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The number of properties being sold at auction exceeds the number being passed in by the barest of margins

The number of properties being sold at auction exceeds the number being passed in by the barest of margins

The sales rate at residential property auctions is now barely holding its head above water, with the number of properties being sold exceeding the number being passed in by the barest of margins.

At the residential auctions monitored by interest.co.nz a total of 369 properties were offered for sale in the week of April 10-16. That's up from 307 the previous week, but down from the numbers offered in the three weeks prior to to that, when more than 400 properties were up for grabs weekly.

However the overall sales rate continues to drift lower, with sales achieved on 189 properties at the auctions monitored by interest.co.nz in the week from April 10-16.

That gave an overall sales rate of 51%, which meant almost as many properties were passed in as were sold.

It was the fifth consecutive week the sales rate has declined since it hit 73% in the week of March 6-12.

Auction activity usually starts to drop off a bit at this time of year with March usually being the busiest month of the year for real estate sales.

However anecdotal evidence from agents suggests some of the froth has come off of the market over the last few weeks, possibly as a result of changes to the tax treatment of residential investment property proposed by the Government.

While there is still solid interest from buyers, many do not feel under the same pressure to commit to a sale that they may have felt at the beginning of the year and are adopting a wait and see approach for the time being.

Agents are also suggesting some vendors' price expectations have become unrealistic and that is leading to some hard post-auction negotiations when properties are passed in.

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

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56 Comments

11
up

Winter is coming..

21
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The question is, can this, let’s say, fall off in activity be already attributed to the recent government measures, extension of bright line and the removal of tax rebates on interest. If the government elects to think so, then the second question is, why then did they not act much earlier in this manner.

18
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Question is, do they actually want to stop the momentum of rising house price and here are not talking about fall but just stopping the rising house price, which PM has already declared that does not want and will not allow house price to fall under her regime ( even if it rises by 35% to 60% in a year)

Definitely Jacinda Arden government and Mr Orr could not be so blind that were not able to see what is happening in the housing market, when the only conversation in NZ was housing and data released suggested that house price was rising in double digit on a monthly basis.

If Jacinda Arden has to experience each crisis personally before taking action ( like she mentioned that realised the housing craziness only after she witnessed a house sold near her house) - God save NZ.

Also, if they were hoping for Mr Orr to take action and not take the responsibility were living in fools paradise as even Mr Orr has made it clear that he support rising house price to support economy besides it is not his job to solve housing crisis.

Think : Why did government announced their housing policy just before April / Winter and also why is RBNZ to announce action on interest only loan and DTI after April.

April data will suit their purpose. Government can take credit of their housing policy and RBNZ can use it to deflect taking action.

22
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Stuart, the thing that really baffles me is the hesitation on IO loans. Weather or not house prices rise and keep rising or if house prices fall to reasonable levels Removal if IO is a no brainer. No one should be taking on debt that they just cannot pay. Anyone especially in property if you are not adding to housing stock (ie building and need relief while you get consents and get building) why would they need an interest only loan? Now say you are an “investor” is it called investing if you don’t want to pay any principal. It’s just pure speculation.

I am dumbfounded that we are still talking in the lines of it’s ok that people can borrow without paying any principal. I just cannot get my head around this. If you cannot pay you cannot get it.

12
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Add to that, if it is a business buying and selling property as its main function, then why is not paying bank interest at the going commercial or business rate, rather than being accorded the same rate as a mortgage for a household?

There can be many reasons for taking out an IO loan. It might be because the purchaser has another house to sell but doesnt want to include that as a condition in their offer. It could be part of a debt management strategy. Another reason might be if the property is being renovated and not producing an income for a period. Many, if not most businesses carry some debt and requiring the payment of principal involves tying up capital that could be more usefully employed elsewhere. Banks now ask (require) a borrower to give reasons for seeking IO loans - they won't be lending anything (IO or reducing) if the borrower can't pay. And all loans have due dates, so it is facile to suggest the borrower won't be repaying the principal. Investors also pay a higher rate of interest, which they soon won't be able to claim as a deduction in the same way as any other business (and yes, residential investment property is a business).

Some of the reasons above have been why I have taken out IO loans. In my portfolio it's provided certainty for budgeting purposes while I've focused on paying off the most expensive debt (e.g overdraft). When the IO period comes to an end I decide whether to refinance the full amount using another IO loan or pay down some debt. I may choose to pay some debt then depending on whether my business plan has any other significant outlays coming up, such as a refurb, a new roof, a new car, etc. A good business plan will budget for capital requirements just as it does for operating purposes (rent income and running costs).

Very few members in the Government understand this because they've not run a business before. That certainly applies to Grant and Cindy.

11
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Investors refinancing IO loans at the end of the IO period (to another IO loan from a different lender) so they never need pay a dollar towards the principal is extremely common and makes a mockery of the RBNZ

WM, investors have been known to move on from one bank to another to get IO when their IO term expires. While investors pay IO and get rent (accomodation subsidy funded by tax payers) that exceeds interest payments (specifically when the interest rates are this low). Use the excess to pay down their debts, increase their equity and go on to acquire more properties on IO and keep looping this cycle over and over again, the average home buyer just cannot compete. It’s not called business savvy, it’s more being a parasite and not paying for the property but owning it when you cannot afford payments. If you can then pay principal just like the rest. Imagine what happens to investors when there are no accommodation supplements?

Then they sell their investment property for capital gains, almost every single time tax free without paying any principal all this while.

May be investors should have double or triple the owner occupier interest rate. Their equity should be cash only 40% every single time.

They can afford it, after all they are a flourishing “business” employing hundreds and paying insane amount of tax keeping our economy moving.

You sound bitter and not objective. Investors already have a higher deposit threshold.

Just because a tenant may be eligible for an accommodation supplement doesn’t make them nor their LL parasites. Same applies to supermarkets that provide necessities to beneficiaries and pensioners.

Re-read my comment. Loans do get paid back.

I could go on but you sound irrational, perhaps borne from envy?

WM
A. I never said a tenant receiving accomodation supplement is a parasite.

B. Don’t have to look far from the Facebook Property Investor group to see how they scheme, belittle and find ways to live off others. Yes I think property investors are parasites. There are probably 5% who are not, but majority are.

C. I despise loan sharks and just because I can’t stand them, does not make me envious of them.

D. There really are much better ways to make money.

E. If I have an opinion that something isn’t right, doesn’t immediately make me jealous of the person who thinks it’s all right.

Have a good night.

You sound bitter and not objective. Investors already have a higher deposit threshold.

Just because a tenant may be eligible for an accommodation supplement doesn’t make them nor their LL parasites. Same applies to supermarkets that provide necessities to beneficiaries and pensioners.

Re-read my comment. Loans do get paid back.

I could go on but you sound irrational, perhaps borne from envy?

You sound bitter and not objective. Investors already have a higher deposit threshold.

Just because a tenant may be eligible for an accommodation supplement doesn’t make them nor their LL parasites. Same applies to supermarkets that provide necessities to beneficiaries and pensioners.

Re-read my comment. Loans do get paid back.

I could go on but you sound irrational, perhaps borne from envy?

Repeated comment.

Repeated comment.

Some yes but most are to fund speculative activity

A cynic would say they knew exactly the release of the timing would coincide with the seasonal downturn so they could claim the decrease in volume as down to their changes.

The opposite of what they do when they need to sneak some legislation through just as we all go on the Christmas holidays.

The Prime minister at the election said she did not want prices to fall, but flatten out with small rises. Problem is at the time (9 months ago) the Auckland median was 820k. It is now 1.1 million. Mostly caused by the reserve bank.

Early days yet

25
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It’s great to see that banks have begun increasing long term interest rates for home loans. This will be a clear signal to the market that rate rises aren’t far away. In that same breath I’m hoping interest only loans will be a thing of the past if Orr thinks of the NZ economy rather than self interest.

This will start the downward pressure of the prices. If Orr fails to scrap IO loans, I hope Robertson takes the reins to make this happen. I am wondering if Robertson is thinking “why on earth did I appoint Orr again”. He has proven to be unfit to perform the role he has been hired for. If this was a normal job outside of government he would be performance managed.

12
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I agree 100%. The RBNZ needs to unwind the reckless monetary policies of the recent past. It is time now to increase the OCR and stop QE and all other unorthodox policies.
A gradual, significant and managed decrease in house prices is necessary, in order to make sure that the unavoidable unwinding of the housing Ponzi does not turn into a catastrophic event, which might take the real economy with it.
The sooner the economy is allowed to re-balance itself, the sooner the market is allowed to operate without artificial constraints such as the existing landlord subsidies and the artificially low interest rates regime, the better for the longer term of the NZ economy.

New Zealand is but a small cog in a very large machine . Tinkering with the OCR with the goal of undermining house prices seems somewhat reckless, given current global rate settings . I do not recall it being a policy objective of the RBNZ to ramp up immigration at a time when all and sundry was saying there was an apparent housing shortage.

14
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Out of town buyers have pulled back in most markets.

11
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"While there is still solid interest from buyers, many do not feel under the same pressure to commit to a sale that they may have felt at the beginning of the year and are adopting a wait and see approach for the time being."

No more FOMO more like POOP...Potential Owner Over Paying

There is less heat in the market but there are still plenty of cashed up buyers. I just sold a house with an unconditional offer, no finance clause the buyer has the full amount! In the same area another house sold for $ 3.3 M, yesterday I called an agent for a house I'm interested in, "the vendor just accepted an offer in the fours" it was on the market for 12 days... Probably the lower end is struggling more with the new rules against accommodation providers

14
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Chippies, brickies, sparkies and plumbers etc provide accommodation, landlords just arbitrage it. Don't confuse the two.

Incorrect and quite silly really. Tradies fix and build places but they of course have no contract with renters. It's surprising that, for apragmatic person, you buy into this rubbish.

Also you could have thanked me for advising you to contact your bank yesterday to request a RRA, thus saving you thousands of $. It's clear you saw my post as you replied to other posts later on

Three replies... guess I hit a nerve.

Childish reply. I won't offer you advice to save you thousands of $ anymore

Double post

Good luck finding a rental through your "Chippies, brickies, sparkies and plumbers"

Shaking my head..

Yeah but no one really cares about that end of the market as it doesn’t have the same social consequences as unaffordability at the south end of the market.

No doubt but anecdotal is not the trend

10
up

'No finance' clause simply means the deal was unconditional in terms of finance. They could have had the full amount in cash or they could have been borrowing all of it, secured against other properties. Only the purchaser knows that info.

Not enough buyers for the amount of homes on sale at the current asking prices though. I really wish you the best in your investments but need to be realistic or will end up selling for a lower price you expect, the reintroduction of LVR restrictions has pushed a lot of perspective FHB and investors out and even more will be on May 1st. New homes may be less affected but existing ones will definitely feel the effect of recent regulation changes.

Exactly, it’s coming into winter and there are still plenty of OO’s buying good properties at high prices.

It’s no surprise that low end rental/fhb properties are cooling off.

Rates will need to go up a good deal more before I’m paying market rent for my house.

Wolf separates out dev sales from normal market sales. REINZ is not equivalent in detail. Also note price cuts and still sales fell. Their 30 year rate rising for 3 months.

https://wolfstreet.com/2021/04/23/cut-prices-and-they-will-come-new-hous...

The craziness previous to the reintroduction of LVR restrictions pushed prices to all time highs, that won't happen again. Sellers are still expecting to get the same prices even though that FOMO is now over which is the reason for low sale rates.
We should expect prices to fall to levels not just from before this happened but likely some further since the addition of new rules for investors is with no doubt pushing them out reducing demand. The small amount of attendees to open homes in the past few weeks is a clear sign of that. Buyers are afraid to overpay, the tide has changed for the better and hopefully will last for some time.

How many of the 369 properties that were monitored were in Auckland? Can you give us a regional split of those properties?

Interest.co is not a bespoke data to order service, you'll need to seek that information elsewhere otherwise Interest.co is happy to provide a pro-forma invoice for their services.

DP

I understand from the buyer's perspective that they can adopt a 'wait and see' approach since they now expect prices to drop due to all the actions the Labour Government has put in to suppress housing prices.

On the flip side, I can also see from the seller's perspective that they are also not in a hurry to sell their homes either (unless of course they need the money desperately to service debt and cannot afford the it anymore). But outside of that, why would seller's be in a rush? There is nowhere else to put their money outside of Stocks? Bank deposit interests are hardly churning any extra income for them.

All in all, I think it's a game of chicken. Sellers are not in a rush to sell. Buyers also not in a rush to buy. At the end, let's see who blinks first.

I understand from the buyer's perspective that they can adopt a 'wait and see' approach since they now expect prices to drop due to all the actions the Labour Government has put in to suppress housing prices.

On the flip side, I can also see from the seller's perspective that they are also not in a hurry to sell their homes either (unless of course they need the money desperately to service debt and cannot afford the it anymore). But outside of that, why would seller's be in a rush? There is nowhere else to put their money outside of Stocks? Bank deposit interests are hardly churning any extra income for them.

All in all, I think it's a game of chicken. Sellers are not in a rush to sell. Buyers also not in a rush to buy. At the end, let's see who blinks first.

I guess there would be a fair number of geared up “investors” that will soon be making a loss due to the tax changes, they may need to sell. Even if it it was only 5% of the market it could create a big price drop without FOMO buyers.

.

“Unn Zull’nn uss duff’runt unn spusshool!”
— Kiwis

Lol. Sure. Good luck with that.

Down to 51%!! Aaaaggghhhhh! Quick Adrian lower the OCR, lower the OCR!!!!!

Still no decent houses under 800k in any city pop. over 50k.
1 million is the new 450k.

Except Christchurch - we're a little calmer down here. Although from my friends trying to buy at the moment, it sounds like we're quickly heading towards the same insanity as the rest of the country.

ROFL no where else to put your money? Have you ever heard of businesses that make a profit employing people to make products and services to sell to consumers? There are places to put your money, but you’d have to be willing to do ‘work’ for your capital gains...just what rentiers can’t stand the thought of...no more easy money. Lazy, greedy, leeches.

Oh, so it's not their god-given right to make a sh*t tonne of money off the work of other people's backs?

Oh, so it's not their god-given right to make a sh*t tonne of money off the work of other people's backs?

The banks will only heavily leverage property, not business investments. The issue is with the banks and ultimately the regulatory framework they run within.

This issue falls on the government ultimately. They've incentivized investment in property and jacked up prices by increasing demand (foreign investment, mass immigration, aforementioned incentives) and constraining supply (RMA, land restrictions, "green" policies, expensive and slow consents). It serves as a "heat sink" for the massive amount of money being printed.

Double

Think the whole existence of any business is to make profit, I think you are either naïve or misguided.