Average Auckland price slips, number of sales drops sharply, reports Barfoots for December

Average Auckland price slips, number of sales drops sharply, reports Barfoots for December

The number of residential real estate sales made by Auckland's largest agent fell sharply in December.

Only 796 sales were completed in the month.

This was down from 986 in November, and down from 1,050 in December 2014.

The December 2015 level is the lowest for that month since 2011.

Median prices rose to a record $800,000, and are now +11% higher than the same month a year ago. They are +0.6% higher than for November.

Average prices slipped to $869,492 from November but they are still +14.5% higher than the same month a year ago. They are -0.8% lower than for November.

A key reason for these shifts is that the proportion of houses sold over $1 million continues to rise. Although only 278 houses were sold over this threshold (35% of the volume), they represented 52% of all sales value. In December 2014 they represented only 37%. Five years ago in December 2010 they represented just 19% of the value of all sales in the month.

Prices are holding 'up' because only the expensive end of town is selling.

Barfoots only sold 44 properties for less than $500,000 in December, an all-time low.

The 'balance' in the Auckland real estate market has all but collapsed. It's only a market now for the [very] well-off.

The distorted picture is reinforced by their listings levels. Barfoots has only 2,431 available listings at the end of December, the lowest level of any since their modern records began in 2001. They added just 757 new listings in the month.

Adding to the picture, Barfoot's drop-out rate (listings that expire unsold) is now at 24%, the highest ever (since 2001) and something that has risen quite quickly in the past three months. This is another sign most buyers can't afford current prices, and an equal sign sellers are being 'unrealistic'.

"Market pricing" expectations are set by 'recent sales'. However, volumes are falling fast so price expectations (valuation comparatives) are being set by an even smaller base. In the past three months it is likely that only 7,000 houses were sold by all agents. These are setting the pricing comparatives for all 585,000 houses in the region. It's a 1.2% tail wagging a 98.8% dog.

Even new-built houses that are coming on stream to address the critical shortage, such as at Hobsonville Point, are priced at $800,000 and above. New additions might be addressing 'supply' but they are not working to redress the high pricing levels.

Here is the Barfoot and Thompson press release:

In December the sales price of Auckland housing remained stable but there was a significant fall in the number of sales compared to those in November and December 2014.

"Sales data for the final month of the year is sending mixed messages as to where the market will head in 2016," said Peter Thompson.

"The average sales price for December at $869,492 was down only 0.8 percent on November's record average price while the median price rose to an all-time high of $800,000, up 0.6 percent on that for November.

"From a price perspective, the market was rock steady.

"Sales for the month at 796 were 19.3 percent lower than in November, and it was the lowest number of sales in a December for 4 years.
December’s sales were also the lowest in any month for the past 22 months.

"While in December new listings at 757 were down 55 percent on those in November, this level of decline is quite normal and they were the highest in a December for 4 years.

"The factor most likely to impact on January sales was the extremely low number of listing at the end of December which, at 2431, was down 25.2 percent on those in November, and the lowest number for any month for more than 20 years.

"With a growing population and the number of new builds failing to keep pace with demand, competition for properties is likely to remain strong in the first quarter of 2016.

"January's sales data is always influenced by the summer holiday period, and it is likely to be mid March when February's sales data is available that a clearer understanding of prospects for 2016 emerge.

"What is clear, however, is that with so few properties on the market, now is an excellent time to list.

"In December 278 properties sold for in excess of $1 million and a further 202 for in excess of $750,000.

"Sales of properties in the under $500,000 price category were 44, representing 5.5 percent of all sales.

"In 2015, the average sale price of homes for the full year was $817,096, an increase of 14 percent on that for 2014, and 25.8 percent over 2013's average sales price.

"The median price for 2015 was $755,333, 17.4 percent higher than 2014's median price and 30.5 percent higher than that for 2013."

 

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32 Comments

Was obvious that the 30% deposit requirement for Auckland investors would see a collapse in sale volume in the lower price range ie sub $700,000 and this would show a false increase in prices. Comparing price data from Dec onwards with previous months is somewhat irrelevant now as an entire sector of buyers have been removed from the Auckland market. On the other hand investors who cannot find a buyer can now lock in a 4.35% interest rate so that is no doubt a factor in homes being taken off the market. There were 14,000 mortgage approvals granted in the two weeks ending 18 December - where are all these people buying - is it just refinancing with another bank or using the house as an ATM to buy a new car, a bach or a European holiday? Or maybe gearing up to buy in Tauranga, Hamilton etc?

Very true Big Blue, there is also a major lack of options in the under 700k for those looking to add value to a property within the Auckland City district at the minute. There are probably only be two or three properties I'd be interested in in that bracket currently compared to 10 or 20 3 months ago. Will be interesting to see what the next 3 months have in store for us all.

Haha I did both, refinanced and then bought a do up in Hamilton, p.s. There are no houses for sale in Ponsonby! Prices are only going one way and that is up!

Thanks for the analysis David. The fact that in 12 months the million plus sales have gone from 37% of overall sales to 52% is poignant. Anyone who is thinking of selling or needs to sell should list their property as soon as they can as the number of houses being sold has dropped dramatically.

An interesting point. If no one is buying the cheaper homes how can those who are in a position to upgrade their home actually achieve it if they cannot sell their starter homes.

Olly Newland:

"Beware of unintended consequences"

Intended elsewhere.

A recent Guardian interactive makes the point: any would-be homebuyer earning the national average of £26,500 will now find 91% of England and Wales beyond their reach. If you can’t buy, you rent – except in London, the epicentre of the madness where rents are so extortionate, newspapers compete for horror stories. Consider the £480 a month charged for a mattress in the corner of a communal lounge in a shed in the east end. Read more

only the expensive end of town is selling

Morse Code for the "smart money" is unloading, or, being squeezed by the banks to lighten the load

David following on from your analysis, if only the expensive homes are selling which pushes up the average and median prices surely the RB and JK must bring in other measures otherwise their strategy has failed. X and Y need to be able to buy starter homes which in turn allows those who have been in the market for some time to buy their next home. Essentially X and Y need to be able to buy homes and not at 10 times income. If this does not happen soon then they will need to bring in more measures making it all possible.

"A key reason for these shifts is that the proportion of houses sold over $1 million continues to rise. "
That is obviously going to happen as the average price goes up, it doesn't necessarily mean there has been a shift towards high end properties. Dodgy stats...

Good analysis. There is a huge amount of ( low quality) stock in the $800-900k bracket sitting unsold. My feeling is that many of these sellers will need to adjust expectations down atleast 10% to see a sale. Ridiculous prices are still being paid, just not for rubbish. Plenty of hardworking kiwi mum and dads who piled into property mid-late last year must be disappointed that there risk free and government guaranteed 20% YoY gain is not tracking to forecast?

Don't ask the wrong people, ask a psychologist. The answer "a crash is already underway".

The inverted triangle has arrived. Only a small puff of wind needed to topple it.

People are dreaming who are waiting for crash! House price in Auckland will never crash.

10
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bloodymigrant has clearly not come from Ireland!

Auckland is no Ireland or Iceland. Keep dreaming about doom n bust but it's never going to happen! The worst case scenario could be market stabilisation. Happy investing if you have funds or keep cribbing if you don't sour grapes.

12
up

Listen team, this time its different. Kiwis don't invest foolishly regardless of what you hear about '87, finance companies, ostrich farming, plaster homes, pine plantations, investing in IPOs from private equity, dairy conversions etc.. we're clever we is. No follow the herd mentality with us.

This extract from a report in the" Irish Economy " might be of interest,
First, I think it is important to note that there are two ways of diagnosing bubbles. They can be thought of as statistical bubbles and economic bubbles. A statistical bubble is one where the growth rate in the price of an asset, such as housing, grows at a rate that is unsustainable for any reasonable period of time. Between 1995 and 2007, house prices in Dublin increased by 300% in real terms (i.e. stripping out inflation), or 12.2% a year. Between 1997 and 2004, McCreevy’s term in office, the increase was 136%, or 13.1% a year. (Nationwide figures are comparable, although slightly lower for the period as a whole, although not necessarily in every year.) Thus, by any statisticians metric, it was a bubble – put another way, if 12% growth had continued for 25 years, a house costing €100,000 in 1995 would have cost €1.7m by 2020.

Economists like to get at causes, though, and a 10% increase due to – for example – a lack of supply has very different implications for what policymakers should do than a 10% increase due solely to first-time buyers needing a smaller deposit and thus being lent more. To economists, a bubble in asset prices is not just any old increase in prices, it’s an increase in prices due to excess capital/money. In the housing market, this means too much mortgage credit. Of course, to sustain people borrowing and lending too much, you need expectations. So the two ingredients for an economic bubble are over-optimistic expectations and excessive credit.

If it does crash it will be part of a historic global event that will be ugly... far too big to fail. Keep believing.... debt is money, debt is money....

I have just looked at a couple of Auckland suburbs on Trade Me including Epsom. I struggled to find any houses being sold using the auction method of sale. What has happened? Why are people not using the auction method of sale? Are people not turning up at auctions therefore it is a waste of time and money. Are there less buyers out there even in Epsom? Interesting times.

Jeepers, talking about ignorant! We're still in the Summer Holiday period...and don't forget Chinese New Year is on the 8th Feb 2016. You'll find the 1st auction for the new year should start around the 2nd half of February. Here's a classic example: http://www.trademe.co.nz/Browse/Listing.aspx?id=1003947149

P.s. Oh and don't forget the Lantern Festival this year has moved from Albert Park to the Domain ;)

Holiday period or not you would expect auctions to be still working. Maybe people are not using them like they used to because so many were being passed in.

People are still in China preparing for the celebration of CNY. No wonder you are an ex-agent *ahem*

People in China are still absorbing the fact they have had 2X 7% down days in the Shanghai Index in 4 days of trading. (Today's trading will be suspended after less than 30 mins of trading) I would suggest their preparations for CNY might be at the back of their mind and buying dunger houses in some far flung country will be even more distant. This will hurt. Ahem!

Yup i couldnt agree more!!!! SHTF...

Except of course it would be more than 14% if the market remained open. So we'll see -7% for some days as the ppl exit?

meanwhile outside of china, shouldnt the "investors" be looking on with horror?

I agree. The buyers from China will disappear more from the Auckland property market. They have more to think about back home. More of them sitting on profits in Auckland will sell to shore up those broking accounts that are now looking sicker by the day. Time to take a profit in Auckland before the profits disappear?

The majority of houses on the market this time of year are ones hanging on that have failed to sell December. You'd have to be freaking desperate to sell your house by auction in January when there are no buyers around.

..are the festivities of the Chinese relevant anymore? I understood the word is they have pretty much gone from the market? I don't profess to know either way and still feel anything is possible..crash or more of the same.

They have pretty well gone from the market and in Australia also. Retail investors drove up the Shanghai share indexes to silly levels using credit and leverage. When it popped last year they were required to shore up their accounts with cash. As a result sell some assets quick, certainly not buy more. Now the Chinese share markets are getting a bit shaky again. The last thing people will be doing is buying houses in a slowing down NZ market. There will of course be a few cashed up Chinese buyers but they will be waiting to see what the market does in Auckland and of course they will be looking to buy quality.

My understanding is that auctions generally achieve higher prices. That being the case, why would people list "by negotiation" over a period where auctions don't work? There can't be that many urgent sales out there.

Did you say back in China shoring up their broking accounts. And at the same time putting their Auckland investments on the market to get some cash to help with the shoring up. By the way a very comfortable retired ex agent who knows a faltering market when he sees it.

Ex agent is correct ....and quoting from earlier post
" To economists, a bubble in asset prices is not just any old increase in prices, it’s an increase in prices due to excess capital/money. In the housing market, this means too much mortgage credit. Of course, to sustain people borrowing and lending too much, you need expectations. The two ingredients for an economic bubble are over-optimistic expectations and excessive credit." This seems to me exactly what we are seeing in the NZ housing market in Central Otago