REINZ reports May property sales up 24.4% from year ago; Auckland median house price up 7.8% to record high NZ$500,000; Two speed market confirmed

Auckland and Christchurch prices are rising, while Wellington prices are falling and other North Island and South Island prices are flat. Chart from ASB Economists

By Bernard Hickey

New Zealand's two-speed housing market continued to diverge in May as central Auckland and Christchurch prices and volumes kept surging, while the rest of the country remained stalled at weak levels.

The Real Estate Insitute of New Zealand (REINZ) has reported 7,175 properties were sold nationally in May, up 26.4% from April and up 24.4% from May a year ago.

But a disproportionate amount of activity and the highest price rises were in Auckland and Christchurch, where supply shortages due to the earthquake, a lack of new building over the last decade and leaky buildings continue to distort activity. Most external migration and internal migration, including from Christchurch, is going to Auckland.

Auckland's median price rose 7.8% in May from a year ago to a record high NZ$500,000, while 2,792 properties were sold, up 28% from a year ago.

The increase of 26.4% in the number of properties sold between April and May compares with an average increase of 12.3% between April and May over the past 10 years, with May the third strongest month for real estate sales across the year.

Canterbury/Westland sales rose 56% from May a year ago, while Central Otago Lakes sales rose 31.9% and Wellington sales rose 28.3%.

There is one strong exception to the Auckland/Christchurch vs the rest divergence. Taranaki property sales rose 60.3% in May from a year ago and the median price rose 11.8% in May from a year ago.

The REINZ Stratified House Price, which adjusts for some of the variations in mix that can impact on the median price, is 6.4% higher than May 2011 and is now also 0.3% higher than the previous peak of the market in November 2007. See interactive charts below.

“Sales volumes have been surprisingly strong in May, with all regions recording increases in sales over April and over May last year,” said REINZ Chief Executive Helen O’Sullivan. 

“May is typically stronger than April, ranking as the third busiest month in the year for real estate sales, but the increase is considerably stronger than normal seasonal trends would suggest.  This is likely partly driven by good deals on interest rates during the month, and a desire by buyers to complete purchases before winter,” she said.

“The strength of the real estate market continues to be focused on Auckland and Canterbury, with Auckland reaching a new milestone with a record median price of $500,000 and Canterbury/Westland again hitting its record median price of $335,000.”

The national median ‘days to sell’rose by one day in May from April to 38 days, but was seven days lower than in May 2011 and remains below the average 41 days over the last five years.

Auckland and Canterbury/Westland recorded the shortest days to sell at 33 days, followed by Otago with 35 days and Wellington with 42 days.  Northland recorded the longest number of days to sell at 67 days, followed by Central Otago Lakes with 63 days and Taranaki with 58 days. See full REINZ regional breakdowns here at REINZ site.

Auckland auctions hot

Nationally there were 1,071 dwellings sold by auction in May representing 14.9% of all sales, up from 584 sales in May 2011 representing 10.1% of all sales. 

Auction sales in Auckland dominated the auction market, representing 71.9% of the national total with  27.6% of all dwelling sales in Auckland by auction, up strongly from the 16.9% of sales by auction in May 2011. 

ASB Economist Jane Turner said house sales rose 17% in May in seasonally adjusted terms, rebounding from an 8% fall in April.

Turner said the early timing of Easter being in April in 2012 drove more activity into May so the three month average turnover level was a better indicator.

Rental property popular again

"This shows that the underlying trend in housing market turnover is one of gradual improvement.  The recent decline in fixed-rate mortgages, to below the floating rate in some cases, is likely to stimulate additional buyer demand," Turner said.

"In addition, the ASB housing confidence survey shows that expectations are for house prices to increase over the coming year and, reflecting this, the ASB investor confidence survey shows that rental property has become the most favoured investment.  This suggests there is a return of investment demand in the housing market," she said.

The housing market remained tight due to low supply, she added.

"However, the national average masks differing regional trends.  Housing shortages appear to be most acute in Auckland and Christchurch and we are seeing growing pressure on house prices in these regions.  The REINZ stratified house price index shows that house prices are up 6.4% on year-ago levels, with Auckland house prices leading that growth up 8.3%.  House prices in Christchurch and the rest of the South Island are also growing strongly, while house prices in Wellington remain flat," she said.

The RBNZ was expecting to see around 5% annual house price inflation over the coming year, "although with momentum continuing to build the risks are house prices growth faster than this."

"For the time being the RBNZ will stay focussed on near-term downside risks stemming from offshore.  However, over the coming year the strength in the housing market, and potential to spill over into generalised inflation pressures, may start to be more of a concern to the RBNZ."

(Updated with more detail, ASB comments, interactive chart)

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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66 Comments

There's another Billy Goat Gruff coming along after me.......

Hugh, I heard a wonderfully relevant quote the other day which I think sums up the situation you are trying to change -
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Upton Sinclair, I, Candidate for Governor: And How I Got Licked
 

When I need people to explain things to me, I choose folk who can see through the Julian Simon  nonsense.
 
Who can question what money is, from first principles.
 
And who understand that if incomes are in unprecedented jeopardy, then trying to relate house prices to them proportionately via histerical data, is a pointless exercise.
 
Bit like counting the dry deckchairs.

...... you're not wrong there , Julian Simon did talk and write non-stop alotta sense , and he is sorely missed today ...... to quote the great man , .......
 
" All of us necessarily hold many casual opinions that are ludicrously wrong simply because life is far too short for us to think through even a small fraction of the topics that we come across . "
 
....... wow PDK .... Prof Simon seems to have known you personally ...... ahhhhh , that's so  sweet .

GBF - kindly note the discussion re exponential math on the other thread..
 
 

Just from,
"His work covers cornucopian views on lasting economic benefits from natural resources and continuous population growth, even despite limited or finite physical resources, empowered by human ingenuity, substitutes, and technological progress."
I know he was a clueless voodoo economist  just from that,
backed up by,
a Senior Fellow at the Cato Institute
tells me he was a blinkered far right wing idiot...
and the nail in the coffin,
"Viewed economically, he argues, increasing wealth and technology make more resources available; although supplies may be limited physically they may be viewed as economically indefinite as old resources are recycled and new alternatives are assumed to be developed by the market"
Carry on GBH.....crash and burn....shares heading for <20% of what they are now worth....
regards

...... yup , Prof. Simon was ahead of his time , totally on top of the knowledge curve when it comes to human capital & resources .... a true humanitarian . More's the pity that we don't have more like him . Splendid fellow .
 
At least 20 % upside on shares from here ..... probably by year's end .
 
.... will you be purchasing SOE stock as they IPO ?

Chuckle. I remember a discussion at Physics (Otagio Uni) in sight of the Economics building......
 
We were discussing intelligence, first principles, and the way the need of some to believe, overrides their actual deep-down knowledge of reality. The Prof called it Cognitive Dissonance, but acknowledged he was out of his field....  I opined that it is just a transfer of the blind following of religion that spawned Torquenada and Confession, to some other mantra.
 
It does get a tad frustrating at times, watching these "she ain't sinking, it's just my feet are in a puddle here on the sloping upper deck" types.

...... is Otagio near where you live ?

When did you stop learning again, Hugh? 
 
Simon stated that more people meant more resources, ad infinitum.
 
That was a lie. Whether he lied purposely, was lying to himself, or believed the lie to be truth, is an interesting side issue.
 
Take a quick look at the comments re exponential math on 'top10'.
 
You end up very quickly shoulder to shoulder with no arable land, and knee-deep in .......
 
Hard to explain to linear minds.
 

House prices up and (according to the little covered news from Terralink) mortgagee sales also trending up (524 mortgagee sales in January to March, topping the 2010 equivalent period record figures). So what's going on? My guess is the banks clearing out their backlog while the market is buying.

But a disproportionate amount of activity and the highest price rises were in Auckland and Christchurch, where supply shortages due to the earthquake, a lack of new building over the last decade and leaky buildings continue to distort activity. Most external migration and internal migration, including from Christchurch, is going to Auckland.
 
No mention of the money facilitators - biased reporting no? This reminds me of my old and nearly only private counterparty - He publicly, at Christie's and Southerby's auction rooms, paid through the roof for individual paintings to revalue the many $billions of warehoused inventory. 

Here's a first hander for you...
Acorn Ave..Royal Oak...821 or 31sqr mt...primary but no secondry zone.
Bungalow ( gosh, I just love them) but completely  gone  looked like roof had been leaking for at least five years...gutters , bits of hanging tin barely recognisable ,almost zero paint left and that was lead.
But a beautiful old girl just looking for a 100k or more to put her in any livable condition.
Section flat...but rubble from ahole to breakfast...
 
 Anyhoo what did it go for...no not the house or garages because the buyer had zero interest in them....a bully job.
It went for 991,000...for the section....(.good luck Gen Y)...a developer..?...yes.!
Do the math...to clear ..build two,two storey, make a realistic margin..!
 I left post auction...just thinking this has got to pure insanity.

Sorry to disappoint, but it's Res 5 and a 1 unit site.
http://www.aucklandcity.govt.nz/council/documents/district/maps/g091.asp
 
If it had been Res 6A and a 2 unit site it probably could have got $1.1 to 1.2m.

Chris J ...are you telling me he paid  that for a one siter....geesus that's worse than I thought.!!
Out of interest ...did you go..?

No.  $991k is a bit high for that way down in Royal Oak.  We paid over a $100k less for a very tidy bungalow in double grammar Epsom (admittedly on a smaller site) last month, and nearly $50k less for a fully renovated (granite benchtop and everthing done) on a full flat north facing site in Mt Eden (MAGS only though).
 
A huge very tidy villa (80s renovation) in Onslow Ave Epsom (double grammar) on a full site (600m2ish) only went for $1170ish last month, and good tidy homes in Royal Oak are available in the $800s on full sites in other streets so getting close to a million for a tear down seems on the high side, as I can't see a new house on the Acorn St site going for anything above $1.5m.
 
Although when a small brick and tile unrenovated on a full (but not big enough to subdivide) section in a very average Mt Albert street gets $841k it becomes hard to judge what people are prepared to pay (it certainly makes any decent villa or bungalow in Grey Lynn under a $1m look cheap!).

Chris J
All this talk of red hot prices in Epsom is making me trigger happy.
I feel like selling into a rally.
Want to buy my house?
Gareth thinks you might be a buyer. He has a house in Royal Oak that you might be interested in too...
;)
cheers
Bernard

Is your house bright and cheery with a Northerly disposition Bernard...? if so it's not the talk of hot money that's got you fired up to sell........What say I pop round and black out some windows for you...pop some of the down pipes off, remove any unnecessary color from the garden.....
You'll settle down again then ....you'll see !

Er yes... thanks...
cheers
Bernard

Sorry Bernard, I asked if anyone wanted to sell six or eight weeks back.  I'm done with buying in Auckland for now.
 
The buyers out there that are paying the big dollars are very specific in what they want. 
 
You need to be in a quiet location, ideally with a level north or west facing rear yard with flat access from the living, a garage or at least secure off street parking for at least a couple of vehicles.  Bathroom and kitchen aren't that important if everything else is alright.  And of course - no plasterboard exteriors!
 
So although you're in a top location Bernard, I'm not sure that the position is going to get the top dollars because of the slope and access.  However in saying that, I think you paid 7s, so you should easily be up 20% on that.
 
Gareth might be interested to know an ex-state semidetached at 43 Fernleigh went for $600k 2 weeks ago.

Latest QV top 22 (on average house value):

1          Herne Bay       $1,815,278
2          St Marys Bay  $1,457,722
3          Parnell             $1,320,056
4          Epsom             $1,137,833
5          Stanley Point   $1,101,944
6          Remuera          $1,075,444
7          Takapuna         $1,071,333
8          Mission Bay    $1,051,556
9          Devonport       $1,014,167
10        Ponsonby        $970,722
11        Mt Eden          $964,389
12        St Heliers        $950,000
13        Freemans Bay $946,111
14        Westmere        $942,889
15        Kohimarama    $939,611
16        Cambells Bay  $936,889
17        Omaha             $888,222
18        Castor Bay      $880,333
19        Grey Lynn       $868,667
20        Glendowie      $862,111
21        Orakei            $838,944
22        Mellons Bay    $816,167

I find the zoodle summaries for each suburb more instructive than the QV data. They use median price and they give you the number of homes for sale - as well as the number of sales - average time on the market - and the up/down price movements.
Here's a few examples;
http://www.zoodle.co.nz/community/auckland/auckland-city/herne-bay
http://www.zoodle.co.nz/community/auckland/auckland-city/grey-lynn
http://www.zoodle.co.nz/community/auckland/auckland-city/remuera
 
 

Hi Kate - Please note that Zoodle is powered by Terralink.  If you'd like to buy a property report it is a lot cheaper to buy it straight from Terralink Property Information Online rather than Zoodle:
http://www.terranet.co.nz/terranet3/
You will also note that the QV house sales is more recent and updated and volume is a lot higher than the Zoodle/Terralink sites hence more accurate average value.  Median can also be obtained from this month's property report.
Cheers

Christov: Was there a (or any) competing bidder(s)? Was there any price tension? Or was the guy in there on his own. Considering all the sections backing onto Acorn Street are the same size but zoned Res 6a it would be a simple but expensive mistake to assume they're all the same. Could be he made that assumption and made a "big" mistake.

There were..iconolast..between 60 to 80 plus peoples there...no parking in the steet available...activity by about a third or less to mid eights...then I went round the corner to talk to the wife about the lunacy unfolding( maybe I'm just too far out of touch)...so missed the closing session , till I managed to squeeze around for a lookie see...( not Asian).
 As to the zoning..I think Chris J right about that ( I was only in for a cheeky nosey to show the wife how it's done., still wiping the egg off my face today)...There was a large sign at the front  and if I'd taken more notice I probably would have seen the zoning.
 But that is the point you see , I thought it crazy at 991K with a demo and two two stories.
 What I think now is just ,....well I'm lost for words... how bizarre..? 

Chris J ...I was being conservative at 100k to put it right..!  I mean, probably closer to 200k having given it some thought ....
 He certainly appeared to have little interest in the existing buildings ......? so , was he an escapee...?
that is just plain crazy..!

Unlikely to be worth renovating certainly not worth spending $200k on it as a beautiful bungalow renovated to the highest standard (granite benchtops and the best restored 1920s timber panelling I've seen in that type of house) on 883m2 in Fairholm Ave Epsom (but only a small 110m2ish house) on a fabulous landscaped section, only went for $1.2m just a week ago (Harcourts).
 
So I would think that it's been bought as a section, which for Royal Oak is expensive, but if the buyer has $1.5m to spend in total, would probably work out ok for him (although I'd have bought a leaker up in grammar zones or at least closer in and torn it down and have probably got a 600 or 700m2 section for similar money (one in Wairiki Rd Mt Eden went for $620k a few weeks back for 500m2 with a large 1990s leaker).

Chris_J are you a leaker?

And pray tell, Bernardo, the equivalent increment in Household Income (to make these shacks more affordable) is??????

Ha.
Everything is affordable at 3% interest rates, which is quite possible in the event of Eurogeddon et al. But then there's going to be some unemployment...
Nothing is affordable at 11% interest rates or if you are unemployed...
Incomes would have to more than double to make Auckland house prices affordable for anything like a normal long term with average interest rates of 7-8%. 
But you know that. And so does everyone else.
But every one and his dog is relying on this market being Too Big To Fail.
No government will ever let it fail.
And hence some almighty moral hazard...
;)
cheers
Bernard

Quite right, Bernard, except for one teeny weeny detail.
Every thing is not affordable at 3% interest rates.
At some point - and I believe we are past it - there will be no collective ability to recoup interest at all.

3% only works with a growing GDP at some factor to pay it back surely? if we have no growth?
"No govn" think canute and tsunami.......
regards

I have to say this is bad news for first home buyers and alike in Central Auckland and Christchurch. Both areas have exceptional pressure on them. Anyone who says the increases are a good thing is certainly talking nonsense as you always need people starting off in the housing market to keep things healthy. One wonders where this will all end as incomes are certainly not increasing at the same pace in these areas. How do people afford such large mortgages. What are they sacrificing to keep up the repayments. The Bank is just another form of landlord where you pay interest which is effictively rent.

ex-agent asks: How do people afford such large mortgages.
Why do you assume high-priced (auckland) transactions involve any mortgage at all?

Experience iconclast. The majority of New Zealanders are on pathetic incomes compared with Australia for example and the cost of living is going up by the month. How could they save $800,000.00 or so. There are only a small minority who have that kind of cash.

You're in Hamilton right? Next time you're in Auckland take a trip over the bridge to Northcote and Highbury and spend some time there .. have a good wander around the shopping centres then hop back over the bridge and spend a leisurely hour wandering along the length of Dominion Road from Valley Road to Mt Roskill. Don't look at the property. Look at the inhabitants.
 
And in case you didn't notice, there is a Christchurch High-Roller in town making a serious number of $1m purchases without finance.

There are people with money alright, I have one client ex Christchurch with in excess of one hundred rental properties purchased in the US, effective yield of 19% across the portfolio.
Most days you will find him in Auckland, only bought a couple with cash...  in central Auckland pre Christmas, one for him and one for his daughter.

There's a lot more than one wealthy Cantabrian buying property in Auckland!

Is this graph adjusted for inflation?

That median graph is looking pretty flat over 5 years. Is May just noise amongst a peaking trend?

Why is it a surprise when interests rates are so low, and tax laws are still too favourable to property.

Deeelightful newz from the streets of Auckland ... lotsa "funny munny" flowing through the big 4 plus our little pet Kiwibank and all the way back through to mmmwaahhhh !!
I am getting truly excited at the thought of the increases of cash flow that are coming MY way..salivating at the thought of more idle days luxuriating at my estate on the shores of Kaanapali on the beautiful island of Maui ... while you, the little plebs slave your guts out making those rent/mortgage payments .... one of the same thing ....haw haw.
UP UP UP !! they go ..where they stop, no one knows
Think I will pop open a bottle of Cristal Brut 1990 "Methuselah" at a mere US (of course !!) $ 17,625 a bottle to celebrate.... aaarhh tastes devine
The weather in little ol' Aucks is a bit kwappy at the moment .... time for a another long weekend, (even though it's only Tuesday) so off to Maui tonite ... bliss
Toodle pip and enjoy slavery ..... fools haw haw
sent from my iphone 7 ...ahead of the game.. of course haw haw
 
 
 
 
 

Love it Champers.....! enjoy your Crystal Brut and do be wary of falling coconuts...as I think gross consumption would be the only fitting end for a good felow such as yourself....although,... a short excruciating bout of the gout may be required to atone as an entry  fee to the Great Kahuna in the sky.
 

He really should have his own section here @ interest.co.nz  ....
 
.....  highly entertaining & inspirational ....

Yes the Government and Banks are in cahoots trying to wait out the debt crises through unprecedented low interest rates. Government and Councils continue to suppress the release of land, to protect property prices and to stave of a market crash.
Fundamentally NZ has over borrowed for property speculation post the 87 share market crash whci drove up prices, not through NZ created economic wealth.
Housing/shelter needs to fall in line with what the local economy and people can afford for NZ future.

Will be interesting to see what happens from mid next year, when rates start to go up and either loans coming off their fixed terms or people looking to buy at such high prices...!!!

We're in the money!

Chris Rea said it all a coupla decades ago: Road to Hell
 
"And all the roads jam up with credit
And there’s nothing you can do
It’s all just bits of paper flying away from you
Oh look out world, take a good look
What comes down here
You must learn this lesson fast and learn it well
This ain’t no upwardly mobile freeway
Oh no, this is the road
Said this is the road
This is the road to hell"

And he's also said
"Fool if you think it’s over
I’ll tell you why
New born eyes always cry with pain
At the first look at the morning sun
You’re a fool if you think it’s over
It’s just begun.."

 

My predction is that the house price will increase 30% in next two years. If it is not increased by 15% by the end of the yeay, I will adjust my prediction to 15% increase in two years.

If it does that, I'm moving to the UK.

Talking about putting your eggs in one basket iconclast . What kind of return do you get on $1,000,000.00 rentals in Auckland as presumably he will not be living in all of them? Are you saying the price thing in central auckland is being driven by immigrants?

We were getting $1000/wk on our $900K home..
One of my sibblings still got a house in Parnell, they bought it for 800,000ish, 4 years ago and they are getting $1350/wk..  Admittedly this is a renovated home and income bungalow (5br in total) - IMHO it's under rent - but he is thinking of selling it and at the moment he should get around 1.3 mil..
 
Anyway, you are an ex-agent you should know this sort of things!

Not a very good return Chairman Moa especially if you are covering rates, insurance and maintenance. Does it cover your mortgage?

Yes, because we had a managable mortgage.. sold it few weeks ago.. 
 

If this keeps up we will have an Iceland/Spanish/Irish outcome sooner than you think .
The main problem is that a wild bunch of foaming-at-the-mouth amateurs are buying up all the slums in South Auckland in the belief that this is where the money is, egged on by self promoting spruikers who are coining secret commissions hand over fist.
They are all heading for a disaster. South Auckland, is populated by low wage workers and beneficiaries who cannot pay more while wages remain low and benefits are virtually frozen.
Olly Newland has repeatedly said that buyers should stick to the leafy suburbs in older areas to get the best rents and the most capital growth.
Better one good property than an "Empire of Rubbish"
 

Brilliant - LOL, well summed up, thats about the truth of what going on in the market.

Big Daddy, you should have realised that not everyone can put their houses on Park Lane. Inevitably, some of those you urged to get into things, were only going to be able to afford Old Kent Road.
Or a miniscule share of 49% of a utility.

This is what happened during "sub prime mortgages" lending to people who really can't afford it.

ssshhhhhh 2 Tooth Bora ... don't mention that to the banks, remember the NZ (and Australian) mantra .... our banks are doing very well and are very 'robust"... yeah, based on a pile of over priced residential property.... this ain't no different to anywhere else on the world and is confirmed with the fact NZ has one of the highest private debt ratios in the OECD .. but the banks won't tell you that .....remember "we live in your world" .... now there's another Tui ad.......hahaha

these banks should be sued...... how can they go scotch free.

Scotch free ! ..... .. lucky buggers to have a drinks cabinet .......
 
...... given the sort of gob-shite coming out of Wellington , Jolly Kids's team appears to be a " drinks cabinet " ......
 
Free the Scots , och aye .

Lots of paralells between London and Auckland property markets? Both part of a two-track property story with slow or no growth outside the city, lots of foreign investment, wealthier areas doing very well, massive private debt ratios. But in NZ the banks seem to be still shovelling money at people which is the interesting story. 
 
 
London - http://www.guardian.co.uk/money/2012/jun/12/house-sales-plummet-surveyors
House prices continued to decrease generally in May as 16% more respondents reported falls rather than rises, a reading which has remained negative since June 2010.
London, which has had strong demand from overseas buyers, was the only area where more surveyors reported price increases rather than decreases, continuing an ongoing trend.
Rics housing spokesman, Peter Bolton King, said: "Ongoing economic instability in the UK and overseas has continued to undermine consumer confidence, and the reluctance of many banks to offer affordable mortgage products has created something of a stagnant market.
"In spite of this, a gradual stability is returning to the market and surveyors expect transaction levels to increase over the coming months, even if prices continue to dip across most parts of the country."
<end>
 
Do kiwi banks not get nervous at all? DH's comment above was interesting:
House prices up and (according to the little covered news from Terralink) mortgagee sales also trending up (524 mortgagee sales in January to March, topping the 2010 equivalent period record figures). So what's going on? My guess is the banks clearing out their backlog while the market is buying.
What is the view of the banks to housing related risk? Or is it just goodtimes all round?

While soverign debt goes through the roof, interest rates are at record lows, money printing has gone mainstream and people think the future is rosey? Go figure: http://j.mp/L32BnJ

ONe more thing for those that can't see the problems ahead check this out: http://j.mp/L35rJw

Although rationally speaking house prices in NZ and esp. Auckland are irrational, it is also hard to see, how the madness could end any time soon.
Thru politics of financial repression and massive money printing politicians and their servants in the central banks have been manipulating interest rates downwards, and there is currently no indication this trend would reverse in the next years. You would have to be quite an optimist to think that the US, UK and Europe would suddenly be blessed with new, job and prosperity creating industries to put an end to the "crisis" and complement trillion of printed Euros and dollars with actual value.
Hate to say it, but there is just too much cheap money out there for the NZ housing market to correct.