Downturn hits Auckland housing market with prices and sales volumes falling substantially last month

Downturn hits Auckland housing market with prices and sales volumes falling substantially last month

The over-heated Auckland housing market appears to finally have run out of puff, with the Real Estate Institute of New Zealand's median Auckland selling price dropping by $50,000 (-6.5%) last month.

According to the REINZ, the median selling price of homes sold in the Auckland region last month was $720,000, compared to $770,000 in December.

However January's median was still up 9.1% compared with January last year.

There was also a big drop in the number of sales, with 1526 Auckland homes being sold by REINZ members in January, down 13.5% compared with January last year.

The areas that were most affected by the decline in prices were the central Auckland suburbs that fell within the boundaries of the former Auckland City Council prior to the super city amalgamation.

Within those areas, the median selling price declined from $867,000 in December to $790,000 in January, a slide of $77,000 (-8.9%) while the number of sales was down 13.6% compared to a year earlier.

That was followed by Manukau where the median price slid by 7.9% for the month to $700,000 from $760,00 in December, Waitakere where the median selling price dropped from $717,500 in December to $685,000 in January (-4.5%), and North Shore where the median price dropped from $910,000 in December to $870,000 in January (-4.4%).

Rodney was the only district within Auckland to go against the trend, recording a 6.5% increase in the median selling price which rose from $745,000 in December to $793,750 in December.

Prices also dropped considerably in most other parts of the country, including the so-called "halo" cities like Hamilton and Tauranga which have been attracting Auckland investors seeking higher yields, which has helped to push up prices.

In Hamilton the median price dropped from $449,500 in December to $388,000 in January (-13.7%) and in Tauranga the median dropped from $470,000 in December to $440,000 in January (-6.4%).

In the Wellington region the median price dropped from $436,000 in December to $394,000 in January (-9.6%) and in Christchurch the median price was unchanged at $440,000.

Other cities to record declines in January's median selling price compared to December were Whangarei (-3.1%), Napier (-4.3%), Hastings (-2%), Palmerston North (-5.3%), Whanganui (-11.5%), New Plymouth (-1.2%), Nelson (-1.2%), Timaru (-6.2%), and Dunedin (-2.9%).

Median price - REINZ

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104 Comments

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Highlight new comments in the last hr(s).

Still a long way to go before approaching sanity.

And a few more months until we really know where prices are going. Lots of new Auckland listings in the last week.

Still, median price back to early 2015 levels is a good start.

Wow this will scare a few more speculators onto the market. It is not nice to sit there and watch prices drop and realise that you are now paying interest and capital on a loan, part of which no longer has any equity supporting it. Those who bought late last year including FHBers will be buying more than their usual quota of toilet paper today.

I would say even those who bought middle of last year will be in trouble, the median price is almost back to early 2015 level.

Anyone got access to see how the index has performed? Would be quite interesting to see...

Auckland stratified index down about 2.4% from December and 8.3% from September.

what, the index has dropped 2.4% in one month (jan index level compared to dec)???

Thats more of a news item, as this reflects actual house price moves (as opposed to median price varying with the different mix being sold).

So 8.3% down since sept, thats a lot, and last month appears to be the biggest drop, or at least the trend maintaining a price decline at break neck speeds.

If the next 4 months continue this trend you'll be looking at close to a 20% price cut for auckland property. Herd mentality, once the flow starts its hard to stop, as far as prices over shot to the upside due to animal spirits there's a real risk they may over-shot to down side also; Id hate to be owning anything in auckland right now.

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Fear is a terrible thing. For so long Aucklanders said their houses were worth so much. Now they cannot say that with the same confidence. More speculators and highly leveraged investors will look to sell now. This is not the time to be paying interest on a capital item where values tend to be trending down. Negative equity on housing is hard to cope with as it involves losses on an item you paid a lot of money for hence the loses can be hefty in size.

This is only a little indicator. But we have several little indicators now and the picture is becoming firmer everyday. Don't hold your breath for the big indicator because you won't be able to see it until next year when you look right back.

The property speculators have another headache today as the Auckland council are stalling on the Unitary Plan. They have been paying huge prices in areas where there was a proposed change.

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But Auckland has been named as the 4th most international city in the world. This must therefore mean that house prices will continue to climb for ever and ever. I'm so terribly confused....

It begins....

I have to say I was surprised to see so many people still buying in Auckland from September last year when the data coming out showed a trending down in prices. Don' t people read the news. Don't they take advice. If the current trend continues you will have a reasonable number of people in negative equity, especially first home buyers who bought last year. Sucked in by agents, the Herald and its daily support of the real estate industry, brokers, valuers, and everyone else who lives off the industry.

all scare mongering, someone mentioned few years back that there were thousands of emptied properties in Hamilton !!

Play the ball not the man. Hamilton was quiet then. Not sure the current momentum will continue. I hear there are a lot of rentals needing occupation.

The Herald indeed! This news release was buried deep down in the bowels of their website.

and stuff.co just as bad - headline house sales and prices up but data seen as weak - UP????? compared to what oh yes a year ago - next it will be house prices doubled ......since 2001 !

And don't forget that over the last 2 or 3 decades there has been whole new industries built upon the traditional real estate industry platform: mortgage brokers, private property inspectors, home-stagers, professional house photographers, dedicated real estate publishers, television programmes, journalists and sundry commentators, ad nauseum. In fact, I'm sure the main reason our recent employment rate has increased is due to these new real estate industry add-ons.
As the market reverses these 'extras' will still be employed; even some new ones could be added
such as dedicated real estate psychologists to counsel morgagee-sale victims.
On the whole, I think that the creation of new specialist industries within older service industries is possibly the only way future economies can try to maintain full employment.

Want does not equal get......

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"Some people are dreaming that Auckland house price will fall, but it won't. Dreams are free! To many speculators here, they don't play game, other people make money and they regret!
(Quote Bloody Immigrant 2 days ago)

It's going to drop! You can't have 39% of the Investor market disappear over night without any impact. Wake up!

There seems to be a drop from December to January in every year I've looked at in that chart above.
The market may be dropping, but a drop from one month to the next is hardly evidence!

I agree but the quantum of the drop suggests some of it may not be seasonal.

IRD and toughening up in terms of getting dirty money out of China. Other assets dropping in value such as shares and farms. Things have changed slightly.

I noticed the exact same thing, this years is at the larger end but 13/14 had a similar drop in $ terms.

I thought the seasonal factor was volume of sales rather than price. In our area I certainly didn't get the impression vendors were offering post Christmas discounts if they thought prices would rise again in Feb.

Volumes lead prices.

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No article in the Herald about this yet. Must be in a meeting with The REINZ. Only item on agenda. What do you want the Herald to say about this sizeable drop or rather what spin should we put on it .

There is an article up now. But it wasn't in the newsfeed, it was hidden down in the business section.

I see the article now, amazing the spin they put on it.
It is mostly about how house prices are up so much since last January etc, and a little note at the end saying that there was a big drop December-January, but it probably doesn't mean anything.
I read it on Stuff, suppose Barfoot and Thompson pays them good advertising dollars to paint Auckland property in a positive light.
Or maybe I'm just cynical.

Real estate and media are hand in glove.

Who else still advertises in newspapers? The papers know how their bread is buttered and have a major incentive not to spook the real estate goose.

My eyes were opened to this some years ago and once you notice it, you can't help but conclude that mainstream media and the real estate agent companies are rather too much in cahoots. The Herald is basically the Property Press and Mediaworks outlets report on The Block as if it's news. It won't be long before Mike McRoberts reports live from an Auckland suburb because a splashback has been installed incorrectly.

Long as it's not Hoskings. :)

Next month will be more interesting viewing...

I just wonder, while most people are looking at the last few months and seeing price drops in the Auckland housing market and gleefully predicting a doomsday scenario, how many investors are out there looking at this from a different angle of, "wow, I'm going to grab a few bargains here".

If i was an investor, I would wait another month as It's highly likely the prices will drop slightly again, and then go in search of some bargains, to the tipping point where it will snowball back again with a rush of investors grabbing property before the prices rise again (which in turn will push the prices up). Nobody like to miss out on a bargain, certainly not investors.

I've said on here before I'm far from anything that would resemble an economist etc etc but just a casual observer with no skin on the line .. I bid you good day !!

If property drops past a certain level the banks may tighten their lending as they may be wary of losing money ( as with dairy farming) which could start a downward spiral of tightening credit and falling values, with only the cashed up being able to buy. Could we be heading for a credit crisis, that will have little to do with a specific sector like property or farming but a tightening of credit which could push asset values down to levels that reflect incomes more than capital gain? Saw Yellen on CNN news this morning and she indicated a desire to raise rather than go negative like Japan.

The combination of rural asset values and Auckland house prices falling at the same time would cause credit to tighten very quickly.
This could be nearly a perfect storm for the NZ banking industry.

It depends , investors are already looking outside auckland and may decide this is a trend and dump.

But, realistically once the chinese get their heads around the new rules it will increase again. Vancouvers market is driven by the chinese and their avg prices are heading towards 3 million.

Interesting times in front of us. yes migration is booming but do we expect that every migrant has $150.000 to even start to talk to the bank about the mortgage? Is there enough local investors/speculators to pay ridiculous prices for the properties? Will the Chinese buyers come back?
The fact is even if there may be a slowdown there is not many properties with good value. Even if there are 'tastefully renovated' they are done quickly and poorly using cheap materials, bathrooms and appliances from local store. It may be that the prices will drop - my feeling is that the crap will become crap (cheap) but reasonable properties on a good street will still hold the value....

A much needed (and overdue) correction. If it turns out to be a significant downturn is still too early to tell.

I live in Auckland, a fall from peak of $100,000 is very healthy (and a relief), it was getting to look too much like a bubble (and none of NZ wants a bubble in AKL and the fall out from such imploding). It does look like double digit growth for Auckland this cycle is over, but as long as interest rates remain at record lows, employment healthy and record immigration it's hard to see a significant price collapse. I wouldn't be surprised to see some of this fall clawed back over coming months.

Really? Do you have any idea what it could possibly do to consumer spending? I don't. But if you do, feel free to share with a quant-based narrative if possible.

I think it will have little effect on overall consumer spending, only complete idiots would have thought Auckland prices would continue at 15% plus forever and acted accordingly (leveraging to the max to buy consumerables they don't need). I believe 99% of Aucklanders are not complete idiots and will carry on in the same manner they have been. The idea of using every last drop of home equity as a credit card isn't like it was back in 2006.

With a thousand migrants coming off the plane each week - all needing everything from appliances to cars to clothes to utilities to food to accomodation to whatever, consumer spending will just continue ho-hum.

Well that's an "opinion" in a world where the propensity to consume has been driven by the wealth effect.

I think plenty of Aucklanders are feeling very smug and wealthy. Builders doing renovation work are flat out (talk of $1m plus renos is not uncommon). I work in the Swimming Pool industry, this industry has never been busier, at an average cost of around 60k a pool, the biggest in Auckland has gone from roughly 100 pools a year 3 years ago to 250 plus a year.
My assumption here is that this is not funded by savings but debt. Im riding the wave as I supply product to these guys, make hay while the sun shines, stack away some nuts.... Winter is coming...

plenty of pools to drown ones sorrows

...if I were the Chinese I would sit and wait. Watch the dairy impact wreck havoc, watch the house price crash .....Open the wallet when at bottom, vacume up whats left and when ready, open the doors to our (their) dairy again. I have postulated such a scenario before...sad to see it playing out when it is a patently obvious path to follow.

Huh...so under your scenario the clever Chinese brought at the bottom of market, and now will open up the buying of milk powder so that prices go back up, and then sell back to us kiwis. More cunning than a fox up a drainpipe

...nope. The Chinese control our economy via milk access and tradeables. They have turned this tap off, they can turn it back in whenever they wish (hence our desperation to join the Tpp). Enough Chinese have been allowed to pump the market up ensure kiwis indebted themselves. Now they pull the pin and wait..........farmers and Auckland ppty investors to the sword...enough to drag us all down.

If a crash happens it will be bad. In this case the TPPA would not go ahead, foreign asset sales will be stopped, these policies were only invented to protect the credit driven bubble. Once the bubble has burst globalisation will reverse. The bullshit and lies will stop. I believe that's what happened in the great depression

I wish what you were saying was true.

The REINZ monthly stats are very up-to-date but jump around a lot. The best way to pick a trend is to use a three month rolling average (with a sufficiently large sample size). Here it is for Auckland using the REINZ stats:
June 2015 = 741,000, July 746,000, Aug 743,000, Sep 748,000, Oct 753,000, Nov 761,000, Dec 761,000, Jan 2016 = 751,000.
Taken together with the latest QV stats there is strong evidence to suggest that the Auckland market plateaued in the latter part of 2015 and continues to plateau (or perhaps to dip very slightly). Whether we like it or not, the stats are the best evidence we have. Anecdotal evidence is just not good enough.

Like your way of communicating.

Denial, the first stage is always denial.

Wow these are big drops ! I understand why Auckland prices are dropping (too high to start with & new local lending rules) but why is the rest of the country's values dropping ? Most areas are barely above 2008 level

Did anyone actually bother to look at the graph before they started typing ? There are peaks an dips all the way but overall its heading in the same direction since 2013. It gets pretty boring listen to what you house price is doing every single day. Yes we could be in for even another month of drops but then don't be surprised if it starts going up again. We need to see a few months of falls before it actually becomes a new trend.

You have had four more months drops already using the stratified index data. How many more do you need Carlos. By the way this is the most accurate data and the REINZ make you pay for it.

If you're "not surprised" that prices will go up, then you probably shouldn't be surprised if prices go down. Why is 2013 a relevant departure point for assuming a trendline?

Carlos, even in Sydney (and Melbourne) where in the last four years price increase has been massive, way more than Auckland. Sydney price has now dropped 3-5% in the last 6 months and auction clearance rate is now around 50%, down from 90+%.

Days to sell are ramping up.

Hong Kong property has also fallen 10% since September as well and consensus is that it is going to have a tough year. Caution remains the word for now and don't believe everything an estate agent tells you!

We will soon find out, if it was just a bubble.

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Ex Agent is quite correct the Auckland property market has been dropping since September 2015, September 2015 median $771,000, October 2015 $765,000, November 2015 $765,000, December 2015 $760,000 and now January $700,000. It seems some of you out there don't believe that an over-priced asset can ever lose value, maybe you should check out what is happening to world equity markets at the moment. HW has a good idea from a mathematical point of view but you are not comparing like with like. Because of the changes in September and October of last year the first of your calculations that would include the changes for 3 months would be January 2015. Another way to look whether Auckland house prices are falling would be to compare current median prices with their peak month from last year, Manukau -7.9%, Waitakere -7.6%, North Shore -9.2%, Auckland - 9.2%.

I think that if people say the Real estate agents are the decision makers when it comes to what people sell and buy for, then they are insulting the intelligence of buyer and sellers.

how come all I hear is my RE said I can get this or that for my house. some are very well trained in reading and exploiting emotion to get that last dollar. for most people buying a home is an emotional one.
investors different kettle of fish all about money and greed

The global economy has added 50 trillion USD since 2008. Everyone expected much more deleveraging post GFC. The central banks coordinated a massive increase in liquidity, adding debt to more debt and creating more instability. What we may be seeing now is a renewed loss of confidence in the debt markets in the face of the Fed increasing rates and starting to withdraw USD liquidity while the global economy is struggling to grow. This external event (possibly a debt liquidation, either orderly or disorderly), is likely to impact NZ housing as NZ banks are negatively impacted by the global deleveraging process.

Correction: The global economy has added 50 trillion of USD DEBT since 2008

Still up 10% v last Jan, historically Jan always less than Dec, have you noticed the anecdotal evidence of nothing for sale in Ponsonby in Jan on trade me, while everyones snapping up crap box apartments, Yes a level off but auckland prices are going nowhere, any new builds will get hit, but any desirable antique inner city house will hold their value, anyone can build a crap box, but you can't rebuild something that is one hundred years old

I like this "any desirable antique inner city houses will hold their value" thank you :-)

As always, these are bald stats. Surely what is most important is the number of sales in each value band, compared with other months. Are these skewed by a preponderance of apartment sales, for example?

Well you have to do more research then that and look at the bigger picture of what's really happening. And reality is - Asia has left the building. ;)

but JK said foreign buyers were not a problem, he cant have been making it up

again
http://www.newshub.co.nz/business/foreigners-buying-houses-not-a-problem...

did you believe him?

It's a good news for real investors than FHB's to buy some more! Any time is a good time to buy houses in Auckland, the yield is still much better compared to Melbourne. Keep buying atleast one house a year, you will not go wrong atleast till 2020 may be beyond!

good luck finding someone to fund it, in case you didn't notice a lot of the worlds banks are getting hammered, credit is not very far away from freezing again, banks will start to call in high LVR loans to shore up balance sheets

Simple answer, be prudent with cash flow then funding will be taken care off!

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FACT: Prices are always set at the margin - it only takes one or two to knock over the dominoes

We have known for 7 years that asian buying at any price was having an impact
The government's ill-thought out residency requirement of $1½ million cash indirectly set the entry price for a house at $1½ million - and that's exactly what happened

That this was hapening was well known
The government could never officially acknowledge that as it would set off racial tensions
The continual denials were for public consumption

That the government privately never took steps to control it defied logic

Harsh steps by the Chinese government have momentarily collapsed the exodus of capital out of China
Simultaneously, prices in Auckland, Sydney and Melbourne start going down

If Asian money wasn't setting prices in the first place, then
Why is the absence of Asian money now deflating prices

That the government privately never took steps to control it defied logic?

Not really, who were the biggest private donors to the National Party ya reckon?

had a chuckle at the herald this morning to stories telling investors where to go to bump up prices now that auckland is a dead duck, quick head to gisborne and rotorua
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1158...
http://www.nzherald.co.nz/rotorua-daily-post/news/article.cfm?c_id=15034...

It's like money is burning holes in people's pockets. Isn't it just better to sit tight in these seriously uncertain times. I've just had a cold caller from NZ Invest telling me that now is the time to invest in property. Are they serious? Leave us alone.

Have decided to come up with a new Auckland house price measure called the Zorro-meter. What the Zorro-meter tracks is the amount of trade me listings ( 4-sale, 3Bdr +) for the following suburbs, Waitakere, Manukau and North Shore, others excluded due to REINZ lack of comparable data, etc. Anyway, the Zorro-meter started its base at 2 weeks ago, 29/1/2016, so has been running for a 2 weeks at the present time. Results show that for the 2 weeks in question for sale listings have increased by 14.6%. Is this a seasonable adjustment or is it something else. Remember, that increased demand leads to reduced prices, or so economic theory tells us. I welcome your feedback, should I keep the Zorro-meter going, does it mean anything?

Sorry, too many beers should have been increased supply leads to decreased prices.

Zorro. It is a reasonable indicator but as you suggest their are seasonal influences. Listings always increase at this time of year after the holiday lull.

I suspect the median house price in Auckland might firm up in the next 3 months but that will only be temporary. Why? Immigration from the Northern hemisphere peaks now and they tend to have to buy property which typically is well above the median. Once that is over the trend will probably be downwards but a lot will depend on the state of the rest of the world.

I wonder if Tony Alexander became 6.5% less smug last month.

Nobody can tell. He broke the smug-o-meter.

Nobody can tell. He broke the smug-o-meter.

I think wait for Chinese new Year, another $15 billion coming to NZ for real estate investment.

You are joking of course. How do you get to a figure of $15 Billion. I thought some people were predicting $20Billion. 30 Billion even. Of course the Chinese government which is cracking down on everything including journalism will allow that to happen when their economy is back peddling.

they are cracking down as it affecting their FX reserves they are chewing through Billions
http://www.cnbc.com/2016/02/07/china-fx-reserves-fall-almost-100b-to-low...

I heard it was $150 billion and they would come riding on fire breathing unicorns.

That shady Conovationz guy said it won't be until May though. Which is good, because Chinese New Year was last week and I was hoping not to wait until 2017.

If the crackdown is effective and the maximum currency any individual can transfer out is $50,000 per annum then how many purse-holders must arrive in NZ to achieve $15 billion

Answer. 300,000 principals and heads-of-family not including the associated family retinue

Last month I heard there was a backlog of 8000 requests from Chinese for IRD numbers.
Two weeks ago I was told there was a backlog of 12,000 requests.
Yesterday I was told its 41,000!

I would like to know if its true or a false rumour?

It's Chinese whispers

Just found out the sold price for this property where the tender closed on 9th Feb. Guess how much? Hint: It's in Double GZ ;-)
https://www.barfoot.co.nz/560653

Let me guess... a billion yuan? How exciting!

Was it $3.25m?

It went for > $4m guys. It's about right for that location :-)

funny I have seen a Chinese person getting an IRD number same week they applied,
guess they were a lot luckier than the 41000

Someone posted on the property talk forums that a relative got their IRD number in one day recently.

The Introduction of the IRD number is not just for cross referencing with the Chinese Authorities it is also for a future wealth tax for international owners. Similar things are happening in the London market.

What will happen to a buyer who purchased a family home in Mangere for $550,000 in July with 20% deposit but the house is now only worth $500,000 a will the bank require a loan repayment to maintain the 20%

What will happen if it hits $440k. No equity in other words. Why anyone bought from November 2015 when data was starting to show a change in sentiment amazes me.

they should be okay as long as they make their payments, it would be unlikely the bank would ask for a valuation on refinancing.
I would expect investors to be hit harder especially the ones that have been revaluing to leverage up and take out new mortgages to buy more property. this practice will stop in its tracks.

Its not that ok to me. A 20% drop needs a 25% increase to get back to the water mark. They are also paying interest on 440k when they could have been paying it on 352k (or 330k with the same deposit).