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Barfoot & Thompson reports strong sales in January; median and average prices down; more houses sold in under $500,000 bracket

Barfoot & Thompson reports strong sales in January; median and average prices down; more houses sold in under $500,000 bracket

Auckland's largest real estate firm is reporting more sales of houses in the under $500,000 bracket, suggesting that banks may be starting to ease up a little on would-be buyers with low deposits.

And Barfoot and Thompson's managing director Peter Thompson said with listings at low levels at the end of January, he was expecting more pressure on the city's house prices this year.

Both the median and average prices dropped sharply in January from December when they were both at record levels.

The average was $647,207, down from $700,387 and the median price was $580,000, down from $629,000. The median was up 10% on the same time a year ago, which compares with a more-than 14% rise in the December 2013 median compared with a year earlier.

Thompson said the drop was "part of the normal seasonal trading pattern".

Interest.co.nz figures suggest the drop in the average price between December and January is in fact the sharpest fall since 2006.

However, recent average and median figures have undoubtedly been significantly inflated by a drop-off in sales of houses at the lower-priced end of the market. The removal of large numbers of lower-priced sales distorts both the average and median figures.

The drop-off in lower-end sales has been caused by the Reserve Bank's introduction of "speed limits" on high loan-to-value lending since October 1.

Significantly B&T has now reported higher numbers of house sales in the lower price range, suggesting that banks are loosening up their lending a little.

During January the company sold 334 homes for less than $500,000, or 39.1% of all the homes sold.

Thompson said this was the highest percentage of total sales since the LVR limits were imposed.

ASB economist Chris Tennent-Brown said B&T's Auckland house sales rose 10.4% month-on-month according to ASB's seasonally adjusted estimate. 

"That lift comes after two months of declining activity in late 2013. Seasonally-adjusted B&T Auckland sales had dipped 7.4% in December, and 14.5% in November."

He said that "in aggregate" signs could be seen of  a slightly lower level of activity starting to show in both the B&T and Real Estate Institute figures, suggesting the RBNZ’s high LVR lending restrictions were having some impact on sales turnover.

"More specifically, seasonally-adjusted B&T sales for the months of November to January have averaged 1047, in contrast to 1150 in the three months to September, a decline of 9%"

But Tennent-Brown said that "in sum", the picture was still one of a very tight housing market constrained by the amount of houses for sale.

"...We continue to expect price increases within the Auckland market, despite the decline in median and average prices within the January B&T data."

Thompson also saw continued buoyant conditions.

'Extremely active market'

"All the indications are that the market is building to being extremely active during the first quarter of the year," Thompson said. "January’s sales numbers at 854 are the highest in a January for 6 years."

"The average sales price for the month is up 7.7% on that for January last year, but down 7.6% on December’s, which itself was the highest average price ever achieved in a month."

"New listings at 1228 were excellent for a January, sales at 854 were up 4.1% on those for January last year and 4.5% on December’s, and we sold 91 homes for in excess of $1 million, which is exceptionally high for the first month of the year,” he said.

However, Thompson said the 3371 properties listed at the end of the month was the firm's lowest number in a January in more than 11 years.

"While this number is relatively healthy compared to many months in 2013, to be this low at the start of a year will inevitably increase pressure on prices over the next three to four months.

“Between now and May is normally one of the two high seasons in a year for house sales, and this strong start to the year suggests that the activity levels of 2013 will remain with us,” Thompson said.

'Out of reach'

Labour Party's housing spokesman Phil Twyford said the latest figures from B&T along with those from realestate.co.nz were "yet more evidence" that  house prices were getting "even further out of reach" of everyday Kiwis, in spite of  LVR lending limits.

"House sales data show prices continue to increase, with speculators and the big end of town filling the void left by first home buyers, who have been shut out of the market.

"First home buyers know they are missing out on climbing the housing ladder. It is especially galling when speculators, both offshore and domestic, are making a killing.

"National’s failure to tackle the fundamentals of the housing crisis has meant that even LVRs cannot dampen the market, leaving the Reserve Bank no choice but to raise interest rates. This will only make the home ownership dream even more of a nightmare.

"Last year John Key said of LVRs: ‘I don't think that it's a tool that should be used to write a bunch of higher LVRs for rich people and lock out a whole lot of first-home buyers’. But that’s exactly what they are doing.

"National’s possum-in-the-headlights approach to housing is creating a generation of renters," Twyford said.

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42 Comments

Increasing demand:
"January’s sales numbers at 854 are the highest in a January for 6 years."
Plus
Decreasing supply:
Thompson said the 3371 properties listed at the end of the month was the firm's lowest number in a January in more than 11 years
Equals? Any Economists out there to answer this for us..

There must be an affordability/yield ceiling somewhere!

Wherever the ceiling is - it hasn't been reached yet - some distance to go
Try this TV news bulletin video - affordability? - no problem
http://aca.ninemsn.com.au/article/8793535/overseas-investors-buy-up-auss...

... there is ... but it's impossible to pick the exact top of the market .... more so to finger the particular reason that causes the bubble to explode ...
 
Keep your ear-muffs at the ready .... when you least expect it ( probably when you've thrown in the towel and admitted " this time is different " , Uncle Ollie's right , property will double from here ) ....
 
KA-Bloooooom ...... pfft pfft pfft ..... psssssssssssssssssssssss !!!!!!

I'm not surprised to hear that listings are down, I don't see many signs up these days, do they even bother with signs on the road these days?
 
And Mach, the only place you'll make more money than Auckland houses this year is the NZX tech companies, happy days. 

Come on PI's...very quiet today, perhaps buying up more rentals or recalculating your capital gains?
 

frazz - how did you know?
I really feel for thos FHB'ers locked out of the market by the LVR's.. The goal post is getting further away from them, not closer.

So if you don't have first home buyers, how are you supposed to have second home buyers?

 
Don't worry Muppet, PIs are always nice people willing to help out.
They will step in and buy, thereby helping provide homes for those people stopped from buying by the draconian Reserve Bank rules.

There are still first home buyers out there MK. I didn't say I feel sorry for all first home buyers. Just those locked out by the LVR restrictions. 

Really...I disagree...prices have peaked...keep saving and those relisted failed auction sites will be in reach later this year.
 

Is that what you think will happen or what you want to happen? 
 
Lets do a quick check, existing shortage of properties, constrained supply thanks to the council, further constrained supply thanks to lack of skilled tradesmen, strong population growth, rockstar economy, foreign money pouring in, property investment going mainstream and being offered through investment vehicles.  What direction do you think that will push prices?
 
Don't be a victim frazz and don't believe the nonsense posts in these commentary sections, prices in Auckland will keep going up for many years to come and even when  there is a slow down the prices are more likely to plateau than drop.  Call me what you will but I've been right for years now, see previous posts...

When I first started to read this site there was a lot of commentary warning of the impending 30% drops in property values. I got very nervous because I needed to buy a bigger home but the warnings from commentators were so certain. BH was leading the charge. How could they be wrong? Anyway, I ignored them all and bought another house. Nothing bad happened, in fact the value sky rocketed. 
 
I would say we are looking at a similar situation here. You can bemoan property to income ratios til your blue in the face but values are what they are. In light of everything that Happy has referred to above I think if you wait hoping for big price drops you will be sadly disaapointed. 

Short memories! Significant, real falls occured in 2007-2011. 
"On this basis, real inflation-adjusted house prices have fallen 11.4%, the second largest fall since records began in 1963, a period of 48 years."
http://www.interest.co.nz/property/54470/nz-house-prices-down-11-april-2007-inflation-adjusted-terms-which-biggest-fall-real-h
 

Short memories! Significant, real falls occured in 2007-2011.
 
Fair call rjf. But, that article is exactly the time I was referring to. I bought (my first) property in 2006 in central Auckland. I was 26. By 2011 it was revalued at a higher price, even factoring in inflation. I kept it and bought my second property, the bigger home, in August 2011 - one month after that article was written. It was worth a lot more by last year and I bought another property.  Make of that what you will. The recession was a battle but holding property (in Auckland) was a blessing.. 
 
 
 
 

The comment was really to remind that property prices can fall in real terms. Timing is everything.

Well to start with if you think BH etc is so wrong why come here?
BH's comments looked at the long term trends, things like aging population etc and not we'll blow up tomorrow and lose 30%.
On the other hand I think we'll blow up and we nearly did. What has temp. put off the melt down from yhe GFC caused by record oil prices in 2008 is record low fed interest rates and QEing...yet the debt has climbed higher than at any time in 100 years.
Im not sure on "hoping" more like greatly  worried becaus ewhen the gamblers find their lives and "wealth" goes pear shaped ppl left stnding like myslef will be expected to bail your banks out.
regards
 
 

... this is not a BH fan club , he's Bernard Hickey , not Big Head ( although that gargantuan melon is a wonder to behold ! ) ...
 
And he got his timing badly out .... 5 years later , property in Auckland is up another 20 % , not down 30 % ....
 
... even so , the facts remain , property prices as measured on every metric of investment or on income ratios are staggeringly high ...
 
Good luck to Mr Mac , and all the others who're gutsy enough to play " pass the ticking parcel " in a Bali nightclub ....

I strongly disagree with the median multiple measure for evaluating affordability and values; if someone comes up with a measure that considers all supply and demand side factors (not just one demand side) then we might be able to measure properly.  As for metric of investments, that would depend on your analysis of future capital gains. 

How would you feel about the measure of a countries house prices to countries GDP, as a measure of how much the countries economy is determined/distorted by the housing sector.
Personally I prefer to take it one step further and look at the amount house prices have increased by compared to the amount the economy has increased by, in actual dollars, as a measure of how sustainable the increases are. But most people baulk at a measure where you have to do a year on year subtraction then a ratio as too much maths.
Now, I'm not asking if you agree with the results of such a measure (so am not putting them in this post) I am just asking if you would consider a useful one.

The more factors the better, I'd like to see a measure including everything:
 
Supply side:
number of existing dwellings
new build rates
number or rented dwellings
number of owner occupied dwellings
rural/urban boundary
future development options
distance from CDB

Demand side:
equity starting points
total household income including capital gains, trusts, etc
Interest rates
GDP growth
population growth
migration flows (domestic and international)
rents
M3

and anything else I cant think of right now all considered with appropriate weightings for each.  For example interest rates might be less important than population growth when equity starting point are higher, etc, etc. 
 
 
Quick comment on your tracking against GDP, yes it's useful, but one is cumulative, the other is not. 
 

While the more factors, the better you can model individual variation between house prices, in general it only takes a few variables to get an idea of what is going on with the big picture (as once you have the main ones you are really not adding much with subsequent collection).
Re GDP- that is why if looking at GDP I like to look at annual change- does the annual change in prices in that year reflect the economy changes in that year. It is a good technique even if you are looking at 2 cumulative/non-cumulative things, for example if we compare M3 and value of NZ housing stock, we get a graph like
https://www.dropbox.com/s/jdyv1vkyppkhr45/m3houses.png
and most people look at the divergence from 2002 and go "That's bad"
but if we also look at the year to year change and how much the two have to do with each other
https://www.dropbox.com/s/lmoqu3qll8pf1ko/m3houseannual.png
We see that since 2002 changes in house prices have had little to do with changes in M3, so can say it is being influenced by things outside of M3. That means pretty much anything that M3 strongly influences is already analysed.
As a complete aside, the Reserve Banks spreadsheet of Key Econmic Data
http://www.rbnz.govt.nz/statistics/key_graphs/
is missing Quarter 3 and 4 for value of housing stock (worksheet 4). I had thought they were being slow about updating it, but it now include Q1 2014 while still lacking the two pervious periods, which I am a little surprised by.

The GFC is well worth mentioning; the biggest recession in 70+ years (?) and in Auckland only a 11% drop...  That's following 125%+ gains in the previous 5 years.  If the worst financial crises in history can only shift prices 11% lower, what will it take to achieve the 30%+ drops that are suggested here....
 
I didn't make my money in property but it has certainly been a wildly profitable place to park it.  I should add that I don't advocate high house prices for all the reasons often mentioned here but it is very important to hedge against it. 

I don't think BH would appreciate if we all agreed with him all the time and took his word as gospel. I have a lot of respect for his market commentary and what he's achieved. He's often right, but like everyone not always. 
 
I agree there will be another downturn at some stage in the future. If you are going to talk about it you should state when - this year? Next year? five years time? I don't see it happening for a few more years at least. 

Nothing wrong with making a profit on an investment  Mr  Machialelli,. You cashed it in yet?, plenty of paper profits around. Surprising how quickly they can dissapear when market conditions change. Haha

amazing how fast paper profits disappear when it comes for payout time!

No plans to sell. I'm building a nest egg for my future. No telling what support will be around in 30 years! Rising property prices are a big bonus but what I am really interested in is the rental income in the long term. 

If rental income and investing by the numbers is important to you then you need to be looking outside of auckland.  You can achieve higher yields in growing cities like palmerston north, where long term support from farmers, good university growth, fonterra plant, food HQ and govt. departments moving up from welly (e.g NZTA) provide certain long term growth, and where prices have consolidated over last 5+ years to where they are significantly cheaper and more affordable than other NZ cities.  Look at fundamentals and what makes sense not where the hype/emotion and past 'boom' has been.

Yes good advice. I feel that property in Auckland is a safe bet over my lifetime and beyond though. 

What say you?  This week a 3-bed cottage on a tiny piece of land (297sqm) at 48 Islington St in Ponsonby sold for over 1.7 mil (http://kellands.co.nz/property/soldview/property-for-sale-auckland-city-...)

Whats the earthquake report on the beam over the fench doors?

That's probably $400 to $500k more than it would have been 2 years ago. Told you the inner west was the place to be.

What say you?  A derelict 1940 do-up ex-state on a steep sloping un-usable piece of land at 54 Lingarth Road sold for over $1.2 mil (https://www.facebook.com/photo.php?fbid=458150360953903&set=a.1008014266...)

It's always interesting to observe the spin put on this stuff. Following the banner headlines loudly trumpeting the >700k figures last time as if it was some sort of wonderful personal achievement, we have this mumbled blurb excused with seasonal this and distortion that...Duuurrrhhh!!.
We could all see that last time too.
 Also, see #1 on todays top 10 and note how very shy the whole industry is about recording much less admitting where the money is coming from. Culpable deniability must be maintained.
Asians?, what asians?, we cant see any asians....
...And why anyone imagines that FHB's belong in this portion of the market is just absurd.

Lots of anecdotal evidence about the cashed up Asian buyers but no hard evidence. It's hard to believe that is accidental. You are right, "they" (polis, journos, bankers, agents etc.) can't afford to risk democratic action being taken to stem the flow of cheap foreign money.

How soon we forget our own history
 
Not so very long ago, after the introduction of CER, kiwis could travel, move, migrate to australia without even a passport. Just jump on a plane and go. Not even a visa was required. Just fill in the arrival card.
 
Then, as a result of the criminal activities of one stupid kiwi that all changed
The Australian authorities cracked down and required passports for ALL kiwis travelling from New Zealand to Australia
 
Since about 1995 it became evident New Zealand's loose open door migration policy was being used to get around Australia's tougher migration policies, in that new zealand was being used as a fast-track back-door entry into Australia.
 
Can't get into Australia?
Go to NZ first, wait a year, get NZ citizenship, get an NZ passport, then go to Australia.
 
Consequently, in 2001, Australia tightened its policy again, this time on welfare, medicare, education and other benefits, largely as a result of back-door entrants spoiling it for the rest
 
Amazingly John Key is today meeting with his counterpart Tony Abbott to plead for a loosening of those requirements. It will be interesting to hear Abbott's response to that.
 
He wont get much sympathy from Abbott when Key wont fix up his own leaky boat

P { margin-bottom: 0.21cm; }
Just thinking out loud.
 
What would be the consequences of instead of a capital gains tax, having a property buyer tax. For a NZ citizen first home buyer doing a new build the tax rate could be 0% and an existing house would be say 2%, an existing home buyer trading up could be taxed at 1% for new build and 3% for an existing house, property investors could be 1% for a new build and 4% for an existing build. The trick would be, get the buyer to sign a declaration that they are paying for the property with tax paid NZ dollars. If the buyer is a not a NZ'er and does not want to have there affairs scrutinized they can pay 33% property buyer tax, Might not keep the hot money out, but the IRD can get some of it this way. Anyone who gets caught cheating the system forfeits there property.

one of the better options to date...

http://www.ecns.cn/business/2014/01-28/99066.shtml
The above article explains quite clearly the impact chinese buyers are having on property in Australia, Auckland, London and Vancouver.
Property prices may in fact keep rising in Auckland but it won't be young New Zealanders buying, the reserve bank have made sure of that.
It is quite interesting that an apartment worth 4 million yuan (nz800,000) only fetches the equivalent of $1400nzd per month. Very poor investment. No wonder they are diversifying their investments elsewhere.

I get $1600 per month for my 230k worth of fee simple (freehold) apartment  in wellington CBD.  A lot of indian money is being parked in wellington apartment market down here.  The Indian story is just as big as the china story too.  Wellington CBD will always be more attractive than the Auckland CBD.

How to pay off your mortgage or on the other hand find out what its like to eat in a median value house if you are on a median wage.
Though going by some of the posts eating Indian or Chinese will be the only dining options shortly.
www.eatwith.com

Think yr account has been hacked, looks spammy.
regards