Inventories on Realestate.co.nz slump in June to 4 year low as new listings stall despite pick-up in sales; Auckland, Christchurch markets strongest on lack of supply

Inventories on Realestate.co.nz slump in June to 4 year low as new listings stall despite pick-up in sales; Auckland, Christchurch markets strongest on lack of supply

Inventories of unsold houses listed on Realestate.co.nz fell to a four year low in June after new listings stalled going into the winter while sales remained stronger than a year ago.

The national inventory of the number of weeks of listings relative to sales fell 17% to 29.8 weeks of sales, which is well below the long term average of 41 weeks.

Auckland's inventory fell to 18.1 weeks in June from 20.6 weeks in May and is below its long term average of 32 weeks. Inventory in Christchurch fell to 16.4 weeks from 20.8 weeks and is below its long term average 32 weeks.

Realestate.co.nz said in its June monthly Property Report on unconditional that the market had firmly moved back to being a 'sellers' market where a shortage of listings and solid demand meant that pricing power was with sellers.

"The ever steepening drop in inventory that has been registering in almost every region for the past six months has now reached a critical point, overwhelmingly leaning the market in favour of sellers across the nation," Realestate.co.nz CEO Alistair Helm said.

“Sales of homes are up 20% year-on-year, but the numbers of new listings just haven’t kept pace, so demand continues to outstrip supply. Each of the key regions – Auckland, Wellington and Canterbury – registered some of their lowest levels of inventory on record in June, simply because buyers have been so active,” Helm said, adding that low interest rates are a factor in the heightened activity.

Inventories had also fallen in Waikato, Hawkes Bay, Wairarapa, West Coast and Queenstown, he said.

“With inventory levels so low, not one region of New Zealand can now be described a buyer’s market, even though buyer demand is what’s driving the market activity,” he said.

New listings fell 16% nationally to 9,689 in June from 11,544 in May.  However, the average property asking price fell 3% to NZ$424,315.

“It will be interesting to see how the ongoing demand for property affects asking prices over the remaining winter months. Although it’s been cold, home hunters are still on the trail of hot property and that will no doubt continue to be on sellers’ minds," Helm said.

Economist reaction

ASB Economist Christina Leung said the Realestate.co.nz monthly property report showed the the housing market remained very tight, "with supply constraints particularly evident in Auckland and Christchurch."

"The decline in new listings nationwide reverses out the improvement seen in the previous month, suggesting the recovery in housing demand and rising house prices are not encouraging potential sellers to put their house on the market," Leung said.

"We expect house price appreciation to be particularly strong in Auckland and Christchurch, reflecting the relatively tighter housing market in these regions," she said.

However, the Reserve Bank was unlikely to act, she said.

"For now there remains little urgency for the RBNZ to raise interest rates, and we continue to expect the OCR will be left on hold until at least March 2013."

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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37 Comments

Funny old world. Especially mine, where supply creates demand.

in my world the forces of supply and demand determine price..... and price is where supply/demand trys to find a balance.
Inventory is the mortal enemy of price.!!
Does not take a rock scientist to see that at the least... property prices are not going to go down....  ( would take a global event to change that dynamic)

Inventory is the mortal enemy of price.!!
 
 
Not in the bond market and where positive carry finance is percieved to be freely available forever.
 
In a world not flooded with central bank promises of infinite purchasing power of securitised assets your argument has all the merit you attribute to it.

What RBNZ promises are those, Stephen? I'm not aware that they have made any.

David B - New Zealand's currency is a derivative of the USD and so I tend not to count on the RBNZ to initiate anything outright - But the FED does just nicely on it's own and is capable of directing actions here when necessary, albeit veiled - we don't have reserve currency status - a fact you have no doubt had rammed down your throat on more than one previous occassion. Maybe you just forgot this time.  

Sounds all a bit too conspiracy theory to me. I don't find you credible.

In the credibility stakes, DB, you're starting from a back marker. Until you get on the pace, perhaps better not to criticize.

It's called Say's Law - which in effect realates that supply creates its own demand...  
You might consider this in light of the iPhone...  before the iPhone no one had produced a phone like that...  supply is created (by Apple) and boom!  demand is created seemingly out of thin air...
Another way of thinking about this is the bigger suitcase theory...  which relates that no matter how big a bag you carry on a trip you will (mostly) always find more than enough stuff to put in it...
Not a funny old world...  just they way things seem to work.

If it's a seller's market, then they should. All of them. All at once.

The capability to build at the same numbers or even the historical average have been lost.
with 2000 kiwi builders now living in NSW and QLD things are only going to get worst. Coupled with the amount of older boys who could be bothered getting a new plastic ticket to allow them to carry out the same building tasks they have been doing for the past 30 years builders will be like gold mines this coming building season.
New Zealand now builds half the amount of homes it did 4 years ago and still declining.
so supply and demand is really starting to show itself now and will compound over the next two years as the realisation hits home.
it wont matter that you can take your kiwi saver funds out for a home because there are no builders building at the bottom end of the market, why would they? the least profitable home with the same regulatory parasites feeding off the project.
Materials, labour, regulatory are increasing greater than wage rises, so if you cant afford a house today, you wont be able to afford a house as its increasing in costs faster that you can accumulate the funds required to purchase.
with no incentives in NZ to build entry homes for developers and no first home owners grant or builders boost for purchasers its no wonder so many Kiwis are heading to Australia for the dream of home ownership. Your new house awaits ,,,in Kawana they are building 50,000 new homes with a new medical university and hospital most of these are entry level homes with that come with State assistance.
soon you will be able to complile a list of new builds in NZ that will be written on the back of a cigerette paper, if you think housing in NZ costs now just wait a year and you may have to fly a builder in to build it.
whats being done,,, not reports actual action,,,imagine if the banking sector halved,or dairy, or tourism, enough is enough when are we going to actually start building.

I agree with u...   Makes u wonder where our Leadership is..????
This has been talked about ...and has been obvious ...for quite a while.
I have a feeling it will becom an issue for our "leaders"...  when it is tooooo late.

I would love to build a new house. But given the costs of building here, I wouldn't waste my time.

Is unsold listings a useful and truthful indicator to demand? Surely demand only happens when there is an increase in the population requiring a house, or a declined in the average number of people per household while the population remains static. In any scenario other than this it is a closed loop, with unsold listings a meaningless indicator of anything other than turnover.
 
There can also be other reasons for low turnover, such as avoiding the transactional cost of buying and selling. Copping 5%+ on agents, lawyers and bank fees is okay when prices are rising consistently, but when they are flat or declining people are less reluctatant to take that hit on their capital. 

you have to look closely at the demographic ages with in the population, if you had a population of 1million and 900 000 are under 20 you dont have many house buyers.
say now you have a population of 1 million and you have 400 000 people who are 25 to 35 marriage age, children age, house buying age.
same population different set of demand for the specific product of Housing.
also its not always about how many unsold houses that are static on the market, its about how many are listed for sale ina period of time.
you are right though that a load of crap overpriced houses will just sit a clutter up data. they are the ones listed on trademe with listing dates of overa year.
if supply keeps reducing then demand must increase.

Or there is a real cost of capital attached to current purchases at the moment -  new entrants find it particularly difficult to raise and then service debt to allow former encumbents out - it will go from a liquidity issue to one of insolvency very quickly. 
 
The government has failed to address the collapsing nominal GDP dynamics with bullshit talk of balancing budgets and curtailing welfare recipients. The cost barriers to productive output are restrictively high and benefit a few - lets look into the beneficiaries of ever rising natural gas prices for instance.  

Stephen,
I Think Richard Duncan has got it right...    He calls the last 40 yrs..."creditism" as opposed to "Capitalism".
Nominal GDP growth has come as a consequence of credit growth.
Because they are always "fighting the last war"... I have no doubt that our beloved leaders will take us into the liquidity trap... and our own vesions of QEI...II...and III.
All they need is the threat of a recession to do this....  and I believe they will.
they have a real disdain for savers.
In a true Capitalistic economy... Capital is largely a result of savings... ( deferred consumption).
In todays twisted world.. they rely of credit growth to increase GDP thru increased consumption and, so called, investment

In a true Capitalistic economy... Capital is largely a result of savings... ( deferred consumption).
 
As it should be.

I am glad some people around here can think, it is all in the meaning of the word really. I have made the comment before about smug property investors who think they are successful capitalists, when they are nothing of the sort. Of course it doesn't only apply to them. Oh and consequences, well I think they will be severe.

Just out of interest here is a Bloomberg description of the type of Ouroboros trading that is being sanctioned by the ECB. Rather unbelieveable, but there you have it.  

I have jokingly said to the better half about buying a house but putting all the risk on the bank. ie: If you had $100K and were going to buy a $100k house don't pay cash. Put $5K down and have a 95K mortgage. Put the $95K somewhere else secure. When there is a deflation in the property market then stop paying the mortgage. Eventually buy back the distressed mortgage from the bank at a fraction its value using some of the $95K. Pretty much the same sort of behaviour isn't it? It is going to get real ugly one day.

Real estate propaganda.  Maybe some propective sellers have looked it over and stepped out of the sale process.  And maybe there are some buyers, but they have decided not to cough up.   You can make any scenario you like out of the data.   Not hard to imagine up some comment that is sort of plausible.
One day I might sit up and take notice  - when I see a comment from the real estate industry that would lead to reduced sales acivity.  But not holding my breath.

I'm only going to say one thing, after reading the articles today. 40 years ago, a 1 income family was better off than 2 income family is today. That statement pretty much speaks for itself I think.

Well houses are certainly selling like hot cakes in Auckland, particularly the good ones. A property about 5 doors down from me listed and sold all in about 1 week. I've never seen a house sell so quickly. Given that the CV on the place was already $980k, I'm assuming the vendor got an offer on it that was to good to refuse, no doubt reflecting the paucity of good properties out there for sale.

Having just sold a low to midrange house in one of AKs best suburbs, I'm qualified to speak.
Surprised how few people looked at it.  Must not be many people looking in midrange bracket.
Look of house seems to take precedence rather than important factors such as ongoing maintenance, solid construction, etc. (As villa owners eventually find out!)
And as for the first home buyers incentive as in Australia - they don't work.  All that happens is sellers raise house prices.  Eg, if you get $25k off Govt, properties go up $25k!  And the new houses are built in suburbs you probably don't wanna live in... no services, no transport... lots of bogans.
 
PS Shame more people don't buy privately.  I would far rather have let buyer off $20k than give it to an agent...

Plasterboard (leaky), busy road, shared drive, steep access or steep yard, no yard, downright ugly - there are plenty of reasons why some houses don't sell!
 
A house with everything right at the moment is getting a real premium and selling faster than most people chasing it can keep up with.

Or they could sell me their property!   I'm still looking for a quality house in mid 4s to mid 5s must be either a good part of ChCh, Dunedin, Queenstown, Arrowtown or Wanaka, or Wellington City, (or in the very unlikely event of something decent being available in Auckland City or North Shore that would be considered too).
 
There is almost nothing decent value about so if anyone wants me to peruse their listing put the link below (I can offer virtually immediate settlement cash offers if it's any good) ...

What do you mean by "There is almost nothing decent value about.. "
 
Do you mean to say the majority of listings in the $450-550K range are overpriced?
 
:-)
 
 
 

Not necessarily overpriced Kate, just not quite what I'm looking for.
 
Perhaps the lack of responses to my fishing expedition indicates most people don't want to sell?  Which certainly seems to be backed up by the number of listings available.

What one person offers does not indicate what the market will pay, people will look at the auction route every time than take your offer...they Want to know they have maximize price

Busy road, in the city?  Who'd have thought!
Shared drive?  Is that really an issue?
Steep/no yard?  I don't like working on the property every weekend.
Ugly?  Fair enough!
You're talking about old school family homes... plenty of us don't want/need that!
 

I am a recent Auckland property seller, the house was in Epsom. I live overseas so we didn't buy another house. I am very sceptical of any talk of houses in NZ continuing in an upward price movement, for a number of reasons. First the midterm outlook for NZ economy is not great, with an unsustainable level of Government borrowing proping up the economy and no plan for replacing this with real income means that some time in the future there will be a major problem. Secondly, houses prices in NZ are high enough to rank NZ as one of the most unafordable when compare to avergage income. Thirdly, the global out look is weak, problems in Europe, US and China will slow growth if we are lucky or blow the whole system up if we are not.
Inventory statistics can be interrupted in many ways, for example after 2008 many companies cancled forward orders for the products they sold, as a result manufactures scaled back production by closing factories. As inventory fell, there was an increase in orders again, that data was interperated as a sign of economic recovery. Turned out it was an inventory replacement excercise only, in response to an over reaction in cutting of orders in the first place. A snap shot of data might make headlines but don't make decsions on it. There is no way you could be any thing but bearish on the current global econmic out look. He is an example why. http://j.mp/L32BnJ

I am a recent buyer in Epsom (and didn't previously and still don't live in Auckland) and I can assure you that current high levels of demand and low levels of supply are a genuine reality.
 
And if you can get a 5% rental return in a premium location with low mortgage rates for the forseeable future, I can't see any likelihood of a downturn - because why would you pay about the same to rent when you could buy?

I do rent when I could buy for the same price. Renting gives me flexibility. If I lose my job, I can move to somewhere cheaper at one month's notice and the only cost to me to do so is a man and van. I also have no unexepected expenses such as repair bills (the landlord is paying to replace a faulty shower as I type).
 
I am happy to wait out the overpriced market. In the first year, I would pay about $10k off of a $500k mortgage. This could be lost by a 2% drop in the market. As we are looking at potentially much bigger drops than this, I will stay renting.

I can't believe you're saying that, don't you know that people who rent are a lower class of people? Don't you want to be a higher class of person? If so you have to buy your own home, whether its a leaky shack or a standalone house or an apartment or whatever, you have to own it to be a better person, and if you don't do it now you will never be able to, so why wait and just get on and do it because you have to at some point, you just have to take the plunge even though its a really scary thing.

oh dear, what does it mean for me? I used to own a 4 br home in Auckland inner west now I am renting a 2br town house in Brissy..  I am spiralling down this class concept.. I am going to be bad..

You're a dirty renter haha

I wouldn't bet on low interest rates for the foreseable future. When borrowed money is in demand as it is now then the current low cost is not a reflection of its real value. QE is keeping global interest rates low and you can be sure that that manipulation will not end well. After all those running the system now are the same people that did not see the financial crises 0f 2008!! The risk involved in betting on house prices to continue to go up is high.