prices fell 0.9% in December.
(Update 3 includes comment from ASB economist Chris Tennent-Brown about subdued market activity and what it might mean for the Official Cash Rate)
There were 4,957 house sales in December, down from 6,056 in November, but up from 4,302 in December 2008.
“It is concerning there was less than 5,000 residential properties sold in December, but the sale time of 33 days is one of the shortest for the year, which goes to show those properties sold were well sought after,” REINZ president Peter McDonald said.
“House prices have definitely stabilised and appear to be slightly gaining, which is a positive sign. The median house price for December 2009 was up 1.4% on the previous month so, while the median price for December 2009 was a record high for that time of the year, it’s a case of steady as it goes,” McDonald said.
In an interview with interest.co.nz, McDonald said he thought the fall in sales was due to a lack of quality stock rather than buyers holding off.
“I believe that we still are short of good stock and the fact (of the sale time of 33 days) suggests that there’s more competition out there for those properties that are on the market,” he said.
“That’s what’s really kept that median rising – where it’s gone to NZ$360,000, it’s more about a lack of good listings and extra competition (between buyers).”
“There’s people out there looking, people entering the market every day looking to buy again. The confidence has come back in from the buyers big time, and so it should, because interest rates are are still very affordable and the economy looks to be tracking on quite well.”
Ebbing demand pressure?
ASB economist Chris Tennent Brown said the figures suggested subdued demand and slight increase in seasonally adjusted days to sell houses. He still sees an OCR hike in April. Here are his full comments.
At this stage a lift in days to sell, the run-off in turnover, and dip in the stratified house price index suggests that demand pressure may be ebbing after a period of recovering demand outstripping modest supply. Mortgage approvals from the RBNZ continue to suggest low activity levels, although the holiday period is typically quiet, and we will have to wait until February’s data to be more confidence in the housing trend.
Supply of houses for sale and construction activity have been sluggish to respond to the pick up in demand and lift in prices observed over 2009. In the RBNZ’s view, the recent strength in the housing market is temporary, and will slow down as interest rates rise and construction recovers. The nascent trend in the closing months of 2009 suggests some loss of momentum. The RBNZ is, therefore, likely to be comfortable with its December MPS stance of remaining on hold until “around the middle of 2010”. We continue to see the overall balance of inflation risks as pointing to a slightly earlier start, in April.
Median up, stratified measure down
The difference in movements between rise in the vanilla median in the REINZ measure and the stratified RBNZ-REINZ measure could be explained by the higher proportion of properties sold in the upper price brackets.
In December 2009, 42% of properties sold were worth more than NZ$400,000, which is up from 35% in December 2008 and 39% in December 2007.
Here is the release from the REINZ:
Figures released today by the Real Estate Institute of New Zealand (REINZ) revealed the median residential house price rose in 11 out of 12 districts last month (December 2009) compared to the same period the previous year.
The national median of $360,000 was up 9.6 percent on the corresponding figure of $328,500 recorded for December 2008. It was also up $5,000 on the median price for November 2009.
The largest gains were Nelson/Marlborough, up 14.5 percent to $343,500, followed by Southland up 10.8 percent to $184,000 and Hawke’s Bay, also up 9.4 percent to $290,000. Northland was the only district to experience a drop in median prices, down just over 2 percent to $306,000
Real Estate Institute of New Zealand President Peter McDonald says it’s an appreciating market fuelled by a shortage of properties for sale but is looking optimistic for 2010.
“House prices have definitely stabilised and appear to be slightly gaining, which is a positive sign. The median house price for December 2009 was up 1.4 per cent on the previous month so, while the median price for December 2009 was a record high for that time of the year, it’s a case of steady as it goes,” he says.
“It is concerning there was less than 5,000 residential properties sold in December but the sale time of 33 days is one of the shortest for the year, which goes to show those properties sold were well sought after,” Mr McDonald says.
The total value of house sales in New Zealand in December was $2.15 billion, which came from the sale of 4,957 houses. There were also 655 more houses sold around the country than in December 2008 but still down 640 on December 2007. The breakdown of the values of the properties was 165 for $1 million plus, 617 for $600,000 – $999,999 and 1,289 for $400,000 – $599,999 and 2,886 under $400,000.
Auckland sales accounted for $918 million of total sales in December. Canterbury/Westland and Waikato/Bay of Plenty were the next greatest value at $283m and $272m respectively with Wellington not far behind at $253m.
The national median for days to sell in December was 33, 12 fewer days than the corresponding period a year ago. Sales were quickest in Wellington at 28 median days and in Canterbury/Westland and Otago, where the median days to sell was just 29.
Tags: House prices, house sales, Peter McDonald, REINZ
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January 18th, 2010 at 10:28 am
Up it goes…but still low volumes
Does anyone know the volumes for DEC 2006 during the peak boom?
January 18th, 2010 at 10:30 am
Dec 06: 8,245
Dec 07: 5,597
January 18th, 2010 at 10:33 am
Inflation static and low rates/OCR for rest of year??
http://www.sharechat.co.nz/article/e4727c34/static-inflation-holds-off-interest-rate-rises.html
January 18th, 2010 at 10:38 am
i do not know if anyone paid any attention… but if you did, well done….
January 18th, 2010 at 10:44 am
“the sale time of 33 days is one of the shortest for the year, which goes to show those properties sold were well sought after,”…and the BS continues to flow…33 it might be if you leave out the time they were listed with other agents and forget about the FACT that countless properties remain unsold after years not months…bloody years.
Once again I suggest the days to sell BS stat no longer be reported. It is a complete fabrication by the RE mob and used to suck fools into rushing to buy when they should be rushing to escape.
January 18th, 2010 at 10:58 am
…the party continues at Barfoot & Thompson, Harcourts, L J Hooker et al .. never a dull moment, as each day the media pumps out the good news here in Noddyland …as the Act party wants to bring down the minimum wage, the banks are scared sh*tless of any price correction …meanwhile the affordabiity ratio just keeps growing folks … yeah, what a party and don’t forget to bring your rose coloured glasses … happy happy, joy joy
January 18th, 2010 at 11:04 am
Wally, I suggest any stats showing increase in price/sales not to be reported, only negative property news like number of mortgage sales, rise in interest rates etc.
January 18th, 2010 at 11:22 am
Barry, you sound very depressed.
Why do so many here think indexes are more accurate than the raw monthly data? (see poll above right). Does the raw data not show what you would like it to show? The indexes always have a time lag, and when the REINZ median was dropping before the indexes had, many here were saying that it was the most current and accurate measure…..
January 18th, 2010 at 11:26 am
House prices can’t just keep going up. They have to correct at some stage and imop not too far into the future. the banks are not completely stupid they know they have to be ready for the storm when it comes.
Any way you cut it the next generation are the ones who will occupy all the flash new houses built in the last ten years. The only question is how much will they have to pay for them. That question should be rephrased to …How much will they be prepared to pay?
January 18th, 2010 at 11:40 am
Government doing their bit to keep the demand side of the equation going. 46000 permanent migrants in the last year. They all have to live somewhere.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10620758
This issue of centre of gravity in the associated article is worrying.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10620756
2 children sponsoring up to 4 parents plus possibly grandparents. I can see why they’re so happy about it. The taxpayer will be footing their medical bills etc, paying out far more than we’ll ever receive in taxes.
Though the REINZ will be very happy about all those extra people to house.
January 18th, 2010 at 11:43 am
Murray, if circumstances lend to more high value houses selling then the median will rise. This does not mean house values have gone up, just more expensive houses are selling.
As baby boomers (50-60year olds) sell their family homes its likely medians will be going up.
QV data accounts for the change in what types of houses are selling by comparing sale price to capital value of property.
Work through the example here:
http://www.rbnz.govt.nz/keygraphs/1697975.html
January 18th, 2010 at 11:48 am
The obvious implication of the REINZ median price, when compared with its own stratified index and the QVNZ data, is that activity in the market is largely confined to the upper end.
The median price is totally misleading, but then real estate agents aren’t too keen on telling the truth.
January 18th, 2010 at 11:50 am
Tell you what Macca…I been watching the marlborough mart for some time and there are a heap of them boomer properties and vineyards that been listed with every Tom dick and Mary for more than one year. Some more than three years. Go figure.
January 18th, 2010 at 11:52 am
“How much will they be prepared to pay?”
- the maximum amount that they can possibly afford. If you believe that property is always a good bet over the medium to longer term (based on what your friends and family tell you and your personal experience of seeing mum and dad’s house and grandma’s bach) then greed and fear are working in the same direction and kiwis will push themselves to the max all the time every time.
- this won’t change until house prices decline year on year for several years. It will have to be nominal price declines as well – simply not keeping up with inflation won’t be enough to stop kiwis putting everything in property.
January 18th, 2010 at 11:53 am
Andy M,
Wow, if there were 46000 permanent migrants last year, then are they here to retire or to work? Are there 46000 jobs created last year to absorb those 46000 migrants that you mentioned?
To the many here, isn’t that a more concerning subject than having to associate migrants to housing demand/prices? What about migrants to employability? Is there such data? What is this going to happen to our economy?
January 18th, 2010 at 12:19 pm
relax,elves…median prices mean nothing as Macca says above…a few sold McMansions for the month skew the results..
check this out… fresh off the stove from The Landlords and these boys see it all very dispassionately as they’re only drilling for facts to base property investment on…the market is stalling, kiwis are starting to head back to Oz..think macro not micro!
http://www.landlords.co.nz/read-article.php?article_id=3635
January 18th, 2010 at 12:26 pm
Macca Says:
“Murray, if circumstances lend to more high value houses selling then the median will rise. This does not mean house values have gone up, just more expensive houses are selling. ”
Exactly….and who are buying..new home owners or established and upgrading.
Lets say one has an ave house about 350K no or little mortgage and value is down 20% from the peak 420K
They can still pick up the bargains at the higher end…paying 500K + which is 20/22% down from peak of 600K+ K
Even if they dont sell the original home..rent it out 400+ a week ..forgetting tax breaks that still makes a big hole in servicing the loan.
The structure of, and type of sellers and buyers is very different from the boom yrs of speculation, buy this week flick of next week.
Wally Says:
” ……it might be if you leave out the time they were listed with other agents and forget about the FACT that countless properties remain unsold after years not months…bloody years……”
If one has auto notifications from trademe going back to 2006 for different areas, there heaps of good quality homes that listed late 2007 early 2008 still just rolling over on the list…and most have dropped listing price 10 to 15% and still over priced for the current market….
Also noticable is they have gone thru several realestate agents listings in that time.
So the question is, If a house is listed with 1 agency, doesnt sell after say 6 months then listed with another for 6 months, is that then calucated as being listed for 6 months or 1 yr with REANZ or the agency?
Previous to late 2007 buyers could buy anything and flick off at a profit, nothing hardly ever got re listed.
January 18th, 2010 at 12:58 pm
Baby boomers are starting to die off and their assets and wealth is being distributed to Gen X & Y who will either buy property with the cash or sit on any property they inherit.
Wally – can I have my inheritiance direct credited to by bank account. Cheers.
January 18th, 2010 at 1:14 pm
rob of the north – “median prices mean nothing as Macca says above…a few sold McMansions for the month skew the results..”
That’s why we use medians and not averages. The median is the mid-point of all sales out of those 5,000 sales in a month. It doesn’t get skewed much by a few hundred extra sales of mansions at the top end or a few hundred dumps at the bottom, unlike averages……
January 18th, 2010 at 1:20 pm
Sorry to dissapoint shorts, baby boomers are actually living longer than ever before thanks to technology and medicine. Even though men are currently 78 and women are 82, most people who make it to 75 will actually live longer. A bit longer wait before wally kicks the bucket I suspect
January 18th, 2010 at 1:36 pm
The figures and trends are consistent. Anyone expecting a short, sharp correction is going to be disappointed. It could take 10-15 years before a return to long-term averages. The youth should put their energies and resources into high-paying careers overseas that come with accommodation instead of deluding themselves with outdated quarter-acre dreams.
January 18th, 2010 at 1:36 pm
Then those baby boomers may have to work longer, leading to greater unemployment for younger generations (interesting factoid – baby boomer employment increased during the recession, with school leavers (in particular) and 19-24 year olds bearing the brunt of the unemployment).
Murray – read how the stratified median index works —> it helps to adjust for any change in mix which can (and obviously has, looking at the difference in the results) affected the overall median. It is timely.
http://www.rbnz.govt.nz/news/2009/3706847.html
January 18th, 2010 at 1:45 pm
Is no one concerned that three different measures of house prices give such divergent results?
Obviously QV’s data lags by about 2 months which explains some of the discrepancy. However QV’s calculation has a more serious flaw than that:
It assumes all houses of similar rateable value in a similar area are worth a similar amount of money. You don’t have to know much about property to know that this isn’t true.
Therefore when a market gets a change in momentum, you also get a change in the proportion of property types sold.
Let me explain: As prices fell in 2008, quality homes tended to be withdrawn from the market instead of being sold at a discount. Estate sales and distressed properties (often ex rentals) continued to be sold as vendors had no option to sell. Mortgagee sales (generally distressed properties) also increased. The net result is a significantly higher proportion of poorly presented properties being sold.
On QV’s measure there is no distinction between two neighbouring properties which have the same RV but where one is tidy on the outside but the inside is fairly original and the other is tidy on the outside but recently remodelled to a high standard.
The net result is that QV’s measure overestimates the fall.
I’ve done my own computer model of how this would affect QV’s number. Based on volume similar to what we have seen over the last two years, when the actual price falls 5% a QV type number falls 9%. Even with a recovery, the discrepancy is still propagated to some extent with actual prices back to even a QV type number gives a result of -3%.
Interestingly the same problem occurs in a housing boom but in reverse. To some extent the QV numbers overestimated the size of the increases from 2002-2007.
Any measure is never perfect however the REINZ figures do seem to have produced numbers closer to reality over the past year.
Reading any figures without considering the whole picture is a bit misleading. Consider for example over the past 20 years in ChCh the median house price is up 200%. Yet an average house purchased in 1990 in an average suburban location that has been maintained but not vastly improved would have only increased by about 120% or about the same amount as the average household income increased. What sounds like a good measure can lead to vastly different results.
January 18th, 2010 at 1:54 pm
The only system that can really tell it like it is is that used by the S&P Case-Schiller index. Only compares same house sales and adjust for improvements.
http://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff–p-us—-
January 18th, 2010 at 2:07 pm
True. Even high school kids know that stats and numbers can be used to push all kinds of arguements. It’s a pity we don’t get to see all the numbers… or get to hear them from more impartial sources. Where are all the tv programmes about mortgagee sales instead of renovations etc. It is important for people to see a little gloom to learn.
I guess it shows how ill-informed and how gullible we NZers are.
That being said, Murray is right in that at least we are getting median prices – less skewed by the large number of sales in the higher end bracket.
I would like to see sales brackets on a monthly/yearly basis, as well as new home buyers (1st buyers and immigrants) vs those shifting (one house to another), vs selling and moving overseas.
More information – Better decisions.
January 18th, 2010 at 2:45 pm
Bevan – Well said. Perhaps, those information you wanted are unavailable in this seemingly property market economy. It would be fantastic if Alex is able to compile something of the type you mentioned.
Alex – how many more of these property reports are there for this month?
January 18th, 2010 at 3:11 pm
Bevan – “sales brackets on a monthly/yearly basis” are in the monthly REINZ release.
Cheers
January 18th, 2010 at 4:09 pm
Thanks Murray… There is definitely some good information on the reinz website.
What I meant, was a breakdown of sales in brackets;
ie. 100-200k vs 200-300k vs 300k-400k etc.
My guess is, its hard to break down those bars (in a graph) into different groups as it requires more data collection and cost; and in this day and age, probably a disclaimer to use that information without using their names etc…
Nice one Trudy – We’re a property market economy. How to cure our addiction?!
January 18th, 2010 at 4:57 pm
Bevan – “What I meant, was a breakdown of sales in brackets;
ie. 100-200k vs 200-300k vs 300k-400k etc”
They break it down to under 400k, 400 – 600, 600 – 1mill, 1 mill & over…..
Go to “Residential News” and download the “statistics” file (PDF), it’s on the last page.
Cheers
direct link here: http://www.reinz.co.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=3E271862-18FE-7E88-429C-0FFCCC411866&siteName=Reinz
cheers
January 18th, 2010 at 5:26 pm
Bevan,
Your question “Nice one Trudy – We’re a property market economy. How to cure our addiction?!..”
Actually, I have read from this webiste and there were numerous articles which had provided some useful answers, and many bloggers have also given many useful suggestions to your question on how to cure the addiction etc…. some also called it “housing obssession”.
Perhaps, I would add a suggestion, that’s to have less property reportings in the media which are quite similar. Do you see that there are too many property reports each month? I was just wondering how many more to go for this month?
January 18th, 2010 at 6:05 pm
I think we need to now look at the next budget to see what, if anything, the government are going to do about this property bubble problem. We earn such low wages, so unless they can raise the wages somehow, property prices have to come down, if the next generation are ever going to be able to afford to buy. Banks however would then be in quite a bit of trouble if that happened, as many people would owe more than they could sell the house at.
Whether they are going to bring in property taxes and/or stamp duty, or change the investment rules of investment property, I don’t know. But something does need to be done. Also any stats released by these property companies, they have a conflict of interest, so they shouldn’t really be reported, as it really just advertising for those property companies. Instead there needs to be a fully independent organisation that should be reporting these types of stats.
January 18th, 2010 at 6:27 pm
Hi Rob
Well said. In your opinion, which company is considered as independent organisation?
Is BERL considered as independent in your views/definition?
January 18th, 2010 at 8:47 pm
70’s residential housing, Angora goats, Kiwifruit, 80’s sharemarket, 80’s commercial property, Ostrich farming, Dotcom, Finance companies and Residential property again. Boom bust boom bust. What’s the next big thing for Noddyland? Time to go into the bush and round up some old billy goats I think.
January 18th, 2010 at 8:59 pm
“Whether they are going to bring in property taxes and/or stamp duty, or change the investment rules of investment property, I don’t know.”
…another option is to allow houses to be built, which in Auckland CBD, Newmarket, res 1, 2, 6 has been progressively banned over the last 3 years. More taxes won’t make houses cheaper if you’re not allowed to build them. If the town planning rules stipulate a 2 bedroom CBD unit must cost $550,000 (which thay have done since 1997 – and no CBD apartment has been built since) then no amount of tax will reduce that figure to something more reasonable.
January 18th, 2010 at 9:17 pm
Not that I post here that often or particularly care, but that 8:47pm post isn’t me. I find the “Noddyland” reverse jingoism thing a bit creepy.
January 18th, 2010 at 9:43 pm
Well said bob, council planning restrictions & fees do play a large part in making city centres expensive.
Rob – “Also any stats released by these property companies, they have a conflict of interest, so they shouldn’t really be reported, as it really just advertising for those property companies” – the REINZ doesn’t sell houses, and while they arguably might side with MREINZ companies, the sales volumes and median prices they report are what they are each month and aren’t manipulated in any way……
January 18th, 2010 at 10:27 pm
Can someone tell me what is the effect on the cost of building a new house after 10% timber price increase this month?
http://www.stuff.co.nz/business/industries/3204025/Timber-shortage-expected-to-bump-up-prices-by-10pc
January 18th, 2010 at 10:33 pm
http://www.stuff.co.nz/business/industries/3204025/Timber-shortage-expected-to-bump-up-prices-by-10pc
January 18th, 2010 at 10:57 pm
Joe Blogg – price for frames and trusses for a single level 4 bedroom home of approx 150m2 would be around $17,000 so 10% increase is $1,700
January 18th, 2010 at 10:59 pm
QV Data usually aligns with REINZ data 3 months later when the transactions have been completed and new occupier takes possession. REINZ data is the most reliable and appears to be a more accurate reflection of what is really going on.
January 18th, 2010 at 11:07 pm
Could the fall in reported sales actually be due to the fact that since 17th of November 2008 it is no longer compulsory for real estate companies to belong to REINZ therefore many offices would not have bothered going to the trouble of submitting their sales data as they no longer have to do it.
interest.co.nz should ask the REINZ President how many reall estate offices put in a statistics return in December compared with October – would be a very interesting one!
January 18th, 2010 at 11:08 pm
http://www.reinz.org.nz/shadomx/apps/fms/fmsdownload.cfm?file_uuid=3E271862-18FE-7E88-429C-0FFCCC411866&siteName=Reinz
http://www.stuff.co.nz/business/3236583/Market-sees-75-point-rate-hike-by-June
Seven of 18 economists surveyed by Reuters predict a 25 basis point increase in the OCR in March, with the rate climbing to 3.75% by the end of September. If the RBNZ fails to lift rates in March, that implies an increase at each of the four ensuing OCR reviews through September with one of 50 basis points.
January 18th, 2010 at 11:17 pm
Bank Manager, I agree. I’m not sure how anyone thinks a manipulated “index” is supposed to be more accurate than just quoting the actual numbers, which is what the REINZ median price and volumes are.
Lara – I had wondered that myself, though I don’t know of any firms that aren’t MREINZ.
January 18th, 2010 at 11:24 pm
Why do we need different types of data ie. REINZ, REINZ-RBNZ, and QV ?
Is our property market that huge as in different types of data is required each month?
January 18th, 2010 at 11:29 pm
Did anyone watch TV3 tonight about the property reports? Bernard was interviewed too. I think he brought up some important points about our property prices. Isn’t that worrying to property buyers?
January 18th, 2010 at 11:39 pm
Any idea who’s “one excitable commentator” with dicky crystal ball?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10617444&pnum=0
January 18th, 2010 at 11:40 pm
Trudy, what did he say, house prices to drop (another) 30%?
January 18th, 2010 at 11:48 pm
@Trudy
There’s loads like this on this site:
e.g.
http://www.interest.co.nz/ratesblog/index.php/2009/06/26/bernard-hickey-talks-to-alison-mau-on-tvnzs-breakfast-the-looming-clash-of-the-generations/
hard to know whats been said before though.
January 19th, 2010 at 7:15 am
I didn’t believe Bernard a second because as usual he may not be able to provide facts.
January 19th, 2010 at 11:15 am
Interesting piece from Alistair Helm at Unconditional on the REINZ stats. He says they show suprising underlying weakness, particularly in volumes going through.
http://unconditional.co.nz/blog/latest-property-data-shows-weakness-in-sales-numbers/
cheers
Bernard
January 19th, 2010 at 11:23 am
Front page of the Press , Bernard : Chch house prices at an all time record level . And 12 % up on December of the previous year . Similar volume of sales in December ‘08 & ‘09 . Tony Alexander is mildly bullish on continued rises , 5-10 % , over the next 12 months . You’re fighting a losing battle on this one , buddy ………………. Have a gummy bear ! …….And hum softly , ” TA is OK ….. TA is OK ” ……