House prices drop by 4.9% in January but market remains strong; Median price NZ$370,000; Number of homes sold up 21% compared with a year ago

House prices dropped by 4.9% in the past month but the overall market remained strong and the median house price was still some 4.2% higher than the same time a year ago.

The Real Estate Institute of New Zealand said that a total of 4993 houses were sold in January 2013, which is the highest number sold during the month in the past five years and is also up some 21% on January 2012. The number of sales nationally in the month compares with 5754 in December. The median time taken to sell a home nationally was 41 days in January, which was six days fewer than the same month last year, but up from the 32 days in December.

Taranaki recorded a new record median of NZ$310,500 in January, up a striking 10.5% on December. Hawkes Bay, with a 7.6% rise to NZ$272,500, was the only other region to report an increase between December and January.

In Auckland, the main driver for the market, the median price fell NZ$509,250 from NZ$535,000 the previous month. However, prices in Auckland last month were still some 8.1% higher than a year ago. During January there were 1800 homes sold in Auckland, up from 1421 at the same time last year, but down from 2167 in December.

Within the central Auckland city area, the median price actually slumped some 18% to NZ$505,000 in January compared with December, but the latest figure is still up on the NZ$486,000 figure reported in January last year. In contrast, prices in the North Shore rose 4.3% in the past month to NZ$626,000 and are now some 14.5% higher than the same time a year ago. Waitakere City also saw a surge in median price in January, up to NZ$460,750 from NZ$442,000 and prices in the area are up 19% on the same time last year.

It is not unusual for national median house prices to fall in January compared with the previous month as New Zealand goes into holiday mode. In six of the last seven years median prices have fallen in January compared with the previous month - although last year the median price actually held at the same level.

REINZ chief executive Helen O’Sullivan, says that the residential real estate market has begun 2013 well, continuing the trend that developed during 2012.

"The residential real estate market has begun 2013 in good shape with a more than 20% increase in sales volume on this time last year," she said.  

"Given the highly seasonal nature of the housing market, prices and volumes tend to ease from their year end levels in January, as marketing campaigns for many properties in the upper price bracket don’t begin until the latter half of the month."

She said that agents across the country were reporting continuing shortages of listings and positive buyer inquiry, even after taking into account the normal slowdown in activity over the Christmas/New Year break.

"The six day improvement in the number of days to sell between January 2013 and January 2012 is indicative of high levels of buyer activity in markets across the country," she said.

ASB economist Jane Turner says the housing sales figures for December and January suggest demand remains firm, whilst supply is still low. "As a result we can expect further price increases in the coming months."

She says the Reserve Bank has become increasingly nervous around housing market developments and the recent acceleration in credit demand.

"The RBNZ will be watching these developments closely, mindful of the risks to inflation and financial stability. We continue to expect the RBNZ will leave the [Official Cash Rate] unchanged [at 2.5%] until March 2014 in light of the gradual pace of recovery, elevated NZ dollar and weak labour market. However, we see a small, but growing chance, the RBNZ uses macro prudential tools later this year in order to try ease housing market pressures."

Westpac chief economist Dominick Stephens said the the "January round" of data portrayed a housing market that has continued to heat up.

"The seasonally adjusted number of REINZ house sales was up 3.5% in January, and is 21% higher than a year ago. And house price inflation has continued to accelerate. The REINZ's House Price Index is now 7.2% higher than a year ago, and Quotable Value's index is 6.2% higher," he says.

"There have been further signs that markets are becoming more buoyant across New Zealand, not just in Auckland and Canterbury. The volume of house sales has risen at least 10% over the past year in all regions of New Zealand except Taranaki (last three months of sales compared to same period a year earlier). And on a monthly basis, January's price increases were concentrated in the North Island outside Auckland."

Stephens says that house prices are once again becoming divorced from rents.

"Back in 2002, a New Zealand house might have sold for 18 years' rent on average. By mid-2007, a fit of speculative exuberance had seen house prices blow out to 33 years' rent. A correction was necessary, and for a few years one seemed on the cards. House prices did dip below 30 years' rent for a while. But in recent years the correction has stalled. House prices are now rising faster than rents, and house prices are once again selling for more than 30 years' rent."

This is the key sign, Stephens says, that physical shortages are not the only driver of today's house prices.

"Physical shortages should affect both rents and prices (witness Canterbury, where rents went through the roof following the earthquakes). By contrast, financial factors such as low interest rates or speculation affect only prices. Today's high-and-rising house price-to-rent ratio indicates that financial factors are at play. Our finger is pointed firmly at low interest rates. The implication of all this is that house prices will keep rising so long as interest rates remain low - but they could fall again when interest rates rise."

 

 

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32 Comments

Yesterdays headline "Strong start to the year for property market"
 
Todays headline "House prices drop by 4.9% in January"

Expectation management effort...?
HGW

Inflamatory headlines aimed at 'selling' more newspapers.  I note that Interest.co.nz moved yesterdays article off thier header when they released todays article.  It's bad enough contradicting yourself day-to-day but doing it simultaneously is just a step too far. 
 
They'll be an equally inflamatory headline when prices seasonally adjust. 

I have a dream that one day unemployment rate is zero and everyone is working for NZ property INC.
 
I have a dream that one day every NZer will live happily on their foreign landlord's property.
 
I have a dream that one day every inch of NZ is on some developer's plan and to be turned into 6 bedrooms residential properties.
 
I have a dream that one day all innovation fund are to be invested in how to sell properties more efficiently.
 
I have a dream that one day all our kids' dreams are either be a landlord or a agent.
 
I have a dream ......

Borrowing Martin Luther Kings' discourse format for such a paltry issue denotes very poor taste on your part Xingmowang, and it is a serious lack of respect for a such notable spiritual leader of a very abused minority in the USA. You should know better
I take exemption at your comment!
It's ignorance at its' best!!
It should be have been censored...
HGW
 
 

Censorship??
 
OMG!!!

My thoughts exactly!!

Both of you show your ignorant disrespect for other peoples' beliefs.
Both of you should be ashamed of your ignorance!
 You're lucky we are tolerant people; we forgive your ignorance...
HGW
 

I am sure you were glad for the censorship when you were abused by other rmembers xingmowang. It now appears they were rightly justified in their sentiment towards you!
Are you one of those landlords you refer to in your stupid little diatribe?
HGW

Do you have any idea on what sarcasm means?
 
Having different ideas? no problem, debate over it.
 
Personal attack? Sure, let's solve it outside.

If you are you suggesting we have a "Mano a Mano," a la John Wayne, you're pathetic!
Maybe you are one of those landlords...
FYI!
HGW
 

Ask not what your country (housing market) can do for you, ask what you can do for your country (housing market)..

As always brilliant, Chairman.
Good context, and from the same era too!
Regards,
HGW

Hevi, surely you jest? If not you need become more familiar with King afore raising him to Sainthood.

Not at all Ergo! 
His plight was not a religous one, but one of civil rigths, and he was assasinated for his beliefs. 
Using his words and context in sarcastic remarks toward something as surperfluous as the housing market is preposterous, to say the least!
I am not a religous person, and to be fair I know very little of the man, but as a person who paid the highest price for his belief, he deserves more respect that he was given. As a matter of fact, I believe xingmowang owes him an appology. 
Regards,
HGW

Hevi, you are too much of a light-weight to be posting on this site.

You dreamed a dream Mr Wang

Here is the latest chart of New Zealand and Auckland house prices versus gold. I maintain that house values have been stagnant for the past 4 years. In fact, they are now around 1992 levels.

Interesting!!

and gold v outlying parts of NZ?
ie gold is possibly in a bubble itself as are many commodities...the Q is what is the speculation/gambling component % of the value of the item / good.
regards

Or is gold up because the dollar is being printed to oblivion?

Well there certainly is a perception from some that printing = inflation.  Maybe after 4 years of printing and having inflation going down if anywhere those who gambled on gold going up to infinity and beyond for zero work may need to think thier putts are not working out to well and their austrian economic model is faulty at this time, unlike Keynesian/Minsky which is doing very well.
There are other aspects of course, but frankly if the gold bugs are still stuck on the first point then trying to mention them is well a waste of time repeating.
regards
 

We could say that about the deflation bugs too...  :)
 

Let us look at the above headlines this way. House prices have dropped 4.9% in January alone. That is damaging. Note though that sales volume is high. Does this mean a strong market? Perhaps it means that more people are selling their houses now as they can sense the market topping. And who is buying? Probably the starry-eyed mums and dads who are getting spruicked by cheap bank lending and who are going to get into deep financial trouble soon. (I have a large distaste for what the banks are currently doing to lure people into high debt situations).

I know a few ppl that have wanted to sell for 3 or 4 years but didnt want to lose even a few $ds of their "paper" profit.  Come the end of last year they found they could sell, but decided not to as their paper profit was increasing....the fear v greed balance is interesting...
NB comparing gold v houses isnt a safe method IMHO.
regards
 

The bubble has burst!
SELL SELL SELL

Haha, yeah right.  I trust you'll be putting your house on the market and selling cheap...
 
Check your stats over the last few decades, January figures taken on thier own are always unreliable (up or down) due to low volumes. 
 
Next months headline "House prices increase 5.9% in one month!" only in the depths of the article will they mention the January decrease and the seasonally adjusted figures. 

Very true indeed! Only 4 months ago I was hearing from the horses mouth, so to speak, Real Estate agents, that the market was in the doldrums, and there was no wind expected anytime soon. It turns out in many parts of the country the property market has been in a upward trajectory for most of the year. My bet is "absolute waterfront" property boon in the next few years.
But who wants another property bubble? As it stands now the biggest risk is Sovereign Debt for the Big Four (currencies), and they are on a "Race to the Bottom." So little risk there as opposed to "subprime lending" a few years ago. The US is entering a recession which will be official in the next few months, but it is mainly due to spending cuts on the war effort in the fourth quarter. The boys are coming home from the Middle East. It's going to be a good year.
HGW

The money shot is:
" The implication of all this is that house prices will keep rising so long as interest rates remain low - but they could fall again when interest rates rise."
 
Ol' Rees-Mogg's (link well rotted, sorry, I blame Gaia meself) four elements of a housing cartel were:
 
"1. license housebuilding, so that no one could build a new house without a licence, or even rebuild an old house or a redundant barn.
2. encourage developers to maintain large land banks in order to benefit from rising prices.
3. leak out new permissions only after long periods of delay.
4. combine this with an unlimited flow of mortgage credit and relatively low rates of interest.

If you restrict supply below the market clearing level and increase funding, you will inevitably create a bubble and you will lock people out of the market."

That's from UK, 2007.
We seem ter have the full deck here.....
 
LBP - check.
Land Banking - check
LG and RMA consent and inspection ineptocracy - check
Lotsa luvverly mortgage credit and low interest rates - check
 
The technical term is, I do b'lieve, a cluster#$%^

Way to Go, Waymad!
That term was well applied by JHK, in the USA, the last time things were OK! 
Then they turned to custard... Ooops! Hopefully, this time is different!!
HGW
 
 

Herald really ought to make its mind up:
Property values up in Jan, gains beyond Akl, Chch New Zealand house values continue to soar but the booming market is no longer being propped up by property powerhouses Auckland and Christchurch. Latest figures from Government property valuer Quotable Value (QV) released today show house values rising 6.2 per cent over the last year and 1.5 per cent over the past quarter.
Property prices fall in January, but up from last year House prices and overall sales numbers eased last month but the property market remains much stronger than a year ago, according to figures out this morning.
Every day there is a article on house prices invariably with a positive spin on the numbers. The obsession is a key indicator of irrational exuberance IMHO.
 
 

Not the case in Canterbury..a very hyped market.