An average under-the-hammer sales rate of about 25% seems to the new normal in auction rooms around the country this winter.
Last week (18-24 June) interest.co.nz monitored 201 residential property auctions throughout New Zealand.
That was up from 166 the previous week, even though last week was a short one leading up to the Matariki long weekend.
Of the 201 auctions monitored last week, 51 properties sold under the hammer, giving an average sales rate of 25%, barely changed from 24% the previous week.
In the Auckland region the overall sales rate was 23%, although auction activity remained particularly weak in Waitakere and Papakura, and auction sales are increasingly few and far between in the Waikato and Bay of Plenty.
The auction rooms were livelier in Canterbury where the sales rate jumped up to 61% last week.
The chart below shows the district-by-district sales results, while details of the individual properties offered at all of the auctions monitored by interest.co.nz, including the prices achieved for those that sold, are available on our Residential Auction Results page.
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43 Comments
Perhaps a more suitable headline would be "75% of properties are passed in at auction".
The downward trend is becoming baked in for the next few months and perhaps into 2023.
Greg - is it possible to track sales at auction as % of total sales but other methods each week? Assuming that time delays on info re the latter makes this impractical?
The new normal is you tell me what you want for your property and I will offer you ~30% less and walk away.
Works buying t shirts in Bali I guess.
I have been trying this method already with zero success. I'm at the low end of the property market.
Be patient. Time is on the buyers side.
Looks like the 25 % sold is the new normal. At the moment, it seems to me that there are more listings, prices are falling a little.
Low interest rates are gone, and many predict that house prices will fall. Its not happening in the overall market yet.
Nationally: 4% drop in median last month, 1.6% drop in HPI last month. This will likely be a long drawn out affair, not an overnight slump. Pretty consistently falling now since November if you look at the REINZ reports. A couple of stragglers but the general trend is picking up pace.
There are some "bargains" happening now, though give it 6 months and those bargains may have just been early bids.
Ireland crash took 3 years to hit bottom at a rate of about 2% house price drop a month to 70%... they hadnt had as rapid growth as us - and conditions were not exactly the same. In NZ between 1974 to 1980, house prices fell by around 40% again it seems to be a slope downwards rather than a sudden drop. it would be interesting to see if there are many events where house prices dropped and corrected back up after a short time...
Maybe the drawn out drops are due to the downturns tending to be a domino effect of events which government initially tries to cushion through stimulating stuff. then the green shoots take ages to take effect so a long flatline at the end of the down bit?
Though prices in NZ at that time didn't actually fall in nominal terms. They stayed flat while everything else (including wages) rose substantially. In real value they dropped around 40%. So with actual price drops and significant inflation now, this has the possibility of being FAR FAR worse.
Yep - seems anything remotely desirable is still actually selling for really good money. Sure, the market is slower, but every property we've looked at has still sold for silly money, although it's taken longer and the insane deals where someone's doubled to tripled the CV are thin on the ground. This wait and watch game requires great patience.
There was a time, only about 3 decades ago when auctions were not the norm and were only used for truly unique properties that a value was hard to establish, or for mortgagee sales. The preferred selling method being an exclusive or general agency. And you could expect a 90% plus clearance rate via auction, for the few properties that were auctioned.
But when Govt. policy started to restrict supply and other policies like immigration increased demand, the more numerous buyers for every property, then auctions are a good way to leverage as much as possible out of any buyer, and were promoted as the best way of selling, but not just for the seller.
RE companies liked it as it gave them control of both buyer and seller and it gave them greater branding exposure and the client paid for it all. In fact, many agencies were just as much advertising agencies as they were real estate selling agencies. And of course, to take your property to auction meant your property was one of those unique properties, and that feed the ego.
But, as the course has changed, this one-trick pony, is struggling to keep up, and really should be sent to the knacker's yard.
WRT that Hawkes Bay success...I'm guessing that's the Taradale property sold by Bayleys.
From what I can tell there was a pre-auction offer of $760K, the auction was brought forward, there were no bids, and the hammer fell for the same price. Looking at the Bayleys page it was 29 seconds from presentation to hammer fall, suggesting there wasn't even anyone in the room.
Property was bought in May 2020 for $610K. Fortunately for the vendor it doesn't look like they put any money in it so they'll still come out on top.
Homes.co.nz has an estimate of $890K on it. Draw your own conclusions.
Still plenty of deluded vendors out there.... this price would have been crazy even for the boom time of late last year. In this case selling privately does them no favors as their price expectations are absurd
https://www.trademe.co.nz/a/property/residential/sale/auckland/manukau-…
Asking over 2 million, selling privately and can't even pay for professional photos lol can't even tell what you're looking at...
Every time I'm in Mangere Bridge it just screams "desireable suburb" and I really wish I could find a nice place for 2.2m there.
Wow.
Its actually a lovely area, especially towards kiwi esplanade and Ambury farm but not that location and certainly not that price
The owners of this property are way out of touch. I've been watching some properties (keen to downsize), and even though I receive emails about every couple of days of price reductions, sellers are still asking too much for their properties. Sellers in this market need to understand - auctions don't work. I for one am getting tired of visiting open homes only to be disappointed when I find out the seller's 'expectations' when homes are listed "by deadline" or "by negotiation". If sellers want to sell, state your price. With rising petrol prices, potential purchasers don't want to spend their weekends driving from home to home to discover seller's are being unrealistic with their pricing.
Why would anyone buy a house now when they will be 30%+ lower by the end of the year???
Downsizing. Moving. You still need somewhere to live.
Because that drop is completely speculative, and with building costs still going up, existing homes may start to look "cheap"
Yep people talking up a 30% drop like it's guaranteed is a bit tiring. Not sure how long you can keep pushing that narrative if it doesn't happen. There will be some bargains for sure as Auckland is blessed with loads of rot boxes that will be frantically sold off but decent builds in good areas are never going to dive.
Well Carlos, if I'm an investor and think we are already down 20% with probably another 20% baked in, I'm not your average DGM. Sure building costs are going up rapidly but that's irrelevant. If the buyer can't afford to build it doesn't happen, otherwise there would be no slums.
Make no mistake, if interest rates follow the swap market pricing NZ resi is down 50% from the peak. Start getting used to it.
If you're an investor you know what replacement costs for a property are, and for prices to drop lower than the replacement costs, we're basically in a Detroit/Beirut/Colombo scenario and the housing market is the least of our problems.
Yes but we're not close to replacement cost yet, are you telling me that house in Mangere is worth $2.25m? It's the land value that is collapsing, not the dwelling value.
When people are missing mortgage payments and banks are repossessing houses, replacement costs are irrelevant for a period as the shockwave hits. We get there by year end. Get liquid and be ready to buy, anyone who has landbanked or paid up for development sites are going to get flushed.
It's remarkable that people don't get this. The simple fact that property prices vary so much across our country despite build costs being similar shows how much of the price represents land.
House prices in Auckland could fall by 50% and still be more expensive than West Coast or Southland. Either build cost is higher than the cheap regions (proving build cost is not a floor after all), or most of the house price in expensive regions represents the land, which can absolutely fall regardless of the cost of timber, GIB and consents.
https://www.interest.co.nz/property/116357/median-prices-auckland-now-l…
Its actually more expensive to build on the West Coast and Southland than Auckland, or almost anywhere else in the country. They're stagnating or declining populations and economies that struggle to maintain a steady supply of building labour.
Minimum price for a new 3 bedroom freestanding almost anywhere in NZ is heading close to a million bucks. Land comprises around 30% of that value. So the land would need to be free before you even have a drop of 30%.
How much did it cost to build a 4 bed house in 2019? I bought my Chch property for ~500k which must have been pretty close to replacement cost, so I guess the quarter acre was free. My house in the UK was insured for a replacement cost quite a bit higher than what I paid for it, based on online building cost calculators.
I am sure that build cost feeds into house prices, but in a subtle way that can easily be overwhelmed by affordability and supply/demand.
2019, at the cheap end something like $1600-$1800 per square metre. I had a few mates buy places then in the mid to late 5s also. No one's making money at that price. Christchurch gets to be a little bit of a standout, because council barriers got reduced in order to supply enough new housing to replace earthquake losses.
People wont buy new builds if they are too expensive because of land or materials or whatever - ultimately it comes down to how much people can borrow and want to pay. Construction tends to stop when house prices correct or recession.
Maybe we have a net migration overseas for a few years whilst it all corrects ... and that will lessen the requirement for houses anyway (kids and tradies will look for greener pastures and who wants to goto a country in a recession) - so suddenly we will have plenty of houses to go round and new builds can wait for the next boom cycle in 5-10 years or whatever.
From memory Mangere Bridge is a gentrified suburb (many with water views) that people will pay a premium for. That's not something I'd pay a premium for, so what I think of its value is irrelevant.
Looks like the average price for a 3 bedroom home in Auckland is 1.3 million. So half of that is $650k. Even if the land was free, you will struggle creating a compliant 3 bedroom house for much less than 650k.
I don't think the average 3 bedroom house in Auckland will be under 650k by years end.
I do think some properties will experience declines, of varying degrees.
The lower bound valuation doesn't always hold true. France is littered with Chateau's that can be bought for a fraction of their replacement cost. When the crisis hit's the banks will foreclose, they will not lend and no one will care about the replacement valuation. Yes, 50% is extreme, but not implausible.
Yeah, that's what I'm saying, this 50% plus drop you and others are talking about won't be a buying opportunity. You can't be an investor when the market is dead.
I disagree, that's when the smart money are buying.
Ok well you started talking about distressed provincial European property so I figured that's where you thought NZ was heading. The point owning property is nothing but a massive liability.
Smart money could buy in the dip. Or just, hop off the bus and sail off into the sunset.
Not sure that this will occur before xmas my pick is next march onwards, will require a deep global recession..... though i am hearing that there are some serious cashflow issues starting to occur in construction, i think we will see a few big construction firms go before xmas and this will hit a lot of subbies
Yes, there is a big difference in operating at a 3 to 4x median income multiples like Texas, which is operating at a stable margin above the next best economic use of the land if it wasn't used for housing and is a still above replacement cost, and Detriot which at 2.5x median income is below next best economic use of the land and below replacement cost.
NZ housing prices are approx. 50% higher than their true next best economic use price, ie if a developer is paying more than $60 to 100,000 per ha for his raw land (they are paying up to $2 million a ha), then they are paying a monopoly induced price, that could disappear in an economic collapse, and that goes for any homeowner who has bought a house based on those underlying costs, ie most homeowners.
If anyone wants to read it, ie Alan Evans, it is just basic land economics.
The house prices were so overpriced 10 or 12 x average wage earners annual income in Auckland. This downturn will crush prices anyone who purchased in last few years will see deposit gone and be in negative equity already building companies are going insolvent as people have to fix mortgage at much higher rates and with inflation running high a crash is unavoidable.
It's a given. It will take Labour down and I doubt Orr survives it either. I'll hold my nose and vote National, as much as I dislike them we need a change and some more serious economic managers.
"More serious economic managers" LMFAO
Yeah, you remember when we added $50+ billion of Government debt to pay for an Earthquake? Which according to the RBNZ in 2015 had an estimated total rebuild cost of $40b, comprising of $32b for residential/commercial and $7b for infrastructure. By 30/9/2015 insurers had paid out $26b (page 3 and page 5 of the PDF). Wonder what the extra $24b was for?
https://www.rbnz.govt.nz/research-and-publications/reserve-bank-bulleti…
Remember how National underinvested in health infrastructure and operations leading to the quagmire we have today. Their brilliant plan was ... to open the immigration floodgates.
I see here in Canterbury the cost of construction for 180sq 3 bedroom house is 2500 to 3000 per/sq and then there is still chattels and landscaping. 450k for a section and you won't see much change out of a million. What I find odd after I moved here is existing housing is cheaper to buy even if it's only a few years old. The opposite was true around the Waikato.
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