Lower quartile house prices dropped significantly in parts of Auckland in July leading to ongoing improvements in affordability, latest interest.co.nz Home Loan Affordability Reports show

Lower quartile house prices dropped significantly in parts of Auckland in July leading to ongoing improvements in affordability, latest interest.co.nz Home Loan Affordability Reports show

By Greg Ninness

It became easier for first home buyers to get into their own home in seven regions last month, thanks to falling lower quartile prices and lower mortgage interest rates, Interest.co.nz's latest Home Loan Affordability Reports show.

According to the Real Estate Institute of New Zealand (REINZ), five regions posted significant falls in their lower quartile selling prices in July compared to June. They were Northland, Auckland, Hawke's Bay, Taranaki, Nelson/Marlborough, while Canterbury and Southland posted modest falls.

And first home buyers in all regions would have benefited from the ongoing slide in mortgage interest rates, with the average of the two year fixed rates offered by the major banks dropping from 3.87% in June to 3.81% in July.

The biggest drop in the lower quartile price was in the Hawke's Bay, where it fell back from its record high of $395,000 in June to  $370,000 in July (-6.3%), followed by Auckland where it dropped from $671,000 in June to $650,000 in July (-3.1%).

July was the fourth consecutive month that the lower quartile price has fallen in Auckland, dropping by $30,000 (-4.4%) over that period from its record equalling high of $680,000 in March.

However the price falls were not uniform across the Auckland region.

The biggest fall was in Auckland Central (the suburbs located within the old boundaries of the former Auckland City Council) where the lower quartile price dropped by a staggering $123,000 (-17.4%) from $708,000 in June to $585,000 in July.

That was the first time that the lower quartile price in the Central Auckland suburbs has been below $600,000 since October 2017.

One reason that the lower quartile price could have fallen so sharply in Central Auckland was that there was a higher number of apartments in the sales mix.

According to the REINZ, apartments accounted for 33% of sales in Central Auckland in July, compared to 23% in June, so it’s likely the drop was caused by a combination of a change in the mix of properties being sold and an overall decline in prices at the lower end of the market.

But there were also significant falls in the lower quartile price in west Auckland, where it dropped from $663,000 in June to $650,000 in July (-2%), and in Papakura where it dropped from $580,000 in June to $540,000 in July (-6.9%), while in Franklin it slid from $630,000 in June to $565,000 in July (-10.3%).

In Manukau the lower quartile price was unchanged at $650,000 while lower quartile prices were up compared to June in Rodney, where it increased from $699,500 to $711,000, and on the North Shore where it increased from $795,000 to $799,000.

Looking at the Auckland market as a whole there is no doubt that the combination of lower interest rates and mostly lower prices has been beneficial for prospective first home buyers in the region.

The Home Loan Affordability Reports estimate that the mortgage payments on a lower quartile-priced home in Auckland have come down from $694.69 a week in July 2017 to $616.96 a week in July 2019, a saving of $77.73 a week.

However scraping up the money for a deposit is likely to remain a substantial challenge for most first home buyers in Auckland.

The Home Loan Affordability Reports estimate that if a couple working full time who both earned the median wage for 25-29 year olds in Auckland set aside 25% of their after tax pay every week for four years, which would be no mean feat, they would have saved $76,870 (including interest).

That is only 11.8% of the lower quartile selling price of homes in Auckland in July.

Although banks can provide mortgages to people with less than a 20% deposit, they would likely be paying a premium interest rate for the loan and may also be required to pay for mortgage protection insurance as well.

So although falling interest rates and lower prices will be helping first home buyers in Auckland, getting into their own home still won’t be easy unless they are on higher than average incomes or have access to a decent chunk of cash.

The comment stream on this story is now closed.

Home Loan Affordability Reports are available for each of the following regions and cities (click to view).
Northland Region
Whangarei District
Auckland Region
Rodney District
North Shore District
Waitakere District
Central Auckland District
Manukau District
Papakura District
Franklin District
Waikato Region
Hamilton District
Bay of Plenty Region
Tauranga District
Rotorua District
Hawke's Bay Region
Napier District
Hastings District
Gisborne District
Taranaki Region
New Plymouth District
Manawatu/Whanganui Region
Palmerston North District
Whanganui District
Wellington Region
Masterton District
Kapiti District
Porirua District
Hutt Valley District
Wellington City
Nelson/Marlborough Region
Nelson City
Canterbury Region
Christchurch District
Timaru District
Otago Region
Dunedin District
Queenstown-Lakes District
Southland Region
Invercargill District
All New Zealand

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

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17
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Every day data is presented withh different outcome.

How come, one day the market is stable and the next is falling.

Truth is despit low interest rate market is sliding downwards (Sliding because interest rate are low) and it is an ongoing process for sometime to come and YES - FHB who waited and will buy now will get better option for their deposit since last year and if can still hold for sometime, will get much more for their deposit from here on.

Also now most vendors who are comming to the market are comming with realistic expectaion and are ready to meet the market - So are able to achieve SOLD sign and is because as now, Sellers are more keen keen to sell than the buyer, who wants to buy - Buyers Market.

From the Central Auckland report:

"The median house price was $860,000 in July, down from $990,000 last month."

The median went down $130,000 in a single month?

I don't know why they report month on month data. It's year on year that reveals a trend.

as explained in the article.. houses not selling, just (mostly leaky rotbox) apartments. Probably smarter investors bailing out now before the others realise what's coming.

I expect it to continue.

Apartments were only 33% of total sales, not the only thing being sold. Point taken, though.

There seem to be quite a few folk trying to offload their Sugar Tree apartments now, from what I've seen. Might be that they were bought off the plans with the hope of capital gains.

Definitely lots of Sugartree. But even worse seems to be those Union & Co ones. The dual key units were sold off the plan for $938k. There are several for sale on Trademe for about $700k now.

That's the problem with apartments off the plan. The sales material looks very flash, but the end result often doesn't look nearly as flash. Have seen it a few times.

A friend of mine bought in Sugar Tree and in his words "It's very nice, overall...but I expected the bathroom floor to be flat."

Yes prices in the upper price brackets (Over 1 million) for Auckland are also not selling much. Gone are the heady days of mass foreign buying and good news for resident buyers: Al Jazeera article - The Hunger for Global Real Estate | 101 East https://www.youtube.com/watch?v=oFcsFOKXsFU

"Gone are the heady days of mass foreign buying and good news for resident buyers."

FYI, there are a lot of residential properties which have been purchased over the years by NZ resident buyers who are not owner occupiers. As a result, the home ownership rate in New Zealand has fallen from 74% in 1991 to 63% in 2019. Here are some NZ resident non owner occupier examples that I know of:

1) Owner of 76 residential investment properties - https://www.stuff.co.nz/business/115181374/residential-property-investor...
2) Owner of 31 residential investment properties - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=117...
3) Owner of 11 residential investment properties (and he is aiming for 100 investment properties) - https://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=121...
4) Owner of 12 residential investment properties - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...
5) Owner of 14 residential investment properties - https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...
6) There is a couple who live in the Hawkes Bay that reportedly own 120 investment properties
7) There was another person who was rumoured to own over 300 investment properties.
8) A friend owns about 10 residential investment properties
9) Ashley Church likely owns a number of investment properties

A number of those in the above list are property mentors who have students which also own multiple residential investment properties.

There are commentators on here who also very likely own numerous residential properties.

This is why the HPI is a better indicator.

Wellington City increased by $35k in the past month?

Yeah... sure it did...

Often the mix of sales explains a great deal...... For example, the relative number of houses versus apartments (as Greg Ninness alludes to).

But some here tend/prefer to dismiss/reject such pertinent factors.

TTP

Yes, and with such low amounts of Winter listings for Wellington, it's hard to read much into it.

Though personally it's hard not to be depressed by it, at least looking at Wellington over the past 12 months.

Is it low for a Wellington winter though? I remember it being lower when I was looking. But again, this is why month on month data is misleading.
Helpful data is YoY inventory, YoY number of sales, YoY prices, the rest is surely just click bait for traffic purposes?

I believe there are more listings this Winter yes. But that's based on my own observations, not the data. There were days without listings in previous Winters (since 2014). It'll be interesting to see what Spring brings.

I do feel for you though northman46, it took me nearly 3 years to find a house in Wellington. It's a particularly tricky city to buy in if you are planning to hold long term. Wind, quakes, slips, sun, parking, journey times, schools (if you have kids), neighbours. When prices are rocketing up, it adds extra pressure too.

Often the mix of sales explains a great deal...... For example, the relative number of houses versus apartments (as Greg Ninness alludes to).

Yes, the composition of sales. Furthermore, when drilling down on the sub-sectors of a relatively small urban market (Auckland), you should expect variance in sales data. However, if you look the yoy comparison, 860k looks to be more accurate than 990k. More interestingly, looking at the annual growth rate for Central Auckland over the past 5 years, it is only 1.8% while sales volume is down 18%.

Another interesting number is the lower quartile price in Auckland
July 2016 : $641k
July 2017 : $649k
July 2018 : $654k
July 2019 : $650k
Its been pretty flat for three years

That's before inflation too.

And maintenance costs.

Another interesting number is the lower quartile price in Auckland

Probably high incidence of the "dogbox" here....at higher prices than 3-bedroom houses in Perth.

Pragmatist, good on you for comparing with same months in previous years

I can see that the Real Estate Agents are getting more desperate to sell particularly in Auckland, they're getting more competitive with their sales commission rates. So those that are selling may want to cut their capital gains losses by going with a more cost effective Real Estate Agents. Arizto seem to be leading this price initiative by having a set price fee which in most case works out to about roughly 1% rate for their sales commission, which is far more reasonable than the shocking rates that the others charge. They have a nice fee calculator too so you can see how much you would save. https://www.arizto.co.nz/

I think selling real estate is a career that is best taken on when you are prepared for this kind of reality.

18
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Got to feel for anyone who bought in 2016 particularly if they were a FHB. Underwater for sure and 3 years of paying interest rates that were well above what the market is offering now. Terrible situation to be in.

Hi Tui12

Please note that there are many parts of NZ where prices of lower-quartile/quintile/decile dwellings are currently much higher than they were in 2016 (or even 2018).

There are many FHBs who have made impressive financial gains in the recent past - especially after factoring in the rent they've been able to avoid paying (and also the relatively low interest rates now being advertised).

TTP

17
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There are many FHBs who have made impressive financial gains in the recent past

Really? That's like saying they have their cake (realized the "assumed" market value of their home) while eating it too (still living in the home that they have supposedly gained from financially).

I say hogwash. Any perception of "financial gain" is simply a feel-good state that can easily disappear or not eventuate in reality.

The bubble reached its maximum height (Auckland 2016), then expanded outwards and is clearly still expanding outwards a little in some places.

Guess how the bubble will deflate.... Everywhere will follow Auckland down or stagnate eventually, so whatever paper earnings FBH (including myself) think we have this month are an illusion with a Best Before date.

16
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Sure, but more pertinent are one ones in Aucland who;

-A: if they were forced to sell today, would lose all their equity (I know of a few personally)
-B: if they had waited a year or two, would have got the same place (or therabouts) for cheaper, and would not have lost their equity. As well as having less debt due to being able to save over the intervening period.

I know people, again personally, who are only too aware that they have effectively set themselves back years by buying when they did. A very painful position to be in.

And before you trot out the whole 'they are better off than if they hadn't of bought' line; you are wrong. It is very simple maths to chart a 'here is my financial position having bought in 2016' v 'here is my financial position having bought in 2019'. Option B is miles ahead of option A. And if the market continues to fall, Option C (buying in say 2021), will be even better still.

The painful fact is, people like you encouraged, pressured even, the people I know to buy. And because of that pressure, they have effectively fucked themselves.

14
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And now it's time for him or another spruiker to comment here that real estate is a long term investment and they don't know anyone who regrets buying. Ignoring everything you just said.

Real estate is a long term investment and I don't know anyone who regrets buying!

I don't think the FHB who is living in their own house would worry about the market movements.
For them the fact that they were able to buy a house is the best deal.
They would be more concerned about how to pay off the mortgage as early as possible.

Of course, being able to pay off the mortgage and not getting kicked out onto the street is obviously the number one concern.

But that fact that these people will literally owe the bank money if they awanted/needed to sell to move somewhere else due to changing life circumstancesn, is something I imagine would weigh on someones mind...

Indeed, I wonder how many stay trapped in unhappy relationships simply because to split and sell the house means they are wiped out financially.

(when there are actual significant drops in house values.. which hasn't happened here yet)

Hi Tui12
A very narrow pessimistic view that really doesn't stand up.
Firstly FHB are in for the long term and short term fluctuations are irrelevant; same house - go outside and check. If the past 150 years of market history is an indicator, house prices will increase. Unless you know a hell of a lot more than the Reserve Bank Governor, or leading economists, then this would seem the most likelihood of the market's future.
Secondly, over the past three years 72,000 FHB have purchased their home and are enjoying the security and intrinsic value of doing so. I don't see many mortgagee sales so they are not underwater and meeting their mortgage commitments - and with falling interest rates this is only getting easier. Currently there are about 250 bankruptcies per year - that pales into insignificance compared to the 24,000 FHB each year and of those 250 bankruptcies I suggest the vast majority are due to failed businesses (63% failure rate of small businesses) and those clearing their student debt.
Your comment sounds much like one from someone who doesn't own property and is looking for reasons not to be a FHB. Just remember that landlords don't provide social housing (that is the government's role) so those renting are paying off the landlords mortgage.

Hi Printer8 - Very well said thankyou, is Tui12 a reincarnated RP, RP seems to have disappeared ??

Hi Shoreman and Printer8,

I was thinking the same thing....... Retired-Poppy has mysteriously disappeared - and Tui12 shows some stylistic similarities.

Had been wondering whether R-P might have surrendered or was "stood down".

Or could he be spending his days searching for a "healthy" term deposit rate? (-;

TTP

15
up

REA-TTP, surrender? stood down? In your dreams. Why should I repeat the same truth day after day? As predicted, Auckland house prices are falling. Like yourself, FHB's do foolishly speculate house price rises are imminent. As we debate this fact, many who bought post 2016 on your advice are getting burned.

Welcome back, R-P / Tui12 (or whatever moniker you're currently using).

Am pleased to note that nothing sinister has happened to you.

And you'll be pleased to note that nothing sinister has happened to the housing market in your absence......

In fact, it appears to have strengthened a little. (But, alas, bank term deposit rates have further weakened.)

TTP

Strengthened? I’ve seen quite a few results around Auckland lately in which selling prices have either been around about RV, or well lower. Interesting mix of results happening in the past few months. I would not stay strengthened, at all.

No you don't get it. The auction rate was just above 50% for two weeks in a row. Prices will be doubling any minute.

Firstly FHB are in for the long term and short term fluctuations are irrelevant; same house - go outside and check. If the past 150 years of market history is an indicator, house prices will increase. Unless you know a hell of a lot more than the Reserve Bank Governor, or leading economists, then this would seem the most likelihood of the market's future.

If that is the case, a housing price crash would be irrelevant to the all-knowing serfs of the NZ housing market. And why are NZ central bankers and economists superior? Alan Greenspan admits and recognized he "got it wrong". What if house prices only increase 10% in the next 30 years? That's still an increase, but not a great ROI if the nation's wealth is stored in residential housing.

I don't think anyone can or should make assumptions either way. If there are any FHB out there reading then please do your own calculations and consider the following;
How much will you being paying in mortgage interest over the next few years (there are calculators that work this out for you) add council rates, buildings insurance and rainy day maintenance money to this to work out the true cost of home ownership.

How much rent are you paying?

What is your realistic savings rate? And how much are you earning on that capital? How secure are those savings/investments?

How secure/ recession proof are your job and qualifications? Are your earnings likely to go up? The banks will probs look at your statements... how is your expenditure looking?

Take into account that a lower LTV will secure you a lower interest rate too.

How much does moving house cost? How much does selling cost? If capital gains are going to be MIA for the next wee while and you will need to rely on savings to move up the property ladder, will you be better off staying put and saving for a bit longer so you can buy a home with more longevity for your needs? Are you handy? Can you add value to a home with DIY?

It's pretty likely that global politics are going to effect the NZ economy in the next few years, can you leave yourself a financial buffer for hard times to cover a mortgage?

Good advice. We bought our first home, a 3 BR unit, upgraded to a cross lease house after a few years, with a small gain on sale of the unit, which went into the c-l house. Never worried about movements in prices. Fully concentrated on paying off the mortgage, which we did a few years back. And sitting pretty and sleeping nicely since then.
The rent we are saving since paying off the mortgage is our capital gain, I guess.

Another consideration for first home buyers on dual incomes and no children -
1) when are you planning on having children?
2) is the property you're planning to purchase large enough to accommodate your future family size? or will you need to sell and upgrade to a larger property?

I recall a story of a young couple who bought a one bedroom apartment. Then they had a couple of children, and the property was too small for them all. However due to the fall in property prices, they were effectively in negative equity, and were unable to upgrade to a larger property as they had no equity or insufficient equity to upgrade. So they were forced to rent a place that was big enough for them all, whilst still paying the mortgage on the one bedroom apartment in negative equity.

1) https://youtu.be/J4XrOGuAdWo?t=414
2) follow up https://youtu.be/J4XrOGuAdWo?t=2166
3) follow up - https://youtu.be/J4XrOGuAdWo?t=2507

Also note the mental toll it has taken on the couple.

Note that this documentary was made 9 years after the property prices peaked in 2008 and property prices have still not recovered to their previous peak levels. The couple have owned the property for 11 years and are still in negative equity.

https://tradingeconomics.com/ireland/housing-index

If first home buyer couples with no children choose to buy at current price levels, perhaps consider purchasing a property where extensions can be added to accommodate a larger family. Even in the event of being in negative equity, there is the option of extending the property to accommodate the larger family, and no need to sell and realise the negative equity with a property upgrade as in the example above. A property owner who does extensions can simply hold on until property prices recover.

For these first home buyers, due to that one single decision to purchase a property at over valued prices in 2006, using a large mortgage has put their entire financial future on a different trajectory. In this case, do the non financial reasons for ownership as owner occupier of the apartment (such as peace of mind of not being kicked out by the landlord, rent rises, peace of mind from owning your own home, not paying a landlord to reduce his mortgage) worth the subsequent financial cost of being in negative equity and strain on monthly budgets for at least a decade?

If they had chosen instead to have rented and waited for 2-4 years to buy at more reasonable house valuations, then this family would be in a very different financial situation. They would have likely paid a lower price to purchase a larger sized property, and taken on a smaller mortgage, which would have resulted in smaller mortgage payments & less financial stress on their monthly budget. They would likely be in positive equity (compared to their actual negative equity situation) and have increased their equity due to property price gains.

These are the potential risks for potential first home buyers, buying at market value, in the 2 most overvalued property markets in New Zealand - Auckland & Queenstown.

For potential first home buyers (especially those looking to buy in Auckland and Queenstown) - the Troughers and the Peakers.

Valuation matters.

https://www.irvinehousingblog.com/2008/08/11/timing-does-matter

Given current interest rates, LVR's and minimum equity amounts,

1) some locations are unaffordable for owner occupiers with a 20% deposit - Auckland & Queenstown Lakes
2) some locations are affordable for owner occupiers with a 20% deposit - Whanganui & Invercargill

https://www.interest.co.nz/property/house-price-income-multiples

FYI, here is an example of a property buyer (owner occupier) who:
1) believed that rent is dead money (comment at 3:00),
2) believe that you have to own your own house (comment at 4:10).
3) had a fear of missing out as she believed that property prices would continue rising (4:39),
4) overpaid for their home (when the house price to income valuation for the area was 8-9 times)
5) financed their house purchase using an interest only mortgage with a 100% loan to value ratio

https://www.youtube.com/watch?v=BfcSWLJBIRg

Their mortgage was based on two household incomes. When one person lost their job or had a significant cut in their income, they faced financial stress.

We calculated the results of 3 scenarios - 1) scenario of Mary above, 2) assuming that they had rented the whole time 3) assuming that they had rented until prices were cheap and then bought property. Assuming interest only financing the net worth at the end of 2019 (i.e 12 years after their purchase in 2007) would be the following under each scenario 1) NEGATIVE EQUITY of 54,000 2) 22,464 3) 192,953.

That single financial decision to purchase a house in 2007 at the height of the property price bubble, has likely had a financial and psychological impact on Mary and her family. It will likely also have ramifications for her retirement due to the lost equity value in the house which will ultimately result in a smaller amount of financial assets to support her and her husband for retirement.

"I don't see many mortgagee sales so they are not underwater and meeting their mortgage commitments - and with falling interest rates this is only getting easier"

FYI, current mortgagee sales are a lagging economic indicator, not a predictive indicator of future mortgagee sales.

It is not falling interest rates that will drive future mortgagee sales, it will most likely be an economic recession and a rise in unemployment. Even if interest rates are low, highly leveraged and financially stretched households may be unable to meet P&I mortgage payments if they are unemployed, have significantly reduced household income, and they are unable to find employment for a period of time. Those households where income earners are employed in very cyclical businesses are the most vulnerable.

Some might say that there is currently no economic recession, and that is correct. Yet there are economic indicators that suggest that the risk and probability of an economic recession occurring has increased.

The reason why the banks are dropping their mortgage interest rates so rapidly is because they're trying to prevent mortgagees/ home repossessions because economically it is very bad news for them. Also they know if they flood the market with repossessed property that can cause a reduction in sale prices and that reduction in property values causes "Negative Equity" then prices really start to fall. One of the biggest economic indicators that we should be looking at is what's happening with Australia's property market. Recent documentary: Exposing Australia's housing crisis | 60 Minutes Australia https://www.youtube.com/watch?v=AB6yM9puTY0

Out of date video from more than one year ago doing the rounds. No I didnt watch it again!

"If the past 150 years of market history is an indicator, house prices will increase"

Agree with you. For cash buyers without the need for financing, buying a house for a minimum 20 year holding period, may be a suitable investment. However for owner occupier purchasers who need an 80% LVR mortgage, and have committed a large percentage of their combined household income to service the mortgage, there are blips such as economic recessions which can result in unemployment, and put owner occupiers in a position of being unable to service the mortgage and having to sell in a lower priced market. Owner occupiers need to be able to hold on under all economic conditions. Different financial circumstances of buyers can have different financial results.

"Firstly FHB are in for the long term and short term fluctuations are irrelevant;"

For the most part, in a rising property price market. However in a falling property price market, not if the short term fluctuations put them in negative equity. Milkyone has shared some stories on this above of some instances of first home buyers in the last 2-3 years as well as Tui21 of buyers in the Auckland property market.

"Got to feel for anyone who bought in 2016 particularly if they were a FHB. Underwater for sure and 3 years of paying interest rates that were well above what the market is offering now. Terrible situation to be in."

Based on Tui21's personal experience below, it looks like Tui21 was referring to first home buyers in the Auckland market, not necessarily all first home buyers in NZ.

I reckon the market around us has got tighter in the last 6 weeks or so. Only a few recent listings, combined with some very old (overpriced) stock.

Will be interesting to see the spring listings; how many, when, and how realistic. At least one "new" listing this week is one that was pulled back at the beginning of winter. Don't know that the vendor has got any more realistic over the winter.

Any of you landlords out there are doing the KFC test and how did you go? TM2, TTP?...
https://www.newsweek.com/what-kfc-test-landlords-scour-potential-tenants...

Looking at this reports "Key Driver" figures; Auckland's median house prices still has to bottom out to be affordable to FTB's and resident wage earners. It's shocking to see how much lower Auckland's weekly take home pay is in comparison to Wellington's, and yet Auckland's property prices even in the FTB bracket are so much higher (Currently $100k difference and more). So from what I can see, you'll eventually see Auckland city medium price drop to $700k to $650k. As for the rest of Auckland, well unless there's big salary increases property prices will stagnate to around a similar reduced levels.

Yes, indeed CJ. median of $670k not quite looking so mad (my forecast for 2021 end)

Sounds like a very reasonable assumption that prices will be wound back to decent affordability, comparable on a global level, rather than in the current “severely unaffordable” category.

The trend is clearly down and starting to spread from Auckland, but these are not what I’d call bargains yet. I’d say much further to go. Interesting to see more places in Auckland under $600k. I expect there to be many under $500k again, eventually, especially with all the apartments being built now (probably too many).

Big question is what's going to happen to all those multi million dollar homes in the wealthy parts of Auckland?? Wasn't that long ago you could buy a good 3 bed home in Auckland's St Heliers for $650k. If prices don't drop in those areas to fit in with local wages, then we know that there's a significant amount of dodgy buying going on via the backdoor probably through trust fund companies.

I think the suburbs gentrified in the past few decades (Herne Bay, Ponsonby etc) will drop back by a certain percentage but will hold reasonably high value over the long term. Still, -15-25% of millions is a lot of money, especially if you’re deep in debt to live there.

At the moment, my read is that this part of the market is frozen. Sellers want 2017 prices. Buyers want to pay less. But most of the sellers seem not to have to sell, and so they don't.

Umm... But most of these sellers are in the older age bracket and are being pressured by their kids to sell up and release their equity so they can afford a home. Plus I have noticed that the property listings in areas such as Remuera are starting to pile up now (According to TradeMe). Things are going to get interesting in the Spring/Summer time.

I agree, they may well do. Just doesn't seem to have come to pass yet, in my observations.

It will take a while given the odd situation Auckland finds its self in, trying to maintain unrealistic prices massively pushed up by foreign buyers. Two years is the usual stagnation time frame before prices have to come back down to reality if they want to sell. We're already at least a year down that track.

The CEO of ANZ, Mr Elliott said the three main causes of families running into issues repaying loans was
1) a loss of a job, (an economic recession and unemployment of a household income earner could put household finances under pressure)
2) an illness or
3) a family break-up.

In addition, for older owners, some motivations to sell are:
1) illness - and hence need to move into care facilities
2) downsizing - e.g. from a larger house to a 2 BDRM low maintenance unit
3) relocation - move closer to family members (such as children) or into a retirement village
4) expected significant and costly repairs in the near future which may be unaffordable (e.g roof repair, retaining wall repair, etc)
5) death - estate beneficiaries wish to receive the cash, and avoid the ownership costs such as mortgage payments, rates, insurance, repairs and maintenance, etc

It's a mixed bag at the moment. Some are selling slightly above RV, some a million or more below RV. Like the one just around the corner from our place, RV $3.9 million, sold for $2.7 million.

Greg, what are the pre tax incomes Interest use for the 25-29 age group. ( RBNZ are using gross numbers in recent data )

A few questions and comments:

1. It is assumed that FHB in Auckland are buying more as a result of lower prices and lower mortgage rates.
In fact, sales in the relevant bracket have fallen (600-750k) in last 12m.

2. It is stated that apartment sales went from 23% to 33% of sales in Central Auckland. in July compared to June. And that prices have fallen $123,000 there on lower quartile. Is it possible apartments are being offloaded cheap for a reason? Who to?

3. Apparently (see Stuff today) banks are likely to withdraw special rates for those with 20% equity, if equity disappears due to falling prices. That sound like a damned if you do situation? As in fixed rates will rise as prices fall and equity with them? ie banks will increase risk premier as THEIR equity falls. That will offset, at least partially, the improvement to affordability and also increase costs to those loaded up with debt at 5 times or. more income.

4. We do not know form stats we are provided with by the relevant authorities, how much mortgage debt people aged 25-35 in Auckland are getting into. Because the RBNZ figures do not give breakdown for Auckland (brilliant - they should work for Stats NZ.

I would say around 600-750k would be the average mortgage for a FHB in that bracket without bank of Mum and dad handouts. So you need a top 10% income in the first place.

OMG I hope you're wrong. That's a staggering amount of debt at that age (along with the student loan).

it sounds about right :(

Yes agreed, remember that house prices in Auckland massively increased in just 3 years (2014 to 2017) by an average of 45%, especially in the outer regions. Now that the gold rush is over prices will return to wage earner levels and prices will deflate significantly.

Sorry to rain on people's parade again but:

Central Auckland apartment sales 2016, May - July were 670.
In 2019, for same period were 298. In 2018 were 403.

So, FHB clearly chomping at the bit in Central Auckland then....
And there a lot more apartments now?
So, that will be reason they are selling them cheaper because they are not selling enough and need to offload.
ie: over-supply, a common reason why prices are reduced.
Expect a lot more of this when people have to sell.

Are you really sorry?

Off-loading apartments cheap because cannot sell enough:

Jan-July 2018 v 2019, Auckland, apartments sold at $600-750k: 401 v 256: down 36%.
$750-900k: 256 v 176: down 31%

You can lower interest rates all you like: diminishing returns. People don't like look of things and are more cautious. Buyer psychology trumps finance all day and all night.

Buyer psychology trumps finance all day and all night.

I think we're kindred spirits, even though we're kind of a minority. However, it is part of what I do for a living.

Well, the market seems to be solving the Auckland affordable housing problem.

Once again Christchurch market remains as steady as ever!

Roperty investors that are long term investors, don’t tend to worry too much about prices, and generally don’t mind prices that are not rising as they are able to achieve better yields if prices aren’t rising.
When you can get yields of over 6% and you are paying 3.69%, then the investors are doing ok!
Buyers in Auckland should not be put off buying because of things that many are saying on Interest.co, as to be fair, most of the doom and gloomers have a very poor record with their predictions.
It is always a good time to buy providing you are buying right!

mikekirk29 didn't think so. But TM2, you need to nudge that needle a little, it seems to stuck on the the same scratchy track on the record of yours!

Of course it is Chairman!
Successful property investors always follow a tried and true method of investing, and now is a fantastic time to be investing.
This site is designed to assist people make financial decisions and there are far too many contributors on here that really have not been successful in investing.
They have been harping on for at least 10 years about the property market dropping and anyone who has read their rankings are so far down the gurgler it isn’t funny!

"Successful property investors always follow a tried and true method of investing, and now is a fantastic time to be investing"... I heard that line before... let me think.. That's it, it was from Richmastery booklet, Phil Jones famous quote!

Anyhow, do you have a 2nd hand car I could buy from you?

Chairman, never followed Richmastery or any of those paid seminars.
The Man knows the market, knows what great buying is and yields with upside.
Tried and true beyond doubt

Funny how The Boy always has to come on and defend his supposed position. Those who protest the most are generally the most vulnerable.

I find it odd The Man refers to himself in the third person. Is he actually royal ??

I like it though, reminds me of the movie Get Shorty. "Harry Zimm tells you the way it is" just before Ray Bones comes in from Florida and throws him around his office.

Seriously though 'The Man'. Specialist in investments in earthquake zones. Love it.

It's a great investment, the property is already f**ked anyway. That's why the Christchurch market is so cheap, and going backwards.

One major investment decision can and is: do not invest. Ie timing is key.
I know a property investor of 30 years standing and he is not buying or selling in current market.

FHB - Debt Problem in NZherald : First Home Buyers Up till Their Nostrils In Debt.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=122...

Near future looks bad.

"Home loan affordability is a measure of the proportion of take-home pay that is needed to make the mortgage payment for a typical household. If that is less than 40%, then a mortgage is considered ‘affordable’."

Sure, and if I can run 100 m I can be considered Usain Bolt.

It is disappointing to compare figures from different months, to have true meaning, any month's figure needs to be compared to the same month a year ago or two or three years ago

NZDan, you are a classic!
Christchurch properties are better built than Auckland property due to the quakes and new requirements.
Prices are not dropping either as you state.
Steady as she goes, and as I say the most stable market in the country and price growth guaranteed as Christcurch expands

Steady as she goes at best and being eaten each year by inflation. You are better off with bank deposits. Says it all about those who invest there.

pop of Christchurch is lower than in 2011

On one minute "The Man" is saying chch properties are better built than Auckland properties, then in the next breath he's talking about "as is where is" properties..

Who are you kidding mister journalist? Or are you playing the banker's fiddle?

AKL property FHB perspective. The amount of interest paid 2016 - 2019 would be far above the amount of rent for the same property on a 20% deposit. You pay next to no principal back for a number of years on a table mortgage (I know I’ve got one) so no they would not have been paying down any debt at all. Its preposterous to suggest someone’s been better off buying during this period when in the situation above and are in addition under the valuation they bought. It’s very simple, anyone who held off now has a bigger deposit saved, properties being offered well below 2016 values, less competing buyers including foreign buyers of course and mortgages offered at lower rates.

At 20% deposit for a FHB home you were probably close to breaking even.

Say $600k for a FHB home in 2016, 20% deposit means $480k mortgage @ 4.4%.
Interest on that was $406/week. Add rates and maintenance and call it about $480 a week in non-equity building outgoings. That was a bit below average 3 bdrm rent ($510) in Auckland at the time. (https://www.barfoot.co.nz/market-reports/2016/march/suburb-report). Of course a soon to be FHB couple with no kids wouldn't have needed an average 3 bedroom home, they would be paying a bit less.
So essentially you are comparing the leveraged capital gains on the property with the increase in that $120k invested elsewhere.
But since mid 2016 there has been almost no capital gains on FHB type properties, as the numbers I posted above show. So if you left that $120k in a growth kiwisaver earning an average of 7% after tax for that period your $120k would have grown to $147K (+$27K).
Your capital gains were more like $10-15k.
Principal payments also would have been invested and received compounding interest, so a win for the non-buyer there too

You are right, you definitely were better off not to buy with 20% deposit. I suspected at 20% deposit it would have been fairly even, and certainly if we'd looked at the numbers in 2015 or earlier it was a no brainer, buying would have been the better choice, but the flat market from 2016 and the higher interest rates back then gave renting the advantage (if you didn't piss the extra money away on crap)

I've had sympathy for home buyers, the ones who aspire to form a houshold and a family for years. I felt I very nearly "missed the boat" myself and that was 20 years ago.
But the whole process since then has been crap and, imop, highly damaging economically.
The only winners were Banks and Speculators. The process has been paid for by those who have formed new households under the adverse conditions of excessive price to income ratios. Who are the ones establishing the foundations for the future of New Zealand? Not the banks, the speculators or the foreign capital fleeing despotic regimes.