Sales on exactly a third of properties at Barfoot & Thompson's auctions last week

Sales on exactly a third of properties at Barfoot & Thompson's auctions last week

Auction numbers continued to track slowly downwards at Barfoot & Thompson's auction rooms last week.

The agency marketed 69 residential properties for sale by auction in the week from July 15-21, compared to 70 the previous week and 72 the week before that.

Sales were also slightly lower with 23 properties changing hands, giving an overall clearance rate of 33% compared to 37% the previous week and 39% the week before that.

Of the 23 that sold, 14 were sold under the hammer, four were sold in negotiations immediately after the auction and five were sold prior to their auction.

Only one property was withdrawn from sale and four had their auction dates postponed (see chart below).

At the major auctions where at least 10 properties were offered the sales rate ranged from 25% at the North Shore auction to 40% at the Shortland St auction on July 17, where the properties on offer were mostly from central Auckland suburbs such as Epsom, Mission Bay, Mt Eden, Ponsonby and Glendowie.

At the big Manukau auction the sales rate was 27%.

Details of the individual properties offered are available on our Residential Auction Results page.

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Barfoot & Thompson Residential Auction Results 15-21 July 2019
Date Venue Sold Sold Post Sold Prior Not Sold Withdrawn Postponed Total % Sold
15-21 July On-site 1   1 4     6 33%
16 July Manukau 3 1   10   1 15 27%
16 July Shortland St, CBD. 1     4     5 20%
17 July Mortgagee/Court 1           1 100%
17 July Shortland St, CBD. 4 2   6   3 15 40%
17 July Pukekohe   1   2     3 33%
18 July North Shore 1   2 8 1   12 25%
18 July Kerikeri       2     2 0
18 July Shortland St, CBD. 2   2 1     5 80%
19 July Shortland St, CBD. 1     4     5 20%
Total All venues 14 4 5 41 1 4 69 33%

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12
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Here’s something interesting in relation to the very low sales rate, and supposed housing shortage in Auckland. Listen to the first caller on this radio show about the property market. The hosts dismiss what he says, but he’s a real estate agent in West Auckland who says the reports of a housing shortage at the lower end just don’t match the reality on the ground. There is plenty of stock and very few buyers. He calls BS on a shortage.
https://www.newstalkzb.co.nz/on-air/the-weekend-collective/audio/alistai...

11
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Thanks for posting. Alistair Helm seems to have positioned himsslf as some kind of Goldilocks property commentator. Dime a dozen. The talkback hosts seem to be a couple of self-important plonkers with a superficial understanding of an important issue. As none of these "experts" and "opinion leaders" can intelligently or pragmatically address the possibility of a credit- and debt-fueled bubble (and its implications in the short-, medium-, and long-term), this show bas limited value.

Noticed the fallacy that house prices could never correct downwards (like Spian or Ireland) in NZ because of the supply issue. Nothing at all mentioned that the world is awash with credit at historically low interest rates.

10
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What was good to hear though was an honest estate agent even if he had no idea about the reality that it is the the missing 'credit' at the margin that is making his life difficult. I would have expected better from Mr Helm though, but I guess if you've tied yourself to the mast of 'a credit cycle' where things only flatten after a credit bnge then it becomes very difficult to change your position if you still want to sell books to those that worship at the 'always goes up' alter.

Alistair Helm is actively working as a real estate agent. Any of his commentary should be taken in the context of him having a vested interest in a ensuring volume of sales continues.

I tell the truth regardless. So as an agent I do not like the inference you made

You seem to be a bit of an anomoly Mike to be honest... I've sucessfully got about 1 in 20 of the agents I talk to at open homes to even admit to a slowing in the market.

Fair enough

11
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Nice pickup. If you have a wander around places like Hobsonville Point its as obvious as daylight there is no shortage of new builds, there would only seem to be a shortage of people wanting/able to pay north of 600k for a 2 bed new build. I believe this was also the issue with Kiwi build ~ affordability.

Just like there was supposed to be a massive supply shortage in Sydney as well, then prices dropped 15% (more in some suburbs). What the immigration stats fail to pick up is that while low income immigrants are moving in, higher income locals are moving out (to other parts of NZ or off to Australia again). Also immigrants often live several families per house, or share bedrooms in house share arrangements. Add to that the later household formation for younger people (staying at home with their parents for longer). There may be less houses per capita of population, but if half that population cant afford to buy their own place, can't qualify for a mortgage, or don't want to buy their own place, then the supply shortage isnt real.

The difference between underlying housing demand and effective housing demand.

Many property market participants and property market commentators are using underlying housing demand to develop their expectation of future property prices, when in fact they should be using effective housing demand. You can also apply this approach to the supply side in the housing market - underlying housing supply and effective housing supply

A 2009 / 2010 report by the Dept of Building and Housing recognises two types of demand:

1) underlying housing demand
2) effective housing demand

1) Underlying housing demand

‘Underlying demand’ refers to the number of houses needed to accommodate households in the population. Population increase in the age range of 20–40 (which is when people tend to form independent households) leads to smaller household sizes and more single-person households. Further, positive net migration increases underlying demand for housing. A ‘household’ means either one person who usually lives alone, or two or more people who usually live together and share facilities in a private dwelling.

Natural population growth rates, internal migration, housing preferences and household formation rates all tend to change relatively slowly, and therefore changes in underlying demand caused by these factors are reasonably predictable. By contrast, the level of external migration depends on policy rules and incentives, as well as on wider domestic and international economic conditions, and it therefore tends to have a more volatile, less predictable impact on underlying housing demand

2) Effective housing demand

Effective housing demand is the combined effect of both 1) the desire to rent or buy a house, and 2) the financial ability to rent or buy a house. This aspect of demand is what shows up in the housing market statistics for sales, prices and construction. It also largely accounts for the changes in housing and tenure choices over time.

The New Zealand housing market has not only experienced increased underlying demand from population growth and higher net immigration; it has also (until the recent global financial crisis) experienced an increase in effective demand as a result of higher incomes, lower unemployment, cheaper and easier access to credit, and the preference of New Zealanders, for various reasons, to invest in housing over other forms of investment.

The difference between underlying and effective demand is a function of:
• buyer wealth and income
• the cost and availability of finance
• the state of the economy
• individual consumer preferences (for example, location, or between renting and owning)
• the attractiveness of housing as an investment good.

The basis and purpose of the underlying demand calculation is for town planning purposes. The underlying housing shortage has been taken out of context as justification that house prices will continue to rise in Auckland by those with a vested financial interest such as real estate agents, etc

How you can have a housing "shortage" and a fall in property prices at the same time.

Note that this is underlying demand for housing in Auckland. Factors which impact effective demand (on which the market prices of residential dwellings are based) are not accounted for.

Note that for the basis of this calculation for the housing shortage for underlying demand, no adjustment is made for changes in demand due to changes in house prices.

The calculation of underlying demand is used for the purposes of long term town planning, and infrastructure needs (such as sewerage, parks, roads, schools, etc) due to an projected future increased population. It is fixed due to the long term planning and construction of the infrastructure. Underlying demand is not useful for estimating future property market prices, nor does underlying demand change for changing property market prices.

For example, the housing shortage number calculated for underlying demand would remain unchanged in the following 2 extreme situations, (assuming current household incomes, current population, current population growth & the number of residents per dwelling of 3.0).

1) if the current median house price in Auckland was $10,000. In this case there would likely be a huge increase in the number of active property buyers which would increase effective demand (and would be above underlying demand). People who were not owner occupiers would buy at this price. A large number of people who are already owner occupiers would also become active buyers and buy at this price - buy a house for their children, grandchildren, parents, holiday homes for out of towners, etc as they are cheap. People who could afford it from all over New Zealand and abroad (such as Australians and Singaporeans who are exempt from the foreign buying rules, and New Zealanders living overseas), are likely to become active buyers in the market. The underlying demand calculation does not incorporate this.

2) if the current median house price in Auckland was $10,000,000. In this case, there would likely be fewer active property buyers in the market. The number of effective demand would be fewer than that for underlying demand. The underlying demand as calculated above would remain unchanged - after all there is no change to population estimates or the assumption of the number of people living in each house. There would still be a "housing shortage" as calculated by economists using the population numbers, but in reality there would be few buyers active in the market if the median house price in Auckland was $10,000,000. Very few would have the deposit necessary to buy, and very few would meet the bank lending criteria particularly on debt servicing.

This is the reason why the underlying housing shortage is a misleading number (as calculated by economists, etc, and quoted by mainstream media, politicians, property market commentators, etc) as a justification for future house prices to continue rising. It is used as a convenient justification by those in the real estate industry to persuade those to enter the residential real estate market.

Economists in their calculations of the underlying housing shortage, and talking about future property market prices, have failed to incorporate the fact that:
1) as prices rise, effective demand falls
2) as prices fall, effective demand rises.

This is introductory economics and the basics of demand. Underlying demand is unchanged, yet effective demand changes. This is how there can be a housing shortage (due to underlying demand vs underlying supply), yet property prices fall (due to an imbalance between effective supply and effective demand).

So when talking about a housing shortage, there are two numbers to understand for their own specific purposes:

1) Level one supply and demand - this is underlying supply and demand - this is the most commonly referred to and discussed by most property market commentators, media, politicians, etc. This is useful for long term town planning purposes for local councils to determine infrastructure needs.
2) Level two supply and demand - this is effective supply and demand - and this is the key determinant of property market prices - and this is how property markets can go from being a buyers market to a sellers market (and vice versa).

The 150,000 "shortage" referred to in the Kiwibank economist article headline is based on underlying demand and underlying supply - many who do not understand the basis and purpose of the number, misinterpret this number as a shortage of effective supply over effective demand, then use this to argue that property prices will go higher due to the shortage. This is a very common misinterpretation of the 150,000 number by many. There was a recent news article about the higher risk of a property price crash in NZ - many of the comments made on the article stated that a property price crash was not possible due to the widely reported and well known housing shortage in Auckland.

Voiceofreason,

Thank you for sharing that link. Very useful.

The real estate agent Julian who deals in West Auckland properties is seeing effective demand being weak, that has resulted in a buyers market. Very different to underlying demand which calculates the widely reported "housing shortage" in Auckland.

Clearance rates up over the ditch - seems that confidence is based on who's in government

Yeah...that'd be it...

Maybe it's that the current PM has managed to last a few months without being rolled.

you mean a PM who can bullshit to people that there is no HOUSING CRISIS and persuade them to buy into it!! as the current Aussie Housing minister has done...

Sammnz, across the ditch they seem to be doing everything they can to pump up the market again. More first home buyers funding, very low interest rates (will they go to zero?). Quantitative easing will likely be added nest. Will be interesting to see if these things actually work this time, and for how long. It's scraping the bottom of the barrel really.

Australia's economy is at a 27 year low. The AUD gets a paltry 1.04 NZD at the moment, which is usually up over $1.12 even when it's doom and gloom in Australia's resource driven economy. To be blunt, the Liberal National Party campaigned on good economic management, but they've overseen the Australian economy go down the toilet. They're into their 3rd term in government and any time there is a problem they blame Labor. Labor haven't been in office for 7 years.
I saw Ardern blaming the National Party for an issue last week on the news. The response from "Crusher" Collins was along the lines of "after 12 months it's no longer a National Party problem, it's a government problem". Apparently that 12 months stretches to nearly a decade across the ditch.

Comparable week last year. 50% more houses went to Auction.

https://www.interest.co.nz/property/94938/no-sales-were-achieved-manukau...

Not To worry. Nothing is happening to housing maket in NZ so what, if all the indicators and the trend is downward BUT Not to worry as is normal in Winter

all i can say is wow.. 33%.. and people still think the housing market is in great shape..

oh yes, all those believers of mr. key!!!

Perhaps the graphic of these articles could change to 'passed in'. It would be more accurate.

11
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So including pre and post sales = 33% shows that the Akld market is still in the doldrums.

Clearance rates have been around the 30% mark for close on 2 years now but the numbers going to auction are reducing. Just bugger all buyers out there at current prices because

1. FBB
2. Investors in Akld dont get very good rental returns so capital gain are important and there isnt any in a falling market.
3.Locals cant afford the prices for the areas they want to live.
4.A large % of immigrants are low skilled and dont have the $$$ to purchase

Prices still have a long way to slide...

I worry if the agents can pay ther mortgages with these volumes

Imagine if RE agent's mortgagee sales triggered the next crash hahahaha

Truth is housing market is down though has not fallen as badly as would have, if did not have such low interest rate but all signs suggests that that worst is yet to come.

Good time for FHB and genuine investors for Long Term is about to come, provided don't sink now with the fear of losing and buy in the falling market that has jsut started.

Anyone else find Trademe's commentary of the property market misleading? They put out an article today saying 'Winter fails to take the heat out of the property market' which espouses graphs showing the 'property price index'. This is infact just an index of asking prices on Trademe and fails to ignore all lagging indicators (i.e. actual sales data).

https://property.trademe.co.nz/market-insights/property-price-index/june...