New research shows the proportion of low-end houses being sold in Auckland hasn't actually dropped at all

The commonly accepted and repeated story since the Reserve Bank's introduction of high loan-to-value restrictions in October is that the proportion of houses being sold at the low end of the market has plummeted.

But new research from property information, analytics and services provider CoreLogic, and published on the QV.co.nz website, suggests that's not actually the case at all.

CoreLogic's head of research Jonno Ingerson said rather than the bottom end of the market plummeting since the LVR speed limits came on,"activity has actually stayed stronger than long term averages and above the same time last year".

He said that "clearly" the number of properties worth less than $400k has dropped, and in Auckland quite dramatically.

"But a corresponding drop in the number of sales does not mean that the bottom end of the market has fallen away, just that there are fewer to buy."

Ingerson said a better way to look at the bottom end of the market was to consider the lowest 10% of properties, independent of arbitrary dollar value ranges.

In greater Auckland, the lowest 10% of properties currently had a median value of $430k. A year ago the lowest 10% were worth $375k, in 2007 it was $330k and ten years ago $222k, he said.

To see if the bottom end of the market was in fact less active, CoreLogic looked at what percentage of all sales came from that lowest 10% of properties.

"In the first three months of this year 11.7% of all sales in greater Auckland were from that lowest 10% of properties.

"A year ago it was 10.1%, and around the time of the LVR speed limits there was a slight surge up to 12.1% as people rushed to get in before the limits came into force. The picture is similar across parts of Auckland."

Ingerson said based on CoreLogic's 'E-Valuer', which gives an estimate of current market value for every property, it can be seen that a year ago there were 714,000  residential properties nationwide worth less than $400k.

"Now, with nationwide values rising over the past year, it would stand to reason that the number of properties worth that much would have declined. Sure enough there are now 656,500 of them, a drop of 8% over the past year. So definitely a drop, but nothing spectacular. Looking back a little further and we can see 805,000 properties in 2007 and 973,000 in 2004.

In greater Auckland "the focus of much of this discussion around the number of low value sales" there were currently just over 62,000 houses, flats and apartments worth less than $400k.

"A year ago there were 91,000. That's a drop of 32% in just 12 months. The drop is most significant in North Shore and Waitakere where the number of properties worth less than $400k has dropped 55% in the past year.

"At that lower end there are currently less than 1800 properties in North Shore (the vast majority of which are apartments) and 8500 in Waitakere, whereas last year there were 3900 and 19,000 respectively. Looking back a little further and at the previous market peak in 2007 and there were nearly nine times as many low end properties in North Shore and four times as many in Waitakere.

"When looking at how many sub $400k properties have sold, sure enough Auckland has dropped, with  just over 1000 in the first three months of this year compared to 1700 a year ago and 4300 in 2007. In North Shore there were only 45 sales in the first three months of this year, compared to 476 in 2007.

"In cases such as this where the base stock is changing a better measure is percentage turnover. That is, the percentage of properties in an area selling during a given time period. In the first quarter of this year 1.7% of low end (< $400k) properties sold in greater Auckland. That's only slightly down from 1.9% a year ago, but well below 3.0% at the previous 2007 market peak. Interestingly, during the 2009 recession turnover dropped to 1.2%," Ingerson said.