REINZ reports sales volumes rose 37% in Feb from a year ago; Median house price up 1.4% from year ago

REINZ reports sales volumes rose 37% in Feb from a year ago; Median house price up 1.4% from year ago

By Bernard Hickey

The Real Estate Institute of New Zealand has reported there were 6,168 houses sold in February, which was up 51% from volumes sold in January and up 37% from February 2011.

This was the strongest February for sales since February 2008, when house prices peaked nationally. The REINZ noted, however, that the sales in February remained below the 9,357 sales see in February 2007 and the record 10,145 seen in February 2005.

REINZ said volumes were up 3% in seasonally adjusted terms in February from January.

“While agents are seeing more activity and more positive sentiment from buyers in most places, this is not translating into significant price increases," said REINZ Chief Executive Helen O’Sullivan

"Agents in a number of areas continue to report listing shortages. Despite the increased number of transactions, buyers are remaining cautious with the days to sell measure down by just one day (to 46 days), and still above the long term average (41 days).”

REINZ said the median price was unchanged at NZ$355,00 in February from January, but was up 1.4% from February a year ago.

QV says national values up 2.9% over past year, Auckland up 4.8%

Meanwhile, government owned valuer Quotable Value (QV) said nationwide residential property values continued to gradually increase through February. Values rose 1.1% over the past three months, 2.9% up over the past year, and are now 2.9% below the previous market peak of late 2007, QV said. It said the national average sale price over the past three months was NZ$408,669.

QV research director Jonno Ingerson said the Auckland area was still the fastest growing of the main centres, up 1.7% over the past three months and 4.8% up over the past year.

"Values are now above the previous market peak by 2.3%. This increase across Auckland is being led by the old Auckland City which has increased in value by 6.5% over the past year and is 5.1% above the 2007 market peak," said Ingerson.

REINZ said the numbers of days to sell in Canterbury/Westland fell four days to 35 days, which was the shortest time nationally. Northland had the longest time at 71 days.

REINZ said there were 686 dwellings sold by auction in February representing 11.1% of all sales, up from 393 sales or 8.7% in February 2011. 

It said Auckland dominated the auction market, representing 63.7% of the national total of auction sales, with 21.1% of all sales in Auckland by auction.

Canterbury/Westland accounted for 9.6% of the national total of auction transactions, and all other regions combined accounted for the remaining 11.0% of auction sales.

The stratified REINZ Housing Price Index, which is prepared using a Reserve Bank methodology that strips out the skew caused by more or less sales in some price brackets than others, increased 0.8% in February from January. The national index was up 2.7% in February from a year ago, but is 3.0% below the peak seen in November 2007.

The REINZ Housing Price Index recorded falls in Wellington (down 2.4% from January), Other North Island (down 0.4%) and Sections (down 5.5%).

Increases were recorded in Auckland (up 4.6%), Christchurch (up 2.0%) and Other South Island (up 0.2%).

The stratified Auckland Price Index however is 0.7% above the previous peak recorded in July 2007 and is up 8.7% from a year ago.

ASB's Turner comments

ASB economist Jane Turner said housing turnover continued to gradually recover. ASB estimated there had been an 8% lift in volumes in seasonally adjusted terms.

"The overall activity remains relatively subdued," Turner said.

"Nonetheless, the steady recovery seen over recent months suggests that underlying household sentiment has continued to improve," she said.

"We expect further recovery in the labour market over 2012 to continue to support further growth in housing demand, although this will be tempered by weak net migration in the near term."

Turner said the REINZ national figures masked stark regional divergences in housing market conditions.

"Agency listings data have shown supply is very low, particularly in Auckland, which has led to a very tight housing market conditions and upward pressure on prices," she said.

"The Canterbury housing market is also comparatively tight, with ongoing seismic activity delaying the rebuild, and it is not surprising to see the region’s stratified house price index is up 5.3% on year-ago levels."

Turner said the pick up in house prices and activity was consistent with some of the robust strength apparent in the underlying trend of retail spending.

"These recent developments have led the RBNZ to revise up its view of consumer demand at the most recent Monetary Policy Statement. House price increases in Auckland and Christchurch continue to outpace those of the rest of the country, largely reflecting supply constraints," she said.

"Under-building over recent years, combined with the housing shortage created by the earthquakes, has resulted in a very tight housing market in Auckland and Canterbury. We expect house prices will continue to lift in these regions over the near term. However, as rebuilding starts to pick up in earnest in Christchurch, the increase in housing supply should help alleviate some of the upward pressure on house prices."

However, Turner expected the Reserve Bank to leave the cash rate unchanged until December 2012 because it was very concerned about the high New Zealand dollar.

'Current rate of value increase very modest,' says Ingerson

Meanwhile, Ingerson said although national values are up 2.9% over the past year, this should be compared to previous periods of value growth.

"During 1993 to 1997 values increased between 8% and 14% per year. Then in the 2002 to 2007 boom values generally increased by 10% to 15% per year, and increased by a staggering 25% during 2003 alone," said Ingerson.

"In comparison the current rate of value increase is very modest and in inflation adjusted terms is only just above level."

He said although there had been a noticeable increase in market activity over the past month, this is typical for the time of the year.

"While this level of activity may be higher than the last few years, it is still below long term average. There is still a shortage of properties for sale in some areas, and in general buyers are acting cautiously and carefully," said Ingerson.

See QV's press release here and its residential price movement statistics here.

See our interactive chart of the REINZ House Price Indicies here on our site.

See the full REINZ tables on sales volumes, prices and average time to sell here on REINZ's site.

See the  REINZ regional analysis here on REINZ's site.

See our interactive chart of house sales volumes below.

(Updated with QV, links, details, interactive chart, ASB comments)

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?

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Oh look a blip on the radar..no sorry..it's gone...keep looking...

I think thats an amazing figure, note that 2/3 of auction sales are between 1/4 of the population of the country - Auckland. To me this is an indication of a huge bubble in this city. Picture it like a share of a company. You never buy when the PE is ridiculously high, you buy it when its low. I suppose that goes for anything though doesn't it.

You call it a bubble, I call it a housing shortage. 

If there was a shortage, would there not be people roaming the streets?

No because they are all living with mum and dad.
Or in Sth Auckland - relatives garages.

If the demand was matched or exceeded by the supply, would the prices be increasing like they are?

Yes, its called bubbleomania. Find a positive cashflow property for me and I'll take it any day. There are NONE, actually, theres one or 2, and only positive for me because I get extra low mortgage rates :)

Find a positive cashflow property for me and I'll take it any day
MK - There are hundreds of properties where the rent covers all outgoings including property management fees. Probably thousands. You just need a computer, a phone, and a good understanding of property investment. But don't kid yourself that you would take one if offered it. You wouldn't. Takes balls as well.
There are plenty of nice liveable towns where you can buy a good house on a good freehold section for as low as half the cost of replacing the existing improvements on the property.

Can you give me a specific example that is on the market right now? Assume mortgage fixed at 8% for 10 years. No down payment. And also in Auckland.
The reason why I say no down payment is because I could be earning a lot more with the deposit than the return on the property, so the opportunity cost of that money is expensive.

MK, why should you be able to buy a property in the most desirable part of the country that will essentially pay for itself in maybe 15 or 20 years (with modest inflation in rents), without you having to put a cent in, or provide any effort (ie pay a property manager to look after it and all expenses covered)?
 
The answer of course is that you shouldn't expect a free lunch and that if it is free, you can bet your bottom dollar that someone else will be prepared to purchase it on slightly less attractive terms.
 
Of course you can get property close to covering itself, and certainly in Auckland can probably find apartments at the returns you suggest (but I wouldn't generally touch them - remember the leaky leaseholds selling for $12,000 and leaky freeholds at about $40,000?), you could also find properties in less desirable parts of Auckland that return the kind of rate you're looking for.
 
In other parts of the country acheiving above 10% is not so much of a challenge.  Even in the CBD of NZ's 5th largest city here are 3 listings which are not even remotely good value but return over 9%.  Work a little harder and double digits returns are easy to find. 
http://www.realestate.co.nz/1622981
http://www.realestate.co.nz/1744871
http://www.realestate.co.nz/1737488
 
If you're prepared to take a gamble, you can buy a written off but liveable ChCh house for nearly nothing.  One which is totally fine to live in (slight slope on a concrete floor house in the eastern suburbs) sold for $90k for a 5 year old 3 bedroom double garage int access.  Rent could easily be $330pw (despite its location).  That's 19%PA gross which may compensate for not being able to get anything but indemnity insurance on the property - but no further quakes and you'd certainly be a winner.
 
Moral is: a lot of people are obviously seeing that now isn't the worst time to be buying property.

I wouldn't just leap at a cashflow positive property, the yield is still marginal.  I have started looking at rentals, and they are more suited to a low input, low output type system.  If you are getting capital gains the returns look better, but I can't predict the future, and there is no control over them (aside from renovating, which is a higher input).
I have seen heaps of cashflow positive rental opportunities, but I don't understand anything about Auckland or how house prices and rents can be so high, so I don't even look there.

In many parts of Auckland there are lots people roaming the streets - but I'm not sure that has anything to do with the shortage...

Looking at the Auckland suburb trend graphs, it seems to be suburbs like Onehunga / Penrose / Mt Roskill / Ellerslie / Panmure that are seing the biggest price increases over the last year - these are not the rich areas that the news seems to be focusing on. Eden / Epsom / Eastern Suburbs all seem to be pretty flat over the last year.

It should come as no surprise that sales volume has increased given the $6 billion of mortgage approvals that have been granted recently.
At say 80% of the median price ie $284,000 there is still at least another 20,000 mortgages yet to find a home to be secured against and hundreds more approvals being granted every week.
Banks are back into lending 95% and if you are buying a rental property they will lend 100% if you have equity in your own family home. They are keen to do deals and published long term fixed rates are simply a starting point for negotiations. Anyone who pays the published fixed rates is a fool - negotiate hard and ask for them to pay your legal costs too!
Looks to me like we are heading into a very strong boom cycle for the property market and with interest rates likely to stay sub 6.5% for many years this could be the longest strongest boom we have ever seen.
All we need in order to stimulate the economy and the new home market is an assistance package for buyers of new homes like they have just announced in the UK
http://www.telegraph.co.uk/property/propertynews/9137248/500000-mortgage...
The building industry is a power house of the economy - flick the switch, crank up new home building and the future for NZ will be secured.
 
 
 
 

Bigblue:
The building industry is a power house of the economy - flick the switch, crank up new home building and the future for NZ will be secured...............
with borrowed money from overseas. 
But I hope prices increase as I own my own home in North Shore of Auckland. At this moment in time I believe Olly Newland more than BH. In the future, is happening now as we speak NZ will be viewed as an affordable paradise for overseas investors to want to come here and hopefully live. As long as they are productive while here, it will be a win win for me:). 

Oooooooooo you would love that wouldn't you, a country full of people not born here, just so they can get loaded up with debt to buy your property then go bankrupt. I see it every day.

Bigblue - The majority of the 6 billion$ of new mortgages is used to pay off existing mortgages. Interest.co.nz reported last week that in the last four years households repaid over 20 billion more than they borrowed.  It seems there is a lot of trading down going on with great improvement in household balance sheets. 

Going from memory here, but didn't that story say that business and company loans had been paid down, but when you looked closer, the household loans which (I remember reading) are the largest portion, actually INCREASED.  The title of that story and the associated data did not match IMO.
 
 

I still can't work it out.

Congratulations Skudiv..that means we are inviting you to take a position at Treasury on half a million a year...

Do I get free lunch?

No, but you can print your own money to pay for it. It's becoming a popular thing to do, there are some guys in Tauranga at it as well. http://www.stuff.co.nz/national/crime/6562880/Police-warn-of-counterfeit-notes

Well Bill did say "no more free lunch" typical.
The govt has sent it's goons out to see who is threatening it's monopoly.  I am looking at minting some coins, though I suspect the intrinsic value is far higher then the nominal.

That Uk policy is interesting, as fellow tories one might think the nats would look at it seriously. But to me there are some big questions. First, the cost of land and building in Auckland means building an average house in an average area is likely to be upwards of 500k. Based on a 5% deposit how many families will be able to afford a 475k mortgage.
So the issue then comes back to planning regulations and building costs. Sort those things out and the scheme might start to work.

It all keeps coming back to those factors.

Auckland up 4.6% in 1 month - that's not too shabby is it?

If you took that as an average for a year that would be 55% = bubble territory

It must be a very strong bubble - it seems to have been around for about 6 or more years now, and even a prickly recession couldn't pop it.

I don't think we felt much of a recession over here to be honest. If we did, the lines for the soup kitchens would have been full. They weren't. You could well be right in saying that there could be an upside in property in the next 10 years, wouldn't bet the house on it though lol. Past trends are never an indicator of future performance.

Agreed - I don't think prices are going to go up much in the next 10 years or so. I just don't think there is going to be a pop (although you could be right, there might be one)

If you took that out to 5 years it would be 1420% but why stop there. 

Story updated with the February statistics from Quotable Value.

SK - could we be likely to see 10% + capital gain for residential real estate in the former Auckland City Council area through 2012 with maybe 15% in 2013 or am I being a tad optimistic.
Seems like there are many more buyers than there are homes available for sale, with the exception of plaster/monolithic homes that seem to be stagnating on the market as nobody will touch them.

QV say - "This increase across Auckland is being led by the old Auckland City which has increased in value by 6.5% over the past year and is 5.1% above the 2007 market peak"

"Values rose 1.1% over the past three months, 2.9% up over the past year, and are now 2.9% below the previous market peak of late 2007"
"2.9% up over the last year" means they actually stood still, when you allow for inflation.  It is nonsense to say they went up.
"2.9% below the previous market peak of late 2007" is likewise twaddle.  Allowing for inflation over the last five years, prices are actually down about 15% in real terms.
Typical superficial & misleading coverage that we expect in NZ
Cheers

To most property investors, the value of the property does not need to keep up with inflation for the investment to make sense. Generally any capital gain is a bonus, even if it is less than inflation.
Not that I am a property investor BTW.

Quite right, these are nominal figures only.

Mortgages are nominal too, a 15% discount over time. 

Before the hysterics go any further, just look at the February figures in a historical context and you’ll find the market is still well below mid-cycle levels of activity.  The 37% increase in volumes was off the lowest month ever, so of course the increase will be high.  The number of transactions, 6,168, is still 14% below the all time average of 7,171, and well below (40%) the peak volumes 10,131.  Rolling 3 month median stratified prices have increased 3.4% year on year, which is slightly higher than inflation, and reflects a supply/demand imbalance in Auckland, but in real terms don’t expect to see house prices run away to the same extent as they did before.  That was once off generational transfer of wealth.
 
So settle down everyone – the market is improving but below mid-cycle levels, and prices aren’t going to take off in a meaningful way anytime soon.
 
PS – told you so.

Agreed - anyone that thinks they are going to make a killing out of real estate in the next 10 years is fooling themselves. Some might get lucky by buying in certain areas of Auckland, but those areas have such a low yeild that it really is a bit of a gamble on capital gains.

The REINZ stratified median needs to treated with caution.
 
The methodology employed is to simply take the REINZ medians for each of the ten strata and average them.  The stratified median is neither an average nor a median but an average of medians. And as such it can and has been skewed upwards by large rises in the medians of the top strata (the stratum 10 median for instance shows an $18,000 rise for February 2012). 

No duh.
But it is the only relevant or semi reliable pricing series available.

But it is the only relevant or semi reliable pricing series available.
 
I thought so too until I started digging into what it actually represented.
 
The stratified data is reasonably useful by itself, but averaging strata medians doesn't do much for me. I have put some work into creating a more reliable series of medians from the stratified data. I should probably put it somewhere on the web for those interested - the only problem being the analysis shows up a few problems with our current property indexes.  
 
StatsNZ have done some work:
http://www.stats.govt.nz/~/media/Statistics/browse-categories/people-and...
 

you could make a thousand suggestions on how to improve any house price index (and debate on what is better, a harmonic mean vs median of stratified data) - they are an utter indication at best.
That said - of all the monthly time series, being QV, being Barfoot & Thompson, being median/average prices, the stratafied housing series is the best, despite its deficiencies.
The crappy thing about having all these time series is that any time there is bad news, or good news, you get to hear about it 4 times every month.
If commentators like interest.co.nz would just focus on the main ones then there would be a lot less noise.
Just my humble opinion.

Yes, there is a lot of noise and spin and partisan debate, but not much light.
 
I agree that stratified measures are superior to others. But I am not making suggestions - I have done it and believe I have removed the main deficiencies with the stratified index. And if I publish it as a better series, it will come with my silence on what I think the numbers mean each month.

Forgot to clarify in my original post, but for each of those statistics that I cited were all for the month of February:  6,168 in February 2012, 7,171 being the all time average for February volumes, and 10,131 the max.

Forgot to clarify in my original post, but for each of those statistics that I cited were all for the month of February:  6,168 in February 2012, 7,171 being the all time average for February volumes, and 10,131 the max.

Bernard - could you update your house price increase/decrease prediction for us say over next 1, 2 or 3 years compared with 2007?

NZ real estete scene is a two speed one; one part is going at motorway speed 100km/h (Central and selected suburbs of Auckland), then the other is at school zones speed of 20km/h which is rest of NZ.   
The question will be will the other one speed up or the faster one will run out of petrol soon?  Who knows..!

Yet another headline as to how well the Auckland property market is doing .... I feel a song coming on....."take the money and run woo hoo" !!