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The number of properties being auctioned increased strongly over March but the number of properties sold at auction rose only slightly

The number of properties being auctioned increased strongly over March but the number of properties sold at auction rose only slightly

There were some interesting trends at the real estate auctions in March, with the number of properties being auctioned increasing as the month progressed, while the overall sales rates steadily declined.

In the first week of March (February 27 to March 5) interest.co.nz monitored 316 residential property auctions, with sales being achieved on 213 of them, giving an overall sales rate of 71%.

The number of properties being auctioned rose significantly in the middle of March and remained above 400 a week for the rest of the month.

However while there was a big increase in the number of properties being auctioned, the number being sold at auction rose more slowly, resulting in the sales rate declining steadily from the second week of March onwards.

In the last week of March (March 27 to April 2) interest.co.nz monitored 413 properties that were auctioned, up from 316 at the beginning of the month.

But only 240 of those properties were sold at auction, only slightly up from the 223 sales achieved in the first week of the month.

As a result, the overall sales rate at all of the auctions monitored by interest.co.nz declined from 71% at the start of March to 58% at the end of the month.

That trend is very clear in the week-by-week breakdown in the chart below.

Details of all of the individual properties offered at the auctions monitored by interest.co.nz and the results achieved, are available on our Residential Auction Results page.

Residential Property Auctions 
Monitored by interest.co.nz in March 2021
  Week  Total auctions monitored Number sold % Sold
  27 Feb-5 March 316 223 71%
  6-12 March 302 219 73%
  13-19 March 412 263 64%
  20-26 March 411 255 62%
  27 March-2 April 413 240 58%
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58 Comments

The market is finally cooling a little but then it was predictable, you cannot have the sort of activity of the last couple of months carrying on for long its been totally nuts. Tauranga still full of SOLD signs and one I passed with Auction bought forward. New builds still going up in volume down here in Ohauiti and the market still looks strong to me.

God's waiting room.

"The number of properties being auctioned increased strongly over March but the number of properties sold at auction rose only slightly'

This headline is misleading though can spin it that number of properties sold rose only slightly but should be that percentage of property sold at auction declines steadily.

Still phenomenal prices being achieved and plenty of competition. The biggest tax change in a generation having a pretty muted impact.

11
up

You are correct still high prices being paid and many are still bought by investors using interest only loan. Have monitored 13 properties of which 9 was bought by investors, of which 7 investors financed it with interest only loan (and it is this 7 properties that went much above expectation) so can say that approx 46% properties were bought by interest only loan but reality is that overall percentage of investors opting for interest only was about 78% and if broke down further full 100% interest only loan was used by speculators.

So data can be used to suit purpose by manipulating.

To control, should have stopped interest only loan but may be for that reason itself has not be stopped by government and RBNZ as intent in action is missing from both.

Yeah can pick the headline to suit one's narrative :

- Interest Only Loan opted by only *46%
- 78% Investor opted for interest only loan
- 100% Interest Only Loan applied was by Investors.

*Though even 46% is still too high

Most for vested biased reason will choose first option and even that only when forced as 46% by itself is very high so will be silent most of the time.

So agree that government and RBNZ being fully aware that controlling Interest only loan may actually work or is the best option of lot, will try to delay if cannot avoid as are happy with the housing ponzi.

How can it be a Ponzi scheme if rental returns cover the cost of the mortgage? Such schemes pay people from the capital raised as if it is earnings but properties have bona fide earnings.

For example a recent sale from the auction page:

2/365 Great South Road, Ellerslie

Sold for 760k. Rent would be 26k. Gross return would be 3.42%

Compare that to a term deposit with a much lower interest rate and a deposit sum that declines in value due to inflation whereas the property keeps up with inflation. It doesn't really fit the definition of a Ponzi scheme.

10
up

Ahh... the illusion of zero risk.

Contrary to boomer folklore, asset prices can, and do, go down.

All investments have risk. Prices may well go down in the short term although after ten or twenty years it's pretty safe to assume the property will have at least kept up with inflation.

It's assuming that the supply and demand imbalance will never be resolved so there will always be a supply of people prepared to pay 26K a year to live in that dump.

Bitcoin doesn't have risk. Its been profitable at the time of writing for 99.9% of purchases. And the 21 week moving average only really goes up.

No it isn't safe to assume that. Everyone agrees house prices have become way too high. Why should we assume that in 20 years, they will become way too high again?

Because of scarcity combined with rising incomes. There is purchasing pressure to buy property more conveniently located causing an inward pressure of buyers towards the central city. The competition to buy more conveniently located property causes prices to rise in line with affordability. This process can only be averted in the long term by either the cessation of rising wages, the cessation of pressure to buy more centrally than peripherally, or a major shift to apartments. Large increases in peripheral supply reduce the pressure on prices but do not eliminate it.
Further, you can ameliorate the 'high' prices with rising incomes, so you can have both higher prices in the future and housing can be more affordable.

And net return?

Assuming a 20% deposit don’t forget the 600k of principal that needs repayment... that’s another 20k a year on top of the 18k of interest.then you still have rates, r&m..... oh and don’t forget the new income tax on the rent

My best guess is it would be losing 20k plus a year on a cash basis if interest only loans get scrapped...hard to ratchet up the rents by 400 a week lol

Here’s are video that explains and the numbers have only got worse with recent changes. https://www.facebook.com/thepropertyaccountant/videos/389506505567071/

That’s why some are calling it a ponzi

It's utter nonsense to refer to principal repayments as a loss.
Anyway what if you paid cash for the property?

Sure repaying the principal is a form saving... I said losing on a cash basis!

But Zachary.... where does the 20k come to repay the capital each year?

Oh I know... the house goes up in value ,you refinance... yada yada ya!

The reason people get sucked into ponzis is because the rate of return is always better....and greed takes over and they can’t make sensible decisions and see it for what it is... a big f’in con job!

Fundamentally all investments should be viewed as if you bought them outright, that you had the capital to purchase them. The cost of borrowing money is something else all together. There are people who can buy properties outright and the yield is calculated as if you did.

What underpins the value of an investment is the return on that investment. It's immaterial how you obtain the money to purchase the investment. Sure, if the returns are good it would be tempting to borrow money to get into the game. Property is so good that people happily take this extra risk.

Agree but high leverage people who are unable to finance by self should have something to worry about but not all investors but most speculators.

If you have the cash you get to play at the main table which is commercial.

Buy a childcare... or a small industrial unit...or invest with PFI etc.

You will get a much higher yield and the tenant pays all outgoings. Six years lease are the norm... .

but you have to look after yourself.... you can’t get a commercial tenant from Winz.... no cushy tenancy tribunal to sort out your scraps for a $20 fee... off to court for nothing short of $75k and be prepared to wait for tenants....

But you actually get real returns... residential is for people with little funds who like to gamble... yeah the wheel has been stopping on black alot.....but could most afford to have the wheel land on red for the next three years

Dp

This numbers could be a matter of chance and not a trend but will like to see the total breakup of finance between interest only loan and loan with principal amount along with break up of interest only loan, what percentage opted by FHB and Investors as that will reflect, if interest only is actually the prime culprit helping speculators.

Stuart
"Have monitored 13 properties of which 9 was bought by investors, of which 7 investors financed it with interest only loan'"
What is the source of your information on seven investors financed with interest only?
Information I would have thought generally privy only to the seven buyers, and their banks and lawyers.

Printer8,I was about to make the very same comment. Stuart clearly has information that is beyond the reach of most .

You are correct but can only say that this data is not from auction room and for privacy reason only have this information.

Will be interesting to see the further breakdown of interest only loan between home owners and investors overall in NZ and just in Auckland as above could be just random data and also number too small to give a bigger picture but may be does reflect a trend.

If can also know the percentage of interest only loan in last few years, growing or declining will shed a light - ignoring people who switched over to interest only last year under waiver as was for different reason.

If anyone is having a look at the website I’d suggest having a look at the term deposit balances at banks.... dropping at a rate of 3$b a month... from 171$b to 143$b over the last year

At this rate of losing 40$b a year won’t the banks be in strife in 18 months time... if not sooner...

https://www.rbnz.govt.nz/statistics/s40-banks-liabilities-deposits-by-se...

My TD matures on Wed and I will be saying goodbye to my bank. I have veen looking at some investment properties to purchase (cash), but won't attend another auction. They are a total waste of time - seller bids, etc. Oh for the days when a property had a sale price advertised.

Auctions are the way to go actually, cuts out all the BS. You simply set the price your prepared to pay or you walk away. If you love the place you simply smoke all the other buyers. The issue would be if your buying it for a rental, your totally devoid of any love for the property because your not living in it, its a pure cold and heartless business decision.

Thanks. As per this existing house owner ( refinancing) plus FHB is appox 62.5% and investors are appox 37.5%, which also is high but will like to know how many FHB are opting for interest only loan as they are competing with investors and not home owners refinancing.

People buying in current housing are investors and FHB - so what is the percentage between them excluding existing home owner as that could cover up the real picture or may be the data is in above link and am missing.

Also will like to see the percentage in Auckland between FHB and investors competing to buy in current market.

Stuart
I still find it very strange that you have this information.
These are presumably all independent buyers in which case they are more than likely to have a range of different banks and lawyers - otherwise it isn't a reasonable sample to make what was a generalised assertion.
In what role are you privy to such information? (Its not a breach of privacy to say.)

This information though I see no reason to be otherwise but as have not seen actual documents could not be verified personally by me but I take it on face value.

Also my interest is in overall data between people competing with each other in current market so will like to know the percentage of investor ( which can be seen) compare with FHB ( excluding existing house owners).

Stuart
Pretty vague and can't see how you would have that information from any source on auctions you were monitoring.
I suspect that your original post and assertion was a porkie.
I welcome an explanation to the contrary though.

I did.

Will know the fact when data for percentage of interest only loan opted by investors ( which is known) is compared with FHB - who are competing in auction room to buy ( excluding exiting home buyers as they are not the one fighting for toilet papers in the auction room).

Data including existing home owner and FHB category may not reflect the true picture and may be, may be is used to cover the actual facts.

Sorry Stuart. :(
You haven't convinced me one iota at all.
You referred to nine specific auctions that you were monitoring and said that seven of these were by investors specifically buying using interest only loans. No one knows that.
You haven't been able to support your assertion, and "I did" is a nothing, so so sorry son, but "bollocks". :)

A developer of 13 terraced boxes, flogging them all at once, would know that info

Agree, monitor may was not the right word but is true as no reason for me to believe otherwise.

Even if it is a pokie, for argunent sake, provide otherwise.

Still maintain that need actual data particulalry in Auckland region of interest only loan between Investors and FHB only (excluding existing home owners refinancing) as the competitiin in auction room is between them.

If no data distinguishing between actual fhb and existing owner is a cover up and not reflecting true picture.

Stuart
I see that your 9.08 post has been edited (changed) from that originally.

Hi Stuart, I have a feeling you are just making this up. It is impossible to know what was price expectation if you are not RA or owner. It is impossible to find who is FHB or investor unless you are banker or lawyer or accountant (confidential info) and for IO loans vs. PI loans info you would need to be banker or accountant (confidential info). Unless you are banker/brooker, accountant/lawyer and RA agent/recent seller of 13 properties in one person, which seems very unlikely, there is zero chance you could obtain this information.

I think is possible as you too know if you know a finance broker, I have a family friend who is a finance broker who gives running commentary most time

It seems fairly normal that if the number of properties offered for sale rose then the percentage of sales may drop.
The tax changes don't appear to have really impacted things much at all although who can really know. Some vendors may accept a little less under the circumstances.

"The tax changes don't appear to have really impacted things much at all "

Those tax changes announced on the 23/3/2021.?.....cant imagine why.

Today's date is 10/04/21. Quite a number of auctions have taken place since the announcement.

2 weeks ..can we stretch it to a month..and monitor the trendline? Or is it business as usual, move along - move along!

This weeks auctions by Barfoots appear to be around the 53% mark. Things looked to be turning yesterday when 13 of the first 17 lots at the central rooms all sold but then only 6 of the next 18 lots sold resulting in a sales rate of 19 out of 35 or 54% sold. whilst there have been some great sales - most appear to be going for less than 200K over their RV so it does feel like momentum is leaving the market. Even at the top end ie the $3M plus houses - over half of these were passed in this week.

It has indeed, talking to a few agents all confirmed there's been much less interest in open homes since the announcement.

Check this out :

https://www.oneroof.co.nz/news/five-bidders-drive-price-of-coromandel-ba...

https://i.stuff.co.nz/life-style/homed/real-estate/124792582/thamescorom...

I think Jacinda Arden and Mr Orr has decided / pact among themselves to take NZ median house price to 1 million.

Whoa - yeah, there is serious dosh out there looking for a "home".

What really amazes me is how optimistic humans are when they buy beach front:
https://www.carbonbrief.org/guest-post-how-close-is-the-west-antarctic-i...
"The West Antarctic ice sheet (WAIS) is a relatively small part, containing an amount of ice equivalent to 3.3m of sea level rise. Yet, most of it sits in a precarious position and is considered “theoretically unstable”.

"The latest research says that the threshold for irreversible loss of the WAIS [West Antarctic Ice Shelf] likely lies between 1.5C and 2C of global average warming above pre-industrial levels. With warming already at around 1.1C and the Paris Agreement aiming to limit warming to 1.5C or “well-below 2C”, the margins for avoiding this threshold are fine indeed."

I'm sure all of this is just greenie scare mongering. Some of the returns from the global COVID recovery now apparently underway, or some more stimulus, can be used to fix the ice.

How are we going to fix the ice ? break bits off and put it in our drinks ? You need to be worried about more than just beach front with those possible rises.

Daily cherry-picking from our friends of the landlords club.

I don't have the figures handy, but I wonder how that decline in clearance rates compares to previous years, during these months when we are heading into the real estate doldrums of Autumn/Winter.

Broader canvas required.
I look at NZ excl Auckland, sales.
Look at Oct-Dec last year v 2019: up 23%
Then look at Dec-Feb: 12% up
Then look at Jan and Feb only: 0.0034% up

People tend to leave rest of NZ out of analysis but this above shows that price rises have removed the wind form housing sale. Looking at auctions all time puts too much focus on investor and NSC sales in particular

So basically a slow down to catch a breath over winter and then who knows where it will go from there. Prices pretty flat for a while now before the mania resumes nearer Christmas ?

Still Jacinda's knights Robertson and Orr thinking and waiting......

https://i.stuff.co.nz/business/opinion-analysis/124785651/parents-are-si...

March is a different story to what's going on since the Government's announcement.

Personal experience has been three out of three auctions I was following have been passed in so the market is definitely cooling down. The above article doesn't look that relevant now.

Just got a notification from TradeMe about a fourth one moving to asking price.

Anecdotally, I live in Masterton. When I was searching for our first home in 2017, there was around 10 - 15 properties for sale on Trademe (By my recollection it was likely sub 10). This was filtered by house, apartment, townhouse and unit. As of today, we're at 73 results.

Rentals: At the time we bought there were 3 rental properties advertised. Today there are 11.

I only watch Tauranga and it appears to have bounced off the bottom and is slowly creeping up again with 511 listings today. Still half of what it was a year or so ago when I started tracking it.

I'd be a motivated vendor given the circumstances so not surprised there's a lot of pent up offer who was probably waiting for the right time to sell.