Real estate market finishes strongly in 2012, median price $389,000 up 9.6% on same month a year ago, Auckland up $50,000 in a year

The New Zealand real estate market showed median price gains on $34,000 in 2012 on a national basis

House prices rose another 1.5% in the month to December, reaching a new record median of $389,000 on a national basis, according to data released by the REINZ today.

There were 5,754 residential transactions in December, the most for a December since 2006.

It took 32 days for the selling agent to sell a house in December, one day fewer than in November and three days fewer than the same month a year ago.

The Auckland market median prices rose 10.3% over the year, Wellington prices rose 5.3%, and Christchurch prices rose 8.0%.

Auckland prices fell $5,000 from the record level reached in November.

263 properties were sold in December for more than $1 million, representing 4.6% of all sales in the month.

Sales of houses under $400,000 fell to 51.9% of the 5,754 total sold in the month. This is the lowest level ever for this category, and will clearly fall to below half early in 2013.

Here is the commentary release from the REINZ.

The national median house price reached a new record of $389,000 in December, up almost 10% on December 2011.

Ongoing strong demand drove robust sales volume growth in the residential property market during 2012 with the number of sales up 21 per cent on 2011 and at the highest level since 2007.

The Chief Executive of the Real Estate Institute of New Zealand (REINZ), Helen O’Sullivan, says that despite the strong growth in sales volume, the number of sales compared to the total number of dwellings in New Zealand remains well below the long run average and substantially below the peak volume of 2003 when more than 120,000 residential properties were sold.

“ A new record median price and robust volume growth saw the New Zealand real estate market end 2012 on a strong note and positioned for those trends to continue into 2013. The key drivers in 2012 were the Auckland and Canterbury/Westland regions, which together make up over half the real estate activity in New Zealand, where supply constraints resulted in significant price gains that have not been achieved elsewhere. The strength of these two regions is starting to spill over into other parts of the country with Central Otago Lakes and Wellington both seeing more invigorated markets, particularly in terms of sales volumes. ”

“A key development during 2012 has been the growth in sales by auction, with the number of properties sold by auction growing by more than two-thirds compared to 2011. The growth in auction sales has been particularly strong in Auckland where almost two of every five sales are now by auction. The trend in auctions is evidence of the continued tightness of some parts of the residential real estate market where demand is increasing, but supply remains constrained.”

Sales Volumes

REINZ data shows there were 5,754 unconditional residential sales in December, an increase of 438 sales (+8.2%) compared with the same time last year and a fall of 22.8% compared to November 2012. On a seasonally adjusted basis December’s sales were about in line with November and 14.8% higher than December last year. Eight regions recorded increases in sales volume compared to December last year, with Northland recording an increase of 37.2%, followed by Auckland with 18.7% and Central Otago Lakes with 18.4%. All regions recorded falls in sales volume in December compared to November – as is usual due to the short trading month - with Northland recording the shallowest fall of 8.8% followed by Nelson/Marlborough with a fall of 11.2% and Canterbury/Westland with a fall of 11.3%. Auckland and Canterbury/Westland together accounted for slightly more than half of all properties sold in December.

Prices

The national median house price increased by $5,750, from $383,250 in November, to a new record high of $389,000 in December, an increase of 1.5%. Canterbury/Westland’s median house price moved up 1.7% compared to November to a new record median price of $351,000, although Auckland’s median house price eased by $5,000 to $535,000. The national median house price is up 9.6% compared to December 2011, while the Auckland median price is up 10.5% compared to December in the previous year. For the month of December, Nelson/Marlborough recorded the largest lift in prices for the month with an increase of 8.3%, followed by Central Otago Lakes 5.9%, and Taranaki with 5.4%. Compared to December 2011, Auckland recorded the highest lift in prices with an increase of 10.5%, followed by Canterbury/Westland with 8.0% and Northland with 6.3%. The REINZ Stratified House Price Index, which adjusts for some of the variations in mix that can impact on the median price, is 6.7% higher than December 2011 and eased 0.6% compared to November. The Christchurch House Price Index set another new record high in December and is up almost 12% compared to December 2011.

Days To Sell

The national median days to sell improved by one day in December compared to November, from 33 to 32 days, with the number of days to sell also improving by three days compared to December 2011. For the month of December, and for the third straight month, Canterbury/Westland recorded the shortest days to sell at 28 days, followed by Auckland with 29 days and Wellington with 30 days (also for the third straight month). Northland recorded the longest number of days to sell at 60 days, followed by Waikato/Bay of Plenty with 52 days and Central Otago Lakes with 51 days. Over the past 10 years the median days to sell for the month of December has averaged 33 days across New Zealand.

Auctions

Nationally there were 1,102 dwellings sold by auction in December representing 19.2% of all sales, a slightly smaller proportion than the 20.7% sold by auction in November. For the 12 months to December the total number of auctions reached 11,950 or 16.1% of all sales, compared to 7,101 or 11.6% of all sales for the 12 months to December 2011. Over 2012 the number of Auctions grew by 68.3% with the rate of growth reaching 86.9% in the Auckland region and 33.2% for all other regions combined. Transactions in Auckland again dominated the auction market in December, representing 73.6% of the national total of auction sales. 37.4% of all dwelling sales in Auckland were by this method in December; this was up strongly from the 24.5% of sales by auction in December 2011. Sales by auction in Waikato/Bay Of Plenty accounted for 7.9% of the national total, Canterbury/Westland accounted for 10.7% of the national total, and all other regions combined accounted for the remaining 7.8% of auction sales in December 2012.

Jane Turner, a senior economist at ASB Bank has made the following comments:

 

House sales dipped slightly in December, down 6.7%, but remain broadly steady on a trend basis over the past few months.  Housing demand has picked up over the 2012 – initially led by Auckland and Canterbury, but there is now evidence of improved housing market conditions in other regions as well. Over the past few months, housing turnover has remained fairly steady.  However, the number of new listings has remained very low (particularly in Auckland and Canterbury) and low supply may be constraining the number of house sales.

The median number of days to sell has remained fairly steady at 36 over the second-half of 2012. The number of days to sell is generally a good guide to the balance between supply and demand, and hence house price inflation.  As an indicator, it suggests the annual rate of house price inflation should stabilise around current levels (currently around 6-7% on a nationwide basis).

Those areas where supply constraints are most acute continue to register stronger increases in house prices. Auckland house prices are up 8.6% on year-ago levels. Auckland prices did record a dip over December, but this follows strong growth over October and November. House listings data indicate new supply remains very low in Auckland and this is likely to continue to place upward pressure on house prices in the New Year. Canterbury prices are up 12% on year-ago levels, having recorded strong growth in house prices over the past few months.  Anecdotes suggest there has been an increase in buying interest in Canterbury, but supply remains tight. House prices have also started to lift in other areas of the country, although to a lesser extent than Auckland and Canterbury.

Section prices have eased over the past few months, after strong increases in August and October. 

Implications

REINZ figures suggest the housing market remained fairly steady over December.  Encouragingly for the RBNZ, it appears the housing market did not pick up any new momentum having stabilised over the past few months.  Nonetheless, new house listings remain at very low levels and the imbalance between supply and demand should continue to underpin further increase in house prices, particularly in Auckland and Canterbury where supply constraints are most acute.

At the December Monetary Policy Statement, the RBNZ commented it was comfortable with recent housing market developments, particularly in the context where credit demand remained subdued.   Nonetheless, the RBNZ was more wary of the risks a stronger housing market could present to monetary and financial stability targets.  There are indications that credit demand has started to pick up.  The RBNZ will be watching housing market and credit developments closely over the coming months.  If pressures were to intensify, the RBNZ may consider the option of using macro prudential tools to ease pressures in the market.   We continue to expect the RBNZ will leave to OCR unchanged at 2.5% until December 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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41 Comments

With no new supply cheaper than existing homes, this thing ain't over either...

I don't understand this comment, how can new supply ever be cheaper than exisiting homes?

  • As house prices rise so do section prices
  • People will always pay a premium for a new home

Hence you don't understand why prices will rise...

Feel free to enlighten me... I'm keen to know why you would expect people to pay more for an old house than a new build.

Thing is Julz, when an existing property has more going for it than a new one, it is likely to sell for more. There are countless reasons why it could be better.
 

I assumed this comment was comparing like for like "With no new supply cheaper than existing homes, this thing ain't over either..."
Otherwise the comment is meaningless becasue there will always be existing homes in rough areas selling cheaper than new builds?

To put it simply, if the equivalent new house costs x% more than the equivalent existing house, then until the price of the existing house rises more than x% there isn't going to be much incentive to increase supply.
Hence at present with increased demand (due to EQs, leaky homes, immigration), increased costs of building, and the cost of an equivalent new home perhaps 30% above the price of equivalent existing ones (in areas where there is demand) then we have a situation where prices must rise in those areas with demand.  End of story.

I still have to dissagree with this logic, I would happily pay 30% more to get a new home instead of the equivalent rubbish out there and so would many others.  If they ever get anywhere near equivalent in price the exisiting stock would be totally over valued.

I'm talking equivalent houses.  Would you rather have a bog standard GJ Gardner brick and tile or a renovated Victorian villa or Edwardian bungalow??  I know what I'd prefer, and most discerning buyers would agree...
 
Obviously I'm not comparing an unrenovated property with a new house because if I was, the price difference may well be double or triple (especially in smaller towns where house prices are relatively low).

I agree with that, most people would rather have a character filled home that was properly renovated than a bulk standard brick and tile.  If that is the comparison being made then I would say we are already at the point where new builds are cheaper than existing stock.
Renovating those older homes is expensive, it's already significantly cheaper to build new than to buy an old house and bring up to new standard. You have to pay market rates for materials and labor after all but you get none of the efficiencies that are achieved by large home build companies. 
Superficial renovations will be cheaper than building new of course but without a new roof, new cladding and foundations you will still have future issues and are not comparing like for like.

$389,000 is still pretty cheap for accommodation, security & a bit of land. 
Try Sydney @ 1.7 milion for 1/2 a house in a nice suburb.  Or Taipei at 2 mill for small apartment. Singapore, Vancouver all a lot more expensive. 
 Provincial NZ house prices have never been cheaper or more accessible for young couples with jobs.  

errr...
ppl there earn a lot more than NZers do as well, right?
 
and you compare a house in the middle of nowhere in NZ with a house in the heart of big cities.

So that's $389,000 across the whole of NZ. Let's put that into perspective.
 
Average house price across the whole of the UK is £168,000 according to latest reports, which is about $320,000.... that's in a country with much greater land scarcity than us, and higher salaries
Property is expensive here.... I'm sure it's more expensive in Hong Kong, Singapore, Monaco etc. But then in Butthole Mississippi I bet it's also far cheaper.... compare apples with apples.

Putting it in perspective...... who wants to live in the Uk. clearly not all the poms on Aucklands Northshore.... We can compare things until the cows come home, sit on the fence and analysis the crap out of something. 

The average UK house is also an 80m2 terrace on 150m2 of land.
 
Keep it in perspective...

So it's a bubble isn't it....blown on the cheap credit and low supply...more profits for the banks...larger sums borrowed...stands to reason.... I remember a politician named Bill saying something about affordable housing....must have been a dream
Gosh Bill...time to recall the housing affordability working group...for another round of BS.

Up up and awaaaaay.
Another 10-15% for 2013.
Meanwhile yields going lower and lower on the commercial side.

Bernarnd & interest.co.nz editors - I told you so.

Umm a bit off topic there?? but its great as far as I'm concerned.  Its a pity to watch fine companies get scooped up and saddled with too much debt, wrecking them.  And i'd prefer the government to get its fair share of tax but not so sure this will make iota's worth of difference.
 
back on topic it will be interesting to see what happens to the market and prices IF the OCR and swap rates ever go back up to more normal levels.  That and the accelerating pace of building.  No one is arguing that house prices here are high relative to income or rents - but its more about the structural elements that support those high metrics, and how they are gradually changing (or not).

So doesnt lower yields = greater stress? 
regards
 

Not Really. Comercial is pretty simple in one way. lower interest rates = lower yeilds required for profit.
Because comercial buyiers see lower interest rates for the forseeable future, they can afford to spend more on a property and still make a profit. This is also combined with the difficulty finding good returns in other investments.
 

I'm seeing a lot of retail for lease signs around the north shore at the moment one shop has been vacant for a year.

Yes, so am I.
Malls putting those pretty tapestries over empty fronts or plastering agents bill boarding is becoming more and more common.....\
regards
 

Yup, retail is definaltey a tricky place to be. A lot of adjustments happening there - due to the recession as well as virtualisation of both retailing and many products.
For example I Just tried to book something through a travel agent (hoping for some advice on possibilites) and I couldn't belive how antiquated and limited thier service seemed compared to online. I guess they are still surviving on business bookings and oldies.

For those not relying on a greater fool, renting demand is Auckland is down and supply is up so I would expect  rental prices will stay even and choice increase or will start to fall.
Either way, not good news for a property investor.

but most are not investors, they are gamblers aiming to find a bigger fool.
regards

"Nonetheless, new house listings remain at very low levels and the imbalance between supply and demand should continue to underpin further increase in house prices, particularly in Auckland"
 
That sounds to me like very good news for property investors.  Not sure where you heard that Auckland rental supply is increasing; to test your theory you should try and rent a house in Parnell or Ponsonby. 

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10859004
NZH today. Supply up 8% in Auckland but demand down 18%
 
I'm leaving my 2 brm Ponsonby apartment in a prime location. Agent had open home for prospects. Only 4 parties in an hour.
 

Sheeple listen to Olly, SK, Big Daddy and other fine intellects, buy up lots of property and rent it out, rental market becomes oversupplied, rental incomes start to fall causing prices to start falling, panicked landlords sell causing prices to fall further, NZ Herald runs out of stories to print.
 
 

Esprit first noted an easy time finding rentals back in Nov, and I chirped in saying this is pivotal confirming my feeling immigration etc is not the driver, and that what we are seeing lately is simply an ownership shift. IE: People who were previously renting now own, leaving rental properties vacant. This will increase supply and soften rent prices.
 
If/when rates move up people will then realise their ownership experiment has left them with an asset that by then may be falling, while renting will be cheaper. They will then cut their losses, sell and go back to renting.
 
It's pivotal because most people out there live hand to mouth and have no choice but to always look for the cheapest option week-to-week, regardless if it means owning or paying rent.
 
So predictable.

In any market regardless of the conditions, there are pockets fo expensive housing and pockets fo cheap housing.  Some parts of NZ the house prices don't make sense and are too expensive. In other parts of NZ the house prices are dirt cheap and limited downside risk.  The government can help reduce building costs by increasing competition for building materials in NZ.  In Australia the company "Masters" is popping up everywhere.  If the government can encourage Masters to NZ then they can be competitve with Mitre 10, Bunnings and drive down costs even lower, so DIY can stay cheap.  This will create jobs also even if it puts pressure on Mitre 10 and Bunnings profits.  Its cheaper to build in Australia than NZ as the building costs in Australia are 30% cheaper than NZ.   House prices should continue to rise for the first 6 months of the year and then the appreciation in house prices will start to cool down in the cities in the second six months of the year.
 
 

Building supplies is one thing that should be cheaper but we also need to increase the number of skilled tradesmen working here.  Margins for builders, sparkies and plumbers are extortionate and a big reason that new builds/extensions are so expensive. 

H123 - as I just wrote in the Morgan thread; step back one.
 
All those building materials, all those 'tradies', all their utes and tools, needed oil to be supplied, processed, gotten to site, otten made-of.
 
Oil has gone from $30 to over $100 in 10 years. Expect more costs. More precisely; expect incomes to purchase less, physically - regardless of their numerical expression

You can still buy a 3br house in South Waikato for under 200K with a full section..

Maybe we should make NZ a tax free haven like the Bahamas or Cayman Islands and ecourage the rich to invest here if its tax free.  Then we can all have tax free salaries and we can feel richer.  Then with our tax free salary we can hire the unemployed to clean our house, cut our lawns and wash our cars.

In NZ December and January are the main holiday months.
During the holiday period - most people prefer not to move house.
After the holiday months - students return to university kids return to school and adults return to work - this is when residential rental demand returns.
SK.

The figures are year-on-year so the rental demand is down and supply up on the same period last year.

Yeehah I'm rich
Roll on housing inflation in Auckland
Agree with SK - Auckland up 10% this year
Any one else want to put their 2013 prediction in
Happy new year

People will pay premium prices to acquire homes close to the water – and of course supply is scarce. New Zealand’s land expanse is tiny; the terrain is mostly mountainous and actively volcanic, so that reduces the spread of development of housing estates and I believe this is what keeps prices in check.

We can’t compare real estate value there to those in popular cities around the world. But if you do so with regions that encompass similar geographical tendencies, then property ownership is still quite reasonable in NZ. Let’s hope developers don’t try to hammer in more houses and destroy the beautiful landscape, and tell us they are catering to supply and demand.