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Barfoot & Thompson reports March sales slightly down on year ago figures; median price surges $32k to $652k; market still distorted by fewer low-end sales

Barfoot & Thompson reports March sales slightly down on year ago figures; median price surges $32k to $652k; market still distorted by fewer low-end sales

Auckland's largest real estate firm is reporting a record median price for house sold in March - though the figures still appear to be skewed by fewer low-priced properties being sold.

Barfoot & Thompson said today that for March the median price hit $652,000, up by some $32,000 in just a month and beating the previous high of $629,000 in December. The latest median price is up some 13.4% on the figure at the same time a year ago, though it is worth noting that the February median of just $620,000 was actually up 17.9% on the comparable figure 12 months earlier.

The average price also hit a new high water mark in March 2014 of $725,728.

However, the numbers of lower priced properties sold were still at much lower levels than a year ago - a trend that has been apparent since the Reserve Bank introduced 'speed limits' on high loan-to-value lending in October. This has meant that a lot of, particularly first-time buyers who would have been in the market for lower priced houses, have withdrawn. And this is skewing the overall average and median figures.

B&T sold 1392 houses in March, which is down from 1430 last March - though that had been the best March for a number of years.

A big perceived problem causing a squeeze on house prices in particularly Auckland has been a shortage of listings.

B&T had 1705 new listings in March, which was well up on the 1476 new listings in the same month a year ago, and  is the highest for a March since 2008. According to ASB estimates the latest month's figures were up 7.9% on a seasonally-adjusted basis.

Yet despite that, the firm's month-end available listings dipped to 3570, from 3674 in February and the number of available listings is fewer than the 3721 available as at the end of March 2013 - when there were already serious concerns about a shortage of listings.

However, the month-end figure does represent an improvement on the lowest recently recorded figure for B&T, which was 2837 as of July last year.

Latest Realestate.co.nz figures have suggested that the critical shortage of properties for sale in Auckland may be easing, slightly.

ASB economist Daniel Smith said the B&T March figures suggested that, while activity partially rebounded over the month, sales remained well below the level seen before the RBNZ’s LVR restrictions came into effect.

He did say, however, that sales of properties below $750,000 did lift by nearly 9% from February "but are still around 20% below the level seen before the restrictions came into effect (according to our own seasonally-adjusted estimates). Despite the partial rebound in activity, the restrictions are clearly still being felt".

Smith said if the apparent lift in the number of homes coming on to the market was sustained, supply pressures may ease a little over 2014.

"But even in relation to the lower level of sales, total inventory remains very low. Strong inwards migration will only exacerbate the structural shortage of housing in Auckland."

Smith said housing market pressures had "clearly eased" in the six months since the RBNZ’s LVR restrictions came into effect.

"Price growth in Auckland seems to have peaked in Q3 2013. We expect house price inflation to continue to slow over the next year or two as higher interest rates take hold and, eventually, greater construction activity adds to supply. But a lack of supply means prices will still be rising."

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36 Comments

Yippee and Yippoo - we're all gonna be Rich!

Let the good times roll ! Money for jam really isn't it.
SK

Looks like Olly Newland's predictions made a year or two ago, that house prices in Auckland could double, could be coming true more quickly than even he thought possible.
.

SK and Bigdaddy come out immediately with their usual caring comments. No concern is shown for our children ,grandchildren and those on modest incomes. How will they get onto the ladder in Auckland. Bigdaddy I would not quote Olly as you so fondly do. He managed to get a lot of ordinary New Zealanders to back him when he ran Landmark. Millions of dollars were lost by these people. Ask Olly if he has paid them back from his regained wealth. I think I know what his answer will be. No wonder he wears dark glasses. I would be embarrassed to walk around and be recognised if I was him. Only those who repay people who trusted them are worthy of respect. He will argue the company owes the money not him personally. That does not wash with me. He talks a lot about his personal wealth. Is there not a moral obligation on his part to put matters right.

risk is part of such investments unfortunately.

Risk maybe but Kiwis are too trusting and often do not check to find out whether promoters know what they are doing or not. Clearly Olly did not know what he was doing otherwise Landmark would have survived. It is easy when markets go up in a straight line but when the going gets tough it sorts out the pros from the amateurs.

If only the wealthy are swapping houses then the median price could more than double.
What's happening in the rest of the market? It's dead. It's waiting for vendors to get real and meet the market.

Sydney and Melbourne are booming. Get in while Auckland is still cheap!!

This is borrowed from an article I read earlier this week:
 
Imagine you had a pool of assets, say widget-making machines. If the number of these machines stays the same but the price increases, overall you are poorer as you spend more money for the same utility (cost of making widgets rises)
 
If the number of machines increases, prices fall but overall you are richer as you have gained more utility (the ability to make more widgets).
 
Replace the machines with houses and you will see the fallacy of increasing house prices making us richer.

But as the widget-making machines get more expensive (as the demand for widgets grows, but number of machines stays static 'cos existing widget machine owners dont want anyone elses widget making machine to obstruct the view from theirs etc.) then the owners do find they can improve their machines dramatically without overcapitalising which is pretty cool. 

Low priced houses aren't selling, median goes up.
Check out the "number sold" graph. Median will keep going up as long as that keeps going down - until sellers realise that their 1940's crapshack in Avondale ain't worth ten times the average family income!
 

Lies, damned lies, and house price statistics. I'd like to see a more detailed breakdown rather than a meaningless agreggation.

@SK,
Money for jam only if you are sold up and moved somewhere cheaper.  Most home buyers/sellers will be in the circle of housing booming and debt leveraging.  
And remember "Only when the tide goes out do you discover who's been swimming naked"

Not neccessarily. Some people faced with a mortgage that will take 30 years to pay off buy a second house which 10 years later is worth more than the mortage on both - so get mortagage free on their house 20 years early.
 
 
Betting that the main reason houses are expensive won't get addressed (more supply where people want to live) has been paying off.

They do that bob because the mortgage on the rental house is deductable against the earnings.
The mortgage on the owner-occupied first house, is not deductible (consumer, not business).

I had a good piece written this morning btw, in reply to your other house comment, but the timeout fairy ate it.  If I get bored enough I write up a cliff notes version.

Basically Dad buys a house 500k.
Dave buys next door, identical house. 500k.
Dad sells his place for 535k because that's what he hears the markets at.  no alterations.

Dave also sell his place for 535k, so he can buy Dad's place.  He buys Dad's place at market rate.

How much capital gain (profit, ebitda)  has Dave made?

I don't care about tax deductibility (that just makes rents a little cheaper). If you have 1 house there is no advantage in prices going up as per your comment. If you have 2 houses there is a big advantage as the second wipes out the mortage of the first. Knowing that the supply issue will never be addressed while the focus is always on red herrings like CGT tax, interest rates and tax deductibility makes it easy in the right locations.

Basically Dad buys TWO houseS 1M.
Dave buys TWO HOUSES next door, identical houseS. 1M.
Dad sells his placeS for 1.07M because that's what he hears the markets at.  no alterations.
Dave also sell his placeS for 1.07M, so he can buy Dad's placeS.  He buys Dad's placeS at market rate.
How much capital gain (profit, ebitda)  has Dave made?

(in fact he made the absolute capital gain as last time)

I have no idea what you're on about or why anyone would do what you suggest?
 
in the real world a person with a $350k mortgage which will take decades to pay off might buy a second house for $350k knowing that supply won't be getting addressed. 10 years later that second house may be able to be sold for 700k paying off both it's 100% mortgage and the other 350k mortgage. There is advantage in that.
 

haha.  hey Cowboy, you were talking to me, Bob Dringle!  Leave the other Bob alone!

Ahhh Ok.  Thanks for speaking up Mr Dringle.

Sorry about that Bob.  

BTW Bob.   A mortgage is still a mortgage.  Whether it's 6% paid on two lots of 200k, or 6% paid on one lot of 400k makes no difference.

And while it is a concern that a second property (defined as commercial activity) means 100% of rent can be claimed, that is really a question about sole trader activity, and whether a proprietors loan from the business (the extension on the loan used to pay off the owner occupier's domicile) should be permitted at 0%.
 And more importantly, how would you make a decision in such a fluid (undocumented) situation to just what the real size of the borrowing was...especially as the trading entity capital is, by accounting definitions, borrowed from the proprietor, A = L + _C_

for that reasons I personally think homeowner property loans should be deductable, and limited by government mandate (max # per LVR tier, possibly using a higher interest for cases wanting more, the extra fee going to an insurance fund to minimise flow on third party risk).
  However that flies in the government and sociopathic IRD leaders desire to suck out every bit of equity and wealth from NZ citizens.
 

Dad buys house and rents to son.
Son buys house and rents to Dad.
Both claim tax losses.
 
 
 

both have to pay tax or rental profits, and keep properties to rental standard, and take risk based on tenants. sounds fair.

I think I understand your point.  Which is that an individuals house will increase in value, but so will everyone elses house too.  So if you buy and sell in the same market, house prices are relative to each other.
 
 
But, what about the people who don't have houses?  They don't benefit from house price inflation.  They don't think that the rampant inflation since 2000 is a good thing.  
 
We might be able to blame a houseless 50 year old person, and say things like 'tough luck', 'you had your chance', and  'What were you thinking not buying early, and securing your future'.   But can you reasonably say that to a 17 year old coming out of high school?
 
To an unemployed, houseless person, or a young person under 30, that $35K appreciation on a $500K house looks very real !!
 
What makes it a generational war on the young, is that NZ's housing policy has bipartisan agreement.  Labour started it with Helen Clarks incompetence.  It makes the Costa Concordia Shipwreck look good.  Instead of trying to impress the opposite sex while on the job though, she was probably nose deep in social engineering textbooks.  She should have been concentrating on a core responsibility, housing.
Then National came in, with Phil Heatley talking a good game.  But he was all piss and wind.  John Key has done nothing to improve affordability either.....

Happily I am not 'most people', however thanks for the boring cliche!
SK

Here is one for those who are always right...especially on Friday.
Remember the Irish had their fair share of luck, with houses...now try this for a laugh.

 

 

The Irish Millionaire

 

Mick, from Dublin , appeared on 'Who Wants To Be A Millionaire' and

 

towards the end of the program had already won 500,000 euros.

 

"You've done very well so far," said Chris Tarrant, the show's presenter,

"but for a million euros you've only got one life-line left, phone a friend. 

Everything is riding on this question. Will you go for it?"

 

"Sure," said Mick. "I'll have a go!"

 

"Which of the following birds does NOT build its own nest? 

 

a) Sparrow

 

b) Thrush,

 

c) Magpie,

 

d) Cuckoo?"

 

"I haven't got a clue." said Mick, 

 

''So I'll use my last lifeline and phone my friend Paddy back home in Dublin ..."

 

Mick called up his mate, and told him the circumstances and

repeated the question to him.

 

 

"Bloody hell, Mick!" cried Paddy."Dat's simple it's a cuckoo."

"Are you sure?"

 

"Of course I'm  sure."

 

Mick hung up the phone and told Chris, "I'll go with cuckoo as my answer."

"Is that your final answer?" asked Chris.

 

"Dat it is."

 

There was a long, long pause and then the presenter screamed, "Cuckoo is the correct answer! Mick, you've won 1 million euros!"

 

 

The next night, Mick invited Paddy to their local pub to buy him a drink.

 

"Tell me, Paddy? How in Heaven's name did you know it was da Cuckoo that doesn't build its own nest?" 

 

 

"Because it lives in a bleedin clock Mick !!"

 

 

 

 

 

The rich get richer that's for sure.

The rich get richer, the poor get the picture.

That is so funny The Landlord!!

I agree ZZ that you do not need to be well paid or that intelligent to get into property investment. My experience in dealing with such investors is exactly that. Buying a house for renting out to strangers has to be less exciting than watching paint dry or spotting trains. Most New Zealanders do not have the capital or intelligence to get into equities, both private and public, where the real money is made. The average kiwi is relying on residential property  only for retirement. In not being diversified they miss out on so many opportunities to ready themselves for retirement. 

... you're so right gordon ... " switched on " investors can make fat dividends ( fully tax paid ) from common stocks listed on the NZX ...

Those who have the  power  to choose.

But gordon is right, because of the security and stability residential housing is the lowest risk of investment and thus the worst yield (as a market).    leverage increases the risk, and is the only thing that makes it viable.

Residental property also serves as a lowest common denominator commodity (everyone needs it, for shelter etc, there is no real value add to "processing it, rentier wise" apart from adding very low management fees) and as a commodity not many want to pay much for it.  Its universal need also means that as it lifts all other returns must likewise lift, and as they depress so does it.  Because of that it will always remaining at the lowest point on the graph, a starter point for anything else.

... during the GFC , residential property prices across the entire USA averaged a 50 % fall from their peak prices ...
 
That hardly seems to be a " low risk investment " .... in fact , that crash was on a par with some of the largest stockmarket falls in recent history ...
 
I'd love to hear Bernard Hickey's prediction now , his update on the 30 % crash he forecast back in 2009 .... I am begining to take notice of the hickeysterical ones , Bernie , and Steve Keen ...

are they still holding and/or using the asset?
has the loan/investment been called up?

compare this to stocks in Allied Farmers, or leveraged paper gold...or Savings in some european banks...or a variety of NZ expert investment companies...

... alot of highly leveraged families in America did get booted out of their homes ... others just posted the keys back to the bank and left of their own volition ...
 
Many were as wiped out , as bankrupted as stockholders in NZ were who held Allied Farmers shares ...
 
... bankruptcy is kind of alike pregnancy , its a 100 % thing ... either you 100 % are , or it's100 % you're not ...

.... armageddon this niggly-naggly feeling dat the steeper the median Auckland house price graph gets , da closer we is to getting Bernard's 30 % correction .... 30 % or more ...
 
And dat should flush out the cuckoos in dis market ....
 
.... you wonder if they'll take the Northland dairy farmers' defence , and blame the banks , rather than accept personal responsibility for der own greed ?
 
What's that I smell , brother ? .... I's getting de whiff of another bail-out in the air !!!

GBH......it's best to cut the umbilical chord between the Islands........a nice new flag :-) ........that'll take the breeze out of the city of sails........spin....nacker......it.