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Housing report: Listings show extra pressure looming on house prices, rentals
February 8th, 2010Watch on our video home page here.
Bernard Hickey delivers a Housing Report in association with BNZ, including news that the number of home sale listings on realestate.co.nz and trademe.co.nz has spiked in recent weeks. This is similar to the spike seen through late 2008 as the housing market went into a downturn and home sellers tried to sell at the peak.
The numbers of houses listed for rent has also moved sharply in recent weeks, falling much faster than it did through early 2009. A fall is usual at this time of year, but this seems sharper, possibly as some landlords put their houses up for sale, sensing house prices have peaked.
Meanwhile, the number of mortgagee listings has also risen sharply, reversing a 3-6 month down trend as banks and receivers for finance companies get tougher now the worst of the recession is over and they work through their backlogs of delinquent loans. All these factors are likely to keep the pressure on for lower or flatter prices through 2010.
Tags: Bernard Hickey, BNZ, House prices, Housing report, Rentals
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February 8th, 2010 at 3:51 pm
Looks like Key might get to deliver the killer blow to the bubble. Throw in the worker exodus across the Tasman and the probable rise in all mortgage rates…it sure don’t look good for the RE mob.
February 8th, 2010 at 5:36 pm
If you think that’s all good you had better make sure your pension is secure because there won’t be any money left for you.
February 8th, 2010 at 6:00 pm
Maybe the stream of lending being choked back in China might be having an unintended consequence here.
Interesting discussion going on over at Steve Keen’s blog. Anecdotal at this point… I wouldn’t place much faith in this unless confirmed via other means.
http://www.debtdeflation.com/blogs/?p=3190#comment-20900
to quote from comment # 23 from gaday
February 8th, 2010 at 7:44 pm
The homes sales data is very interesting.
Usually you climb the mountain up to Xmas, then descend in January. This year the mountain has continued to rise through January and February
Possible reasons (likely a combination of these):
- sellers think the market has returned, and believe that with interest rates only likely to rise from here they need to sell whilst its still summer (literally and figuratively) and before rates rise (I know a couple of people doing this)
- Distressed buyers
- sellers concerned values may drop further once tax changes are introduced
Buying will now be subdued which combined with increasing listings means flat to falling prices throughout 2010
So lets wait and see if TA’s predictions of price increases this year and Infometric’s of 20-odd% over the next couple of years eventuates
I doubt it
February 8th, 2010 at 7:51 pm
If prices fall say 5% this year, then over the period 2007 -2010 prices would have fallen in real terms by about 10-12%
Pretty ordinary especially in the face of sluggish rental growth
I’m still waiting for those REs to change their window front graphs showing an ever upward reaching graph
February 8th, 2010 at 9:46 pm
That’s a very good point Bernard makes – amount of homes available to rent drops as number of homes increases – conclusion landlords have put the homes on the market and taken them out of the rental pool. Makes sense
February 8th, 2010 at 10:23 pm
I don’t get it – isn’t it better to sell a house leased?
February 8th, 2010 at 10:49 pm
@ IanC – Not unless it’s leased to a quality tenant at above market rates. Currently most demand is from folks looking for a home rather than an investment.
February 8th, 2010 at 11:38 pm
If you sell a house leased your market is a residential property investor. An empty house is for anyone interested.
February 9th, 2010 at 9:02 am
I think TheBankManager is being sarcastic. I want to put my house on market so I’ll turf out the tenants so I’ll have no income for the 2 or 3 months it will take to sell? Bernard and economists treat housing as a commodity not a necessity. Therefore by making it more expensive they think that demand will drop as people decide not to consume it. Hmmmm housing is getting expensive so I think I’ll move on to the street and invest in shares instead.
February 9th, 2010 at 9:29 am
“… number of home sale listings on realestate.co.nz and trademe.co.nz has spiked in recent weeks.”
- I only follow the numbers for Auckland and Northland on Trademe but they’re roughly the same as they have been for months. No spike.
@ Ian C
“I don’t get it – isn’t it better to sell a house leased?”
- It depends on the tenant!
@ Simon
“If you sell a house leased your market is a residential property investor. An empty house is for anyone interested.”
- Generally, a rental property will be sold with a vacant possession clause, so the new owner has the option to continue a tenancy or not. It doesn’t matter if it’s leased. Not even if it’s a fixed term tenancy.
February 9th, 2010 at 9:39 am
Ok, so my point is that once they sell they either return to the rental pool or are bought by an owner-occupier reducing the # of renters.
February 9th, 2010 at 9:58 am
I agree with Ian !!
There’s way too much rubbish written by vested interests, suggesting that if ‘rental investors’ get out of the ‘rental market’ that some how renters will have no where to live.
Are people going to blow up their ex-rentals?
Apart from the ‘occasional’ bach, I can’t see why Ian isn’t spot on.
i.e. a) Houses will be bought by investor, therefore no net difference to rentals available.
b) Houses will be bought by an owner-occupier (logically an ex-renter, or someone vacating a house, which is now available to rent) thus one less house to rent and one less renter. Nett sum gain equals ZERO.
Yet the Herald (an NZ comic-magazine) prints crap at the weekend from vested interests (property seminar presenters etc) that it will be ‘the end of days’ if we do anything remotely ‘negative’ towards ‘rental investors’. What absolute rubbish and SHAME on the pathetically low levels of journalism shown by the Herald.
But then again it is a comic and maybe I’m setting the bar too high for a comic?
February 9th, 2010 at 10:03 am
Mr Kevin, yes, Mr Smyth and Mr King et al walking utter wollocks, they wefuse to acknowledge this simple factor and continue on trying to frighten wenters and Mr Key and Mr English. Wenters have no wurries, weally, and nor do Mr Key and Mr English – unless of course they have wentals.
February 9th, 2010 at 10:10 am
Rental houses are being put on the market however beacuse so many are highly leveraged these owners are not willing to face reality in regards to price. In my experience many of these properties have tenants on a periodic tenancy as this keeps the income flow for the existing owner and as I suspect the buyer will be and existing landlord with good equity wanting the tenant to remain insitu. I don’t believe there is a rush of first home buyers as the economy is too fragile and those first home buyers who do have the $$ are waiting for the property market to sink another 10% over the next year or so. Barfoots and the Property Investor spruikers can spin all they want but we are headed downwards for the next two years.
February 9th, 2010 at 10:12 am
Dave – You can’t terminate a fixed tern tenancy to sell – you can only do this if it is a mortagee sale as far as I am aware
February 9th, 2010 at 10:22 am
Its all very interesing .. but surely you have to distinguish between the investor and the speculator and take peoples indervidual circumstances into account
out of the 7% of the housing stock held in investment how many of these are actually free hold and cash flow positive and whether loosing a few tax breaks will actually matter towards the end goal . Sure you wont make as much money but if the incomings cover the out goings you still end up with relatively safe rock solid investment that could be cashed out for your retiremet or handed on to your kids , if your not under financial pressure , freehold your own family home and taking a long term time frame is there really going to be a cause for panic and nesscery to dump ?
How many of these mums and dads who have inherited Grannys home and are renting it out will really notice the difference , or investors with high equity in thie rentals .
Surely life goes on
Over leveredged multiple property owners who were willing to pay rediculouse prices over the past few years and reliying on tax breaks to make it all work deserve to get burnt in my opinion as they were all spured on by greed and the want to make a quick easy buck … And media hype didnt help
February 9th, 2010 at 10:25 am
Fixed-term tenancies are for a specific length of time and cannot be ended with notice. They can be ended early by the mutual agreement of all of the parties to the tenancy agreement, or by assigning the tenant’s interest in the tenancy to someone else.
Department of Building and Housing
February 9th, 2010 at 10:26 am
“I only follow the numbers for Auckland and Northland on Trademe but they’re roughly the same as they have been for months. No spike.”
Have to agree with this. We follow the market in our area very closely. If anything, the number of listings has decreased.
February 9th, 2010 at 11:08 am
trev…you must be looking at something different on Trademe as i’m tracking it.
on jan 30 there were 15856 houses listed for AK..today 16276…that’s 418 new listings in ten ( 10) days.
on that average there’d be 1254 new listings for the month….if you drill down you can clearly see that some are $3-400K and obvious rentals so landlords are obviously baling.
this,of course,is good for young people wanting a first home as the entry level price goes down.
2010…the year of the tiger and the year kiwis started their rehab withdrawal from property addiction.
Key and Weldon of nzx etc are setting up a new capital markets structure and levelling the playing field with regulations etc to get investors to have faith in other than housing.
we need a brave, new economy not this banana republic stuff we’ve been putting up with for years…have faith,elves..help is on the way…keep your powder dry and stay out of the R/estate market until at least spring this year.
February 9th, 2010 at 11:17 am
trademe is putting the cost of listing up from 199 to 249 dollars next week so it makes sense to list now.
February 9th, 2010 at 11:30 am
my 2 cents – 2010 will undo all the gains from 2009. Then stagnation for the next few years. Then further falls due to frustrated speculators finally realising they arent going to make a killing in ppty.
February 9th, 2010 at 11:35 am
Yeah I was looking at the sharemarket market, you know everytime I get real excited about shares my confidence gets knocked with new capital raising share dilutions or an over hyped over priced IPO appear on the market just like imported cars – BEWARE the only real tangible with shares is the piece of paper, everything else is just a promise just like capital gains on property
February 9th, 2010 at 11:42 am
jimmy (the other one) – sounds just like the last boom/bust. We bought some in 2002 for less than people paid in 1997…..
Sean Says – “BEWARE the only real tangible with shares is the piece of paper, everything else is just a promise just like capital gains on property”
– you said it! But at least with property, no matter what it’s worth, you still have the land and the buidlings – that’s why it’s called REAL estate….
February 9th, 2010 at 11:45 am
“if you drill down you can clearly see that some are $3-400K and obvious rentals so landlords are obviously baling.”
Like Rob I’ve noticed a big jump in completely empty 3-4 bedroom homes in Auckland in the $3-400,000 range. I can’t remember so many houses in the $300,000’s since 2008. A bloody good sign for first home buyers. If it continues to build it will be very much a buyers market again. Personally I think houses are still too expensive compared to sections and I don’t think sections are cheap. I’d still rather get a good deal on a vacant plot and build something new for the same or less than most of the tired rentals.
Still think 2010/11 will be a double dip recession for NZ and Aus and the year our property markets catch up with everybody else.
February 9th, 2010 at 11:45 am
This site – a world of different small pictures (tax, interest rates, global economy, brain drain, investors, mums and dads…)
Sum of all the small pictures (me thinks) over next decade is that property in NZ will be a very lucrative, globally highly sought after and in a very short time rather limited resource.
Why?
1.3 billion Chinese for starters.
NZ – not big, not rich, but a hell of a great place to be – and if the world’s getting crowded, and the crowded bits are getting richer then…
February 9th, 2010 at 11:53 am
“jimmy (the other one) – sounds just like the last boom/bust. We bought some in 2002 for less than people paid in 1997″
Agree Murray. We sold a heritage villa in Freemans Bay in 2005, and a year later the next owner sold for $30,000 less. A couple of friends sold a villa in Ponsonby at a loss in 2003 that they had bought in 2001. It then doubled in price. Property is no one way street any more than shares or precious metals. If you have to sell for whatever reason luck plays as big a role as anything else.
February 9th, 2010 at 12:18 pm
@ Kevin
“There’s way too much rubbish written by vested interests, suggesting that if ‘rental investors’ get out of the ‘rental market’ that some how renters will have no where to live.”
That’s not the point. It’s like this… yes I agree with IanC that renters will become home owners and it’s zero sum. But… as population rises, because the ratio of rentals to home owners is smaller, there will be more demand on rentals, rents rise and the price gap between rents and home ownership will reduce.
@Sean
“Dave – You can’t terminate a fixed term tenancy to sell – you can only do this if it is a mortagee sale as far as I am aware”
- You’re right, I misread the rules earlier. You can still terminate with a tribunal order… a real pain but still possible. I doubt the tribunal would prevent a necessary sale.
February 9th, 2010 at 12:43 pm
Murray,
“But at least with property, no matter what it’s worth, you still have the land and the buidlings”
true, but you also get all the maintenance associated with that.
And it depends on what share you are buying? BHP owns a tonne of very valuable land – i dont see how this can suddenly become worth zero, unless of course no one wants commodites anymore .. but maybe there is as much a chance of that happening as people not wanting houses any more. … but if you are buying shares in a Lehmanns or Bear Stearns or other financial services/investment banking outfit, then yes, it can be worth nothing.
Remember also, that companies are just like houses. The quity can be worth zilch (or -ve) once debt is taken into account.
February 9th, 2010 at 12:56 pm
Rob of the North – I did say “in our area” which is within the Alkd Grammar zone. I should have been more specific.
I do not know what is happening outside of that area.
February 9th, 2010 at 12:58 pm
so when there is a big drop in trademe listings after 15th feb due to agents listing early to avoid the increase what spin will we put on that?catastrophic drop.
February 9th, 2010 at 12:59 pm
Dave – ” … yes I agree with IanC that renters will become home owners and it’s zero sum.”
This was the point I was trying to make with you, maybe I was bit clumsy in expressing things, sorry. It follows then the potential (tax) changes we are are talking about should also be ‘rent’ neutral, as it were, as well. IMO some people have not been helpful to cause scares on this aspect. I don’t think this negative (myopic) approach will (should) be lost on those in government.
Yes, I take your point about the effects of population increase, but that does not detract from the fact that the taxation changes made end up as zero-sum. In regard to effects of population increase, we need to increase land supply and build more homes, and that will be good for FHBs and the trades and businesses that build them. Plus you’ll be able to buy more affordable rentals with hopefully more sustainable yields. I can’t see why you wouldn’t want that.
Cheers, Les.
February 9th, 2010 at 2:02 pm
How come someone in Government doesn’t limit the immigration number (approximately) on the available housing in NZ?
It would seem a very logical step.
We’re a poor country by most OECD countries standards, so can’t afford for prices to rise by too much from the long term norm, as we’re not creating extra wealth to cover the cost of housing..
So either the Government should build houses relative to the number of immigrants it feels we need to allow into the country. OR check on the housing permits (plus an appropriate delay) and allow a certain amount of immigrants accordingly.
I realise they won’t always be spot on with the numbers. But presumably it isn’t difficult to average (over say 6-12) around about the correct number.
February 9th, 2010 at 2:11 pm
Immigrants may lead to prosperity (depends if they’re qualified) – certainly that’s the hope.
We’re a poor country by most OECD countries standards
I agree – you’d think that by the time you factor in globally priced petrol and other commodities (eg food) and their impact to our cost of living (greater as a proportion compared to other countries), plus interest rates systematically 2-3% higher than in other countries, and similar tax rates … that we’d have house prices at a **lower** multiple of income than is typical (rather than the opposite).
February 9th, 2010 at 2:15 pm
@ Kevin
“So either the Government should build houses relative to the number of immigrants ”
- Why would you want Government to control the housing market? Do you have that much faith in them?
“But presumably it isn’t difficult to average (over say 6-12) around about the correct number.”
- You’re right, it’s really easy. Every year, we can check on immigration numbers and look back and be absolutely certain of what we should have done.
February 9th, 2010 at 2:32 pm
@IanC “plus interest rates systematically 2-3% higher than in other countries, and similar tax rates … that we’d have house prices at a **lower** multiple of income than is typical (rather than the opposite)”
Exactly the problem. Almost every home owner in NZ considers themself a property investor and expect house prices in the longer term to provide a capital gain which is higher than bank interest rates. Now if the bank interest rates were several percent lower, then housing prices would increase at a lesser rate. Investors gear up their own family homes, a great risk. At high bank interest rates they look for safe investments like property. At lower rates they can afford greater risk and invest in productive businesses.
February 9th, 2010 at 2:41 pm
@ LoRates
“Almost every home owner in NZ considers themself a property investor and expect house prices in the longer term to provide a capital gain which is higher than bank interest rates.”
- Yes absolutely true. And they vastly over estimate the real value of their own home at retirement too.
February 9th, 2010 at 7:50 pm
To me and many many other people theres nothing better than owning your own home, you can do anything you want, its your own world, even it does cost money.
Theres always a price to pay, if you want it you will try you best to get it.
Prices of KFC have gone up so much in the past 10 years, i use to swear to myself if they ever rise the price again i’m going to stop eating KFC….. but i go to KFC even more often now, they are so bad for me i know…but i just love it.
February 9th, 2010 at 8:14 pm
out of all the chatter here from the chattering classes, small Kev always come through with reality in the life and times of everyman…KFC indeed …buy restaurant brands shares i say!…i like you ,small Kev!!!!!!!!!!!