Auction numbers at low levels, could go lower over next few weeks

Property

The number of homes offered at the latest auctions was up slightly on the previous week but the sales rate took a dip

20th Jul 19, 9:02am by Greg Ninness

There were only slight movements in auction numbers in the week of 7-13 July, with the number of homes being auctioned and the sales rate both remaining at low levels.

Interest.co.nz monitored 140 auctions over the week from 7-13 July, up from just 127 the previous week.

Of those, sales were achieved on 52, giving a sales clearance rate of 37%, down slightly from a 44% sales rate the week before.

Where selling prices could be matched with a property's council Rating Valuation (RV), 54% of sales were for more than their RV, 38% were for less than their RV and 5% were for the same as their RV.

In the Auckland market, where auction activity is strongest, the sales rate was 39%, down from 46% the previous week, with 44% selling for more than their RV, 48% selling for less and 8% selling for the same as their RV.

As auction numbers remain at very low levels, agencies are continuing to consolidate auction activity, often by reducing regularly scheduled auction events from weekly to fortnightly.

Current new listing data suggests auction numbers may decline further before finding their floor this winter.

Details of all of the properties offered at auctions monitored by interest.co.nz are available on our residential auction results page.

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57 Comments

by oreo | 20th Jul 19, 9:16am 1563570983

Auctions reports are becoming really insignificant

by CN | 20th Jul 19, 2:39pm 1563590383

Auction reports becoming really insignificant has significance

by Zachary Smith | 20th Jul 19, 10:32am 1563575562

I look forward to the auction results. I see quite a number of properties here that have sold for quite a high price and the ratio of above and below RV is quite a good bellwether for the state of the market. I don't want to see rapidly rising prices nor declining prices, just keeping abreast with inflation so that people neither gain nor lose too much.

by Glitzy | 20th Jul 19, 11:12am 1563577954

ZS, we get the same from looking at the results page. If they included a weekly table on overs/under RV that would achieve the same result without the need for the reporting.

by VeryInterested | 20th Jul 19, 11:35am 1563579323

Hi Glitzy..... I get local sales information with CV and previous sale data from a couple of local real estate agents. Just received the June data and it's a shocker for the Eastern Suburbs here in Auckland.

by Dgm | 20th Jul 19, 1:51pm 1563587517

You excited about the market sliding..

by NorthernLights | 23rd Jul 19, 4:41am 1563813675

bell·weth·er. It’s always interesting to note where the flock runs to The herd Humans are no different
/ˈbelˌweT͟Hər/
noun
the leading sheep of a flock, with a bell on its neck.
an indicator or predictor of something.
There is no room for Auckland property to increase in value because the buyers incomes cannot match the payments now & foreign speculators have left for other pastures
Combine this with the fact the Chinese bank holds many Auckland mortgages & you are staring at troubles ahead . As for Sydney they’re only starting to discover the extent of shoddy new apartment construction woes I was so happy to miss out on a modest Emerald Tower apartment

by alittle | 20th Jul 19, 10:30am 1563575409

This has to be the new normal.

Now wil be headline when the sell volumes goes up - say above 50%

by Voiceofreason | 20th Jul 19, 11:01am 1563577283

Yes, in Sydney where auction rates have climbed a little after a long slump (but they were still higher than Auckland in the slump), the headlines herald a new market upswing as imminent, likely temporary.

by Voiceofreason | 20th Jul 19, 11:06am 1563577601

It’s clear that investors have all but stopped buying, for good reason, and of course foreign buyers have disappeared. Interesting what Ray Dalio said this week about the overall investment outlook, a “paradigm shift” coming in the next few years, which certainly concerns NZ too. Forget leveraged NZ property for the next phase. The cutting of rates now, and QE, will have diminishing returns until they don’t work:
“Most people now believe the best ‘risky investments’ will continue to be equity and equity-like investments, such as leveraged private equity, leveraged real estate, and venture capital, and this is especially true when central banks are reflating.

As a result, the world is leveraged long, holding assets that have low real and nominal expected returns that are also providing historically low returns relative to cash returns (because of the enormous amount of money that has been pumped into the hands of investors by central banks and because of other economic forces that are making companies flush with cash).

I think these are unlikely to be good real returning investments and that those that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.”
https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/

by CN | 20th Jul 19, 2:58pm 1563591534

"It’s clear that investors have all but stopped buying, for good reason"

A high profile property investor / property tutor based in Auckland and who owns an investment property portfolio of about 10-13 properties in Auckland mentioned that they were unable to get any additional bank financing to buy more properties, despite their LVR being about 50%. The key constraint now is the bank lending criteria on debt servicing.

by Glitzy | 20th Jul 19, 6:00pm 1563602412

That's a pretty interesting little story. Sounds like the banks are sensibly limiting their exposure to a one dimensional investor.

50% LVR isn't actually quite as big as you'd think. You'd still be cash flow +ve after rates etc but a couple of empty places and that would stress something nasty.

by Dgm | 20th Jul 19, 6:17pm 1563603430

It's been happening for over a year

by CN | 20th Jul 19, 7:10pm 1563606642

Yes, but not widely reported in the mainstream media, nor widely known by the general public. Only those who are in the business of mortgage lending, and those borrowers who need to refinance know about the significantly tighter bank lending constraints.

by Glitzy | 20th Jul 19, 11:01pm 1563620471

That's really interesting. I had no idea. Makes sense now that the top of the property market is seeing such a significant slowdown. Not only no foreign buyers but local buyers are having their lending multiples trimmed.

Any view on whether the refinancing issue (or lack thereof) is forcing sales in the investor space ?

by CN | 21st Jul 19, 10:58pm 1563706719

Don't know. Real estate agents would be best placed to give details on what they're seeing. Perhaps Mikekirk29 has some insight. Given that dgm knows about the tightening bank lending criteria, he might be seeing something.

I have heard that some who are going from IO to P&I due to tightened bank criteria on servicing are refinancing with non bank lenders. That is why there has been a dramatic pickup in the non bank lending growth numbers in percentage terms. Moving to a non bank lender means paying a higher rate of interest. But I think that the borrowers are still paying IO, which would be less than paying P&I at a bank.

There are two key non owner occupier property owners
1) long term buy & hold property investors
2) property traders

I have heard that some property traders who look to buy, renovate and sell are selling - not sure how prevalent this is though. They might be making a small profit or even losses, given that property price gains haven't been as much as they thought when they bought (or property prices have subsequently fallen)

by Averageman | 20th Jul 19, 10:41am 1563576071

Auctions only really serve the agency by creating pressure and call to action. Pressure on buyers in a boom, or pressure sellers in a flat/declining market. In the current conditions without a realistic reserve pretty hard work. Market stats agree.

by Jaf | 20th Jul 19, 11:07am 1563577642

Averageman .True. Auctions serve the agent.A few grand $$$ collected upfront from the owner for auctioneers fees,marketing, admin etc. If the property does not sell, its the owner who is out-of-pocket

by Glitzy | 20th Jul 19, 10:47am 1563576461

If a similar number of stories to those covering auction results were written about the fall off in volumes in the top end or how many apartments are going up, how many have applied to get OIO approval etc it would be a nice balance.

by tothepoint - d… | 20th Jul 19, 11:13am 1563578018

It's hardly rational having high expectations of auctions at mid-winter during a flat market.

Nonetheless, some brave souls still put their properties forward - and a surprising number are striking success......

I think they deserve a pat on the back.

Enjoy the weekend everyone - despite the weather and the colds, coughs and 'flu'.

TTP

by CN | 20th Jul 19, 3:19pm 1563592774

"Nonetheless, some brave souls still put their properties forward"

It is very dependent upon the seller's personal circumstances and priorities. Some examples include:

1) relationship breakup and desire to sell the property
2) estate sale
3) need to downsize
4) need to sell as the sellers have already purchased elsewhere - (I know of retirees who are unable to sell at their desired price and they have committed to buy and move to a retirement village)
5) desire to relocate to another geographical location (in NZ, or to Australia for example) due to job, or be closer to family relatives
6) cashflow strained leveraged property investors

by theglc | 22nd Jul 19, 1:47pm 1563760067

or... better sell now, market could be worse by spring/summer

by Voiceofreason | 20th Jul 19, 1:50pm 1563587434

Both regular and new readers might find this interesting, in relation to NZ property and the current slowing market. Be aware of the risks. Mapped: The Countries With the Highest Housing Bubble Risks. Take a look at where NZ stands.
https://www.visualcapitalist.com/mapped-the-countries-with-the-highest-…

by Dgm | 21st Jul 19, 8:34am 1563654875

We are top of the world, yes we Love our debt and our housing bubble

by Yvil | 20th Jul 19, 2:16pm 1563588968

Actually, if you look at the link properly, debt is the only graph where NZ is at acceptable levels (i.e. in blue) and does not rank near the top.

by Dgm | 20th Jul 19, 2:51pm 1563591069

Haha, for you, charcoal is gold ..

Time to go back to school to Learn geography?

by Yvil | 20th Jul 19, 8:15pm 1563610535

No need to be rude, there are 4 graphs on the link, 3 of which NZ is in the top (i.e. worst) and one where NZ is below the average (not bad), which is the the graph about debt. You're just wrong, it happens, accept it and move on.

by Dgm | 21st Jul 19, 11:17am 1563664676

lol, ignorance is bliss... so you chose to leave 75% of the measures that are in red and chose 25% that is not so bad..

BTW, we're just 24% below Aussie withregards to credit to households... so not that far behind..

get your blinkers off

by Yvil | 21st Jul 19, 12:29pm 1563668971

I'm not the one who chose to talk about the data about debt, you did, see your original post (which you have now changed btw)
Also I'm not ignoring the other 3 data, that's your assumption, I agree they are bad. I was just pointing out that the data you chose to talk about, debt, is actually not that bad

by Dgm | 21st Jul 19, 12:42pm 1563669766

NOT THAT BAD, but bad enough...

by JimmyJames | 20th Jul 19, 3:28pm 1563593288

Yvil, it’s a very light blue so still very high. Nothing to celebrate. Interesting house prices to income is a very dark orange. Indicates we were selling a lot of houses to foreigners.

by Yvil | 20th Jul 19, 8:20pm 1563610804

Very light blue is "below average" so not "still very high". But yes agreed it's nothing to celebrate. I was just making the point that dgm's post was not accurate about NZ debt levels

by JimmyJames | 20th Jul 19, 9:17pm 1563614243

Light blue doesn't mean we are below average, it means we are just below 100% of household debt to GDP which ranks us as 8th in the world. That is well above average.

by theglc | 22nd Jul 19, 2:01pm 1563760873

The price to incomes is even more significant given the highly taxed we are as a nation

by Voiceofreason | 20th Jul 19, 5:09pm 1563599377

The level of denial is incredible. Keep ignoring the obvious, it’s your money.

by Dgm | 20th Jul 19, 5:28pm 1563600496

Unfortunately it's our money.. people like him borrow and then claim bankruptcy.. putting pressure on the rest of us

by Yvil | 20th Jul 19, 8:21pm 1563610894

Correct, it's your money. I have never been bankrupt though, and I never will be

by Yvil | 20th Jul 19, 8:23pm 1563610995

Why is correcting someone's inaccurate post denial? Did I say NZ property is in great shape? No I didn't, I just made the point that dgm's post was not true

by moneyphobe | 20th Jul 19, 7:08pm 1563606487

A few market signals in the results..

$650,000 sold Jul 19
$683,000 sold Oct 16
https://homes.co.nz/address/auckland/massey/5-loughanure-place/zOqpJ

$775,000 sold Jul 19
$1,098,000 sold Feb 17
https://homes.co.nz/address/auckland/point-england/38-tamatea-avenue/aa…

$1,140,000 sold Jul 19
$1,070,000 sold Jul 17
https://homes.co.nz/address/auckland/grey-lynn/102-25-pollen-street/pQA…

$670,000 sold May 19
$685,000 sold May 17
https://homes.co.nz/address/waiheke-island/ostend/35-calais-terrace/YOx…

by Dgm | 20th Jul 19, 7:31pm 1563607865

Deduct agents fees on each of those...

https://www.qv.co.nz/property/17-leafield-crescent-henderson-auckland-0…

Listed for 60k less than purchased price, minus agents fee, minus negotiated price.. at least 120k lost

by Zachary Smith | 20th Jul 19, 7:45pm 1563608723

I think 38 Tamatea Ave has been subdivided so for 775k you only get half the land that 1098k bought.

by Dgm | 21st Jul 19, 8:36am 1563654984

can you confirm thats its been subdivided?? i couldnt see that

by Zachary Smith | 21st Jul 19, 11:35am 1563665732

Here is the Bayleys advert:

https://www.bayleys.co.nz/1800459

You can see on image 2 a drone shot showing new fences and a new house built behind it. In image 15 you see the subdivision plan dated April 2018.

If you go to streetview
and look at the satellite image you will still see the section without the new house at the back.

With such a massive drop in value it is almost safe enough to assume a subdivision has taken place and in this case it clearly has.

by tothepoint - d… | 21st Jul 19, 11:56am 1563667008

Good, intelligent analysis, Zachary.

TTP

by Nzdan | 21st Jul 19, 4:19pm 1563682779

"Intelligent analysis"? What, a Google search and a quick browse of an image gallery?

by Zachary Smith | 21st Jul 19, 6:09pm 1563689388

It looks easy in hindsight but both dgm and moneyphobe missed it. I could immediately sense that something was wrong with those figures.

by Yvil | 22nd Jul 19, 1:28am 1563715688

Spot on ZS

by theglc | 22nd Jul 19, 2:03pm 1563761006

I would agree

by BacktoPerth | 22nd Jul 19, 12:00am 1563710451

by Dgm | 21st Jul 19, 2:04pm 1563674659

Joke right... property prices crashing. I was told London prices would never crash.. just like Auckland..
https://www.oneroof.co.nz/news/36486?ref=nzhhome

by CN | 21st Jul 19, 10:26pm 1563704760

This might be having an impact on effective supply and effective demand in the UK

https://www.moneysupermarket.com/landlord-insurance/buy-to-let-tax-reli…

Imagine if this had been brought in here instead of the ring fencing rules.

by RickStrauss | 22nd Jul 19, 9:08am 1563743295

Despite the average price of a London home being only NZ$845,000, they're still going down... Wow.

by Averageman | 21st Jul 19, 6:45pm 1563691516

As before remain impressed with the bulls blind faith to NZ bubble. Clearly oversea money and immigration has bloated NZ prices. NZ does not set global money policy. Hard to pick what will happen but a global event will take it out of NZ hands. Good to see banks tightening on debt stacking investors. Perhaps debt to equity ratio is coming....

by CN | 22nd Jul 19, 12:58am 1563713902

FYI, the author acknowledges the high debt levels and high house price valuations, and gives reasons why they believe that property prices crashing in NZ is low.

https://i.stuff.co.nz/national/114321627/new-zealands-armourplated-hous…

by theglc | 22nd Jul 19, 2:09pm 1563761373

That is a good article and outlines all the arguments the bulls have although I have to say it is very slanted to a positive outlook.

Some key areas that are missing is how the prices have ballooned (in Auckland mostly) due to foreign money and speculation during the frenzy, the medium prices are now well out of whack with medium household incomes meaning that price growth in Akld is near impossible in the short to medium terms. If there is no growth, there is no speculation, no FOMO and the buyers have all the power which is what we are seeing now.

Sure all those "Armour plating" solutions may come to pass, but if 11% were to lose their jobs you can be sure that prices in auckland would be down 20%, (a lot of places are already down 10%+) meaning that 7% of Akld home owners would be in negative equity. and that can only cause a downward spiral.

It also makes the huge assumption that Chinese QE will hit the mark again without crashing its currency

by Yvil | 22nd Jul 19, 1:32am 1563715929

"Perhaps debt to equity ratio is coming...."
It's been in NZ for a few years, it's called LVR

by theglc | 22nd Jul 19, 1:45pm 1563759953

There are a lot of unseens in the auction results

A mate of mine sold a 3br house in Blockhouse Bay recently. Was really well kept brick & tile with a big backyard, lots of interest and bidders, sold for 12% below 2017 RV.

When even nice places are down over 10% below RV, it is starting to say something...