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Barfoot & Thompson warns that buyers no longer feel pressured to accept high prices as sales volumes decline 21% in October

Barfoot & Thompson warns that buyers no longer feel pressured to accept high prices as sales volumes decline 21% in October

The number of homes sold by Auckland's largest real estate agency declined by 21% in October and the median selling price was also down compared to September.

Barfoot and Thompson sold 1068 homes last month compared with 1358 in September.

October's sales numbers were the lowest since February and come after three consecutive months in which sales were above 1300.

However they were still ahead of October last year when Barfoots sold just 939 homes.

October's selling prices were flat, with the average price of $840,402 being marginally ahead of September's average of $836,402, while October's median price of $780,000 was down compared to September's median of $790,000.

"Since the Reserve Bank announced an equity ratio increase for investors and the Government [announced] new rules for non-resident buyers, market trends have definitely changed," Barfoot & Thompson Managing Director Peter Thompson said.

"Sales numbers are definitely down but it is too early to say whether the changes will have a permanent influence on prices.

"At present the market is balanced and sales numbers and prices between now and Christmas will determine where prices go in the new year.

"Clearance at auctions has definitely slowed, but a significant number of sales are being concluded in post auction negotiations.

"For vendors looking to sell quickly, auction remains the preferred sales method.

"However buyers are no longer under the same pressure to meet vendor price expectations and the properties that are selling are those with realistic reserves," Thompson said.

 Barfoots signed up 1820 new listings in October which was down compared to the 1940 it signed up in September and the 2123 it signed up in August.

At the end October the company had 3264 properties for sale on its books, compared  to 3148 in September and 2957 in August.

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59 Comments

Which data source should I use to report house price?

Barfoot & Thompson or QV or Trademe or Real Estate NZ or .....

If you can I would go to some auctions and get a feel about how many people are turning up and how many are bidding. Be careful though as agents are making bids on behalf of vendors undisclosed. I am aware of one formal complaint to the REINZ where agents did just that. That house is still on the market which is a good thing as the vendors were simply trying to get a stupid price for their house as they had already bought their next home. Agents have had it good in Auckland and some who have got into the industry lately will not have experienced a market where they actually have to do some hard work to get a sale across the line. It has been money for jam until recently. Some vendors will look back and think why the heck they paid their agent so much for so little.

Mainly vendor bids or passed in with no bids or owner being worked over to drop their reserve price before a deal can be concluded.

If sales volumes drop sharply will that be followed eventually by lower prices being achieved. Only time will tell. Maybe there is glimmer of hope for FHBers. If I was thinking of selling I would be getting it done soon as todays news is only going to put more houses on the market.

The pump and dump days are coming to a close. Wheeler and Key dealing Joesphparkers to foreign buyers.

It couldn't continue forever. What happens now?

the ones that cashed up early will be able to go back in shortly and buy

If prices do drop when will you know it is time to go back in as they could drop further. Especially with borrowed money. I find with shares I generally buy a session too early. I wish someone could invent that crystal ball.

Yes we are, keeping the powder dry for now though...

I am down at the Barfoots auction rooms - it's like being on the share market floor in 1987 - almost all homes so far passed in - auctioneers and salespeople ashen faced!

Big blue, there are probably going to be some flash European cars being returned to where they were leased from soon. Good bargains to be had maybe.

From what I saw of obvious owners down there , there is a few that are starting to realise they might have missed the peak. If they have it could become a slippery slope as they try and play catch up.

some of the real estate "professionals" in Auckland have never experienced a challenging market where they actually have to do some work to sell a home. I hope they have not borrowed large amounts of money to play the market themselves. There will be cases where a vendor had no idea of who they were really selling to.

Slash that OCR Mr Wheeler and do it now!

To keep the mad hatters party going - no.
To respond to falling employment numbers and poor commodity prices - that's a different kettle of fish.
Question - If overseas buyers are reacting to the new laws will they start to focus on the stock market as a place to park their "cash".

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No. No. No! Keep the wheels on! Leave the OCR where it is and decrease the LVR for Auckland investors to 60%. Also ban interest only lending to investors and cap loan terms to 20 years (higher principal repayments).

Auckland property needs a good hard slap in the face ASAP.

We can't let Auckland ruin financial stability for the rest of us....

The rest of us ... that nameless, faceless, voiceless, unidentifiable group

No, the rest of us non Aucklanders...

Great time to be a buyer though - or maybe sit on the hands till the new year?

Sit tight for some time and as my broker says do not buy until you see it rising again.

That will be too late, just buy when the price is right for you...

Chris I am presuming you would be personally happy if you thought the market had bottomed out, bought a property then you see it drop another say $50k which you had borrowed and then had to service. Not many people would share your glee.

Trying to pick a bottom is lose, lose. Far better to pick a property when the market is flat as you get more selection and more potential upside. When a market is rising you will have scant chance of buying a bargain.

After 10 years you won't care if values fell slightly... Just don't go buying in peaks...

How do you know it is flat?

That's when houses sit on the market for ages and everyone says it is a bad time to buy, despite it actually being the best time to buy.

In Auckland this was last experienced in 2008-10 and before that in 1999-2001.

It is not yet the time to buy, it may still be up to 2 years away.

Chris that sounds a bit better than simply buying when the time is right for you. I have a relation who has a good deposit and very good income who is looking to buy his first home. Late $800's. Deposit $180k and borrow $700k. He could buy now which I hope he doesn't. How would he feel if he buys now and the house value drops to say $780k. It could as he is looking at average 3 bedroomed houses in average Auckland suburbs. He can do it now but he will be feeling terrible if the price of his house drops significantly. Those who bought in the last few months have the potential to be feeling pretty miserable if their values drop. It is not a great feeling. Baby boomers have experienced it more than once in their lifetimes.

I said buy when the price is right (not the time) which I still think is pretty reasonable advice...

Chris when do you know when the price is right. Surely when there is a trend off the bottom

That might get you buying at a theoretetic bottom of the market but will you buy the right property??

There is always a better property than the one you live in or are looking at Chris. And you should never fall in love with an investment. Why then would you buy when you do not know whether the market has bottomed. It does not make sense especially if you are borrowing funds to help buy the investment. Why pay interest on borrowed money that has gone down a big black hole.

Great time to be a buyer?
Great time to be mortgage free more likely! (either renter or owner who was able to leave the market with capital gains)

The worst thing a first home buyer can do now is being impatient. When the correction (crash) happens it will hit the productive economy and it will translate into more unemployment and lower salaries. Nothing to gain by buying a little bit cheaper (still hugely overpriced though!) when the job prospects don't look bright and, more important, when we don't know where the real bottom is.

I would not only sit on my hands but actually walk away from property market and see how well NZ survives the new global crisis ahead.

Right now.. cash is king.

but where to put your cash with the OBR?

Munti -"When the correction (crash) happens it will hit the productive economy and it will translate into more unemployment and lower salaries" Why? What is the linkage that means this has to happen? I understand a part of it, but the general economy?

Good news for FHB's as Auckland average nears $1M. We could be seeing the plateauing of prices that most sensible people have been expecting. Lets hope so. Further massive price increases or a major decline will be not be good for the majority.

No plans to sell or buy right now but pre-approval sitting there just in case. Anecdotally RE agents have actually been calling me lately. Imagine that!

A major decline would be the best thing in the long run. Families need housing they can afford and people need to learn that housing speculation is NOT a one-way bet.

There is no reason for prices to plateau any more than go up or down. It's a myth.

Lots of affordable housing around the country. Auckland is NZ's biggest city. As with the rest of the world it's going to be more expensive than smaller towns. As much as you seem to hope for it there isn't any reason for a massive Auckland property market crash in the near future.

In the long run housing investment is a one way bet. Speculation / trying to time the market is certainly not without risk.

In the long run housing will track what people are willing and able to pay. There are plenty of good reasons for a correction in the near future. There are also plausible reasons it won't. Let's just wait and see.

I'd have much preferred to see stable house prices than a boom and subsequent bust. But we are where we are now.

So if prices drop 20% that will put us back to where? The start of this year? Not that great for fhb who may have been sitting on side lines for last 5 years.. Most likely they'll end up paying similar prices to 2015 average and see those prices remain static for the next 10 years as they pay tons of interest on a shoddy excuse for a house up there

Glaringly absent from the article are details of the non-resident buyers rules .

Its a game changer , the non-resident buyers have to :-

1) Register with the IRD and get an NZ tax number
2) If they use a company to own the property , govt now requires DOB , and place of birth , citizenship and a whole host of other stuff .

Quite simply , this has caused auction rooms to be deserted by foreign proxy buyers with mobile phones stuck to their ears .

Hopefully the market adjusts back to realistic levels , although those sneaky foreign buyers made find ways through the loopholes using nominees.

The new rules for negative cashflow seeking investors, only come into effect for November, not October.

I think the dooms-dayers need to cool the jets here a bit .. Predicting a crash is a bit of a reach at this stage. More like a drop of about 4/5% but into the new year when the market adjusts to the new criteria (and the foreign investors find the relevant loop holes), it will be a BAU. I'm certainly not an economist or anything close to it, but just an opinion based on observations of the market for the last year or so .. Foreign/local investors are still going to get some good returns, looking at the forecasting of immigration numbers over the coming quarter. As i say, just a non biased observation :-)

I presume you have skin on the table kemistry. As you sound a little desperate to make yourself feel better. No one knows what is going to happen just yet as we need some solid data first. What we do know is sales volumes have suddenly dropped a lot and people are saying that when they attend group auction days there is a lot less activity and numbers attending. If the market does drop off price wise it will take some months to filter through. It also depends how much panic hits the market. Overseas buyers are finding it harder to get money together as the Chinese government is making it harder to get it out as their economy is slowing down and they want to limit how much wealth leaves the country. A lot of people in China have seen their equity portfolios go backwards so they are not so keen to invest like they were. I note "The Age" in Australia mentions today that Chinese buyers are also deserting Australian housing markets. New Zealanders who have bought "investments " with debt will also consider selling to lock in profits and to minimise risk of going backwards further than they can cope with. All it needs is more sellers than buyers and there is some scope for a drop in values. I don't want to put a percentage on it as there are too many factors to consider. Rising unemployment, the dropping dollar affecting overseas buyers and general confidence.If I was a betting man which I am not I would think there is a bit more chance of a drop currently than the market stabilising. You only need more sellers who are worried than there are willing buyers for that to happen. People will say that is then a great opportunity to buy more houses but the trouble is you do not know the bottom until there is an upward trend. Better to give some back to someone than to buy and see it keep going down.

....summed up nicely. Interesting to see if the region prices will follow auk (as in down which I see as a foregone conclusion) or as they are not so far out of whack, just maintain recent rises. Interesting times.

No skin on the line mate .. As i said previously, just an unbiased opinion on how things might play out. (to be honest, i don't have the kahunas to put the equity i have in my house in an investment property, too much stress :-) ) I enjoy reading the articles on this website but there is a huge bias towards "end of the world" scenarios on here for as long as i can remember. I just try and see the wood from the trees

It will take big kahunas to cope with the stress if investors and speculators see their equity going backwards in any significant way. Especially if they are leveraged in any way. Fear is a terrible thing to endure and there will be some fear creeping into the Auckland market as sales volumes fall and evidence of less buyers in the market reaches the ears of those who have overdone it or feel less than confident about their position. I have seen it in the sharemarket several times over the last 30 years. More sellers than buyers and you have some form of retreat. Houses are not easy to sell when the market turns. The big question is how many vendors will take significant losses to just get rid of fear and gain the ability to sleep at night. Only time will tell. It is early days. Many vendors are sitting on significant paper profits. Just how many of them are going to sell and lock in those paper profits. Some will sell now with the view to buying back cheaper. I would be selling everything now other than my home. Not because I think there will be big drop but because I would be happy with the profits I have made and being a trader at heart I would be hoping to buy back cheaper in the future. Pay my tax and think I have done well. I sold some shares today with a 9% profit over one month after brokerage. They ended the day up 5 further cents. No big deal as happy with the 9%.

that is XRO share?

no ZEL Marshal. My broker has always said do not be greedy and leave something in for the next guy. Bought at $6 and sold at $6.54 net of costs. Enough to live on for a month which is nice at my stage in life. Beats being a landlord as no tenants, no costs and I can sell on any day I like.

Agree. Always leave something for someone else and you never lose your shirt by selling early either.

might be the Chinese crackdown on funds alongside NZ measures that is slowing the market
http://www.smh.com.au/business/the-economy/chinese-demand-for-australian...

A correction is required especially to hammer the negative cashflow debt ponzi brigade. Bring in the income to borrowing ratios in as well and lets really get the party started. Hopefully some of the bankers who have been making record profits lending to ponzi brigade will get fired to boot.

There are still good buys around if you are patient and hunt for them, but there has been plenty of vendors asking too much for too little in the last 6months trying to cash in on the frenzy and there was an almost instantaneous effect with the new rules coming in...

Over the last month I have noticed more houses listed in the $300-500K range in auckland so it is a good time to be looking as investors and foreign buyers assess the new rules and figure out how to deal with them which is taking away a significant portion of buyers, and where there is less liquidity (buyers) prices will move more - just like any other market

I don't think prices will crash, but affordability wise - incomes are clearly not keeping pace with house price inflation and it is tougher for FHB's and locals to get into the market than it has been in the past

Also the way that house prices are reported by agents is somewhat misleading - median vs average/ mean makes a difference to how the numbers are viewed

"incomes are clearly not keeping pace with house price inflation and it is tougher for FHB's and locals to get into the market than it has been in the past"

Understatement of the century! My parents had me when they were in their teens, my father worked while my mother stayed at home and they paid their mortgage on one income. I'm in a relationship with no kids, both working, I'm earning pretty good money and there is no way we could service a mortgage in Auckland, my home and place of birth. Something is seriously wrong.

Something is seriously wrong alright, you cannot budget and your first home expectations are too high. A modest first house is still possible on two incomes, its just a question of where and what your money is being spent on. Prioritise the mortgage at the top of the list and you just have to live on the balance. Your parents didn't have two cars and all the electronic toys and head off overseas every year for a holiday.

"first house"?
Again assuming prices never go down and after a "first house" we all can upgrade to a "second house" and climbing the "property ladder"?

My expectations is to buy a decent house for 3 or 3.5 times my annual household income, which is what the reasonable price is for a family home. Where in NZ do you get that?
My expectation is that a house is bought to live in the house and not a speculation good or a mean of transferring wealth from new generations to older generations.

Comparing this generation's situation with previous generations' situation as if we were talking about the same issue is simply wrong. Again, lets talk about income/price ratio, inflation and interest rates that help borrowers and future jobs prospects, percentage of tax, price of studies, etc.

There is no such a thing as property ladder in the long term. Just a ponzi scheme ladder. It just happens that some of you are on the top and keep encouraging fools to join the party while refusing to change things.

Luckily this won't last much longer..

You know nothing about me. I have one car I bought for $8k with cash I saved. I just finished paying off $40k in student loan debt, I have no toys...zero. I own a phone, aa cheap laptop and a TV. I went for a holiday this year and won't next year. I live frugally. I would live outside of Auckland but my line of work requires me to be in Auckland.

Yes us baby boomers had it hard.

I cannot understand all this negativity, Land Bankers, Investment Buyers, Land Agents, Banks and borrowers have never had it so good.

Awklanders are booming, Boomers are booming, Stocks are booming, what is all the negativity about.

Half the country does not work, gets paid anyway.

Some have milked the others for years. Sitting on a substantial nest egg.

More empty nesters, than not.

Prices are stable, Fuel is dropping.

You can always put the TV or the car on the Mortgage.

Helps keep the kids in the style they have become accustomed to.

Facebook is worth a mint, Dollar is up, up and away, or down, down, down, periodically.

Incomes are stable,though some on strike for a tad more.

All Blacks are back, Charlie and Co are here on a good will freebie too.

What can possibly go wrong?.

Ooops...maybe statistically speaking I am in the wrong place.

"Helps keep the kids in the style they have become accustomed to"

And that's the problem right there. Every generation EXPECTS more than the last and is not prepared to work as hard as the last generation to get it either. Everyone just wants to sit on a computer and expects to get paid s*$t loads of money.

Well the bad news is folks its all going to hit the fan one day, its inevitable but no need to panic its situation normal for the next 40 to 50 years then you had better expect a whole lot less than you have right now. If I was you I would be pretty happy with life in New Zealand, if you want a reality check watch Aljazeera instead of our useless news service and really see whats going on in the world.

My father rode a camel, I drive a Toyota, my son will drive a Merc and my grandson will ride a camel.