House prices set new record in Auckland but big drop in sale numbers: REINZ

Property

No sign of the spring lift in sales for the housing market this year as sales numbers plummet in October: REINZ

14th Nov 16, 10:07am by Greg Ninness

The usual spring surge in the housing market has failed to arrive this year, with sales volumes falling rather than rising although prices are holding up reasonably well.

The Real Estate Institute of NZ says it recorded 6727 residential property sales in October, down 9% compared to September and down 14% compared to October last year.

The national median selling price was $510,000 in October, down $5000 compared to September, although record high median median prices were set in Auckland, Northland, Waikato/Bay of Plenty and Southland.

In the Auckland region the median selling price was $868,000 in October, up 5.2% compared to September and up 16% compared to October last year.

The North Shore was only part of Auckland where the median price declined, dropping to exactly $1 million which was down 2% compared to September.

The monthly median price increases throughout the rest of the region ranged from 2% in Papakura/Franklin to 10.4% in central Auckland.

However sales volumes throughout the region were down 11.9% in October compared to September, and down 16.1% compared to October last year.

The biggest decline in sales numbers within the Auckland region occurred in Waitakere, where volumes were down 21.3% compared to September, and down 22.2% compared to October last year.

In the Waikato/Bay of Plenty median selling prices declined in Tauranga (-0.5%) and Mt Maunganui/Papamoa (-1.1%) and Taupo (-2.5%) compared to September but were up 1.4% in Hamilton.

However the number of residential properties sold in the Waikato Bay of Plenty in October was down 9.3% compared to September and down 25.4% compared to October last year.

In the Wellington region the median price was down 0.6% compared to September while sales volumes dropped 8%.

In Christchurch the median selling price dropped by $10,000 (-2.2%) compared to September while the volumes of sales fell 11.5% and was 23.8% lower than October last year.

REINZ spokesman Bryan Thompson said the latest loan to valuation ratio mortgage lending restrictions imposed by the Reserve Bank appeared to be mainly affecting sales of lower priced properties homes.

"Our data suggests that the impact of the revised LVR rules is having more of an effect on lower priced sales compared to higher priced sales, with a surge in the percentage of sales over $1 million and a noticeable decline in the number of sales below $400,000 compared to a year ago," he said.

"The market for lower priced properties is becoming more difficult for both buyers and sellers."

Click on the link below for the REINZ's full regional sales statistics for October:

Volumes sold - REINZ

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Source: REINZ

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59 Comments

by mvgsmf | 14th Nov 16, 11:17am 1479075455

Can this now be confirmed as a trend? I'm on the North Shore of Auckland and I have never seen so many houses for sale with a price against them for YEARS - some with "discounted to meet market" headers....went to 3 open homes in the weekend and they were dead -("affordable" homes too - not mansions..)

Can anyone else share from other parts of Auckland as the Shore has def changed

by diy-guy | 14th Nov 16, 11:24am 1479075894

Still sizzling like a year or 2 ago in Onehunga / Royal Oak open homes. Plenty of foreigners looking through.. although they seem older than first home buyers (more like mid 30's / early forties).

by Simon | 14th Nov 16, 11:36am 1479076594

Sales are down throughout auckland.

Sales UP 23% in the mighty manawatu by contrast. The new Hotspot as Paul Henry mentioned

The only other region to see sales increasing is Taranaki up a minor 1.7% on Oct last year ( miles behind pn/manawatu)

by Simon | 14th Nov 16, 12:38pm 1479080321

147 sold in the October month in Palmy. 155 currently listed for sale on TM. That's what you call a shortage and what causes large upward price moves

by Odyssey | 14th Nov 16, 1:27pm 1479083268

I live in Onehunga, it's completely opposite to what you say. Been to 4 open homes last weekend it's dead and the same feedback I got from agents.

by firsthomecryer | 14th Nov 16, 2:54pm 1479088473

Been to a handful of open homes in Mt Albert/Sandringham/Waterview over the past couple of months. Completely dead. In some cases we have been the only people there.

Got an email last week from a real estate agent who I met briefly, well over a month ago, asking if we are still looking. Smells like desperation.

by dtcarter | 14th Nov 16, 1:01pm 1479081703

Mid 30 \40 is FHB demographic in auckland. It takes time to save 200k for a deposit.

by SeriousSaver | 14th Nov 16, 11:26am 1479076012

I was perving through the blinds at a north shore open home in the weekend, only 3 couples with one being a nosey neighbour for both saturday and sunday for a 1.0-1.5 million dollar home. This is the first open home for this house so expected more than that.

by jcs | 14th Nov 16, 11:40am 1479076822

I went to 5 open homes in Titarangi/Glen Eden last week and only stubbled accross 2 other buyers. It didn’t feel like anyone was remotely interested in what was on offer!

by Roelof | 14th Nov 16, 12:08pm 1479078508

The way I see it :
1/ First sign is volume of sales declines..... sellers still think they can get top dollar... no distressed sales..
2/ Inventory builds... (This is the biggest clue)... Sellers start to realize that they need to lower prices.
3/ Trend changes... !!
4/ Start to get "distressed sellers"....

When an external event happens... ( eg..LVR )... my view is that one needs to give the mkt TIME to see whether the impact is just a "one off" , short term thing, or whether it becomes a fundamental factor that has a long terrm impact..

eg...Vancouver is a great example.... In my view we still dont know if the 15% foreign tax results in a fundamental shift in long term supply/demand.... etc....etc..

by David George | 14th Nov 16, 12:12pm 1479078775

The weekend Auckland centric Herald homes supplement was the largest I have ever seen. Probably indicates more listings/more ad spend /increasing desperation?

by Alter Ego | 14th Nov 16, 12:52pm 1479081131

Wot..nobody buying things sight un-seen anymore?

A pretty picture tells a thousand words.

Otherwise, why would they advertise...it at all.

Prices too high even for the average New Zealand punter.

http://www.stuff.co.nz/national/politics/85413428/Auckland-businessman-…

It is all a gamble, life is a gamble. Wot ever next.

Especially when buying New Zealand citizen ship, at any cost to others involved.

Does no one else besides me, see this as a very strange article, linked to above.

5th most wanted man. Name changes to protect the deeds??

There could be between 30 to 60 such economic fugitives living in New Zealand??
etc...etc.

Just asking.

by Kakapo | 14th Nov 16, 1:06pm 1479081992

I doubt we'll be seeing him again.

by buzby | 14th Nov 16, 1:09pm 1479082153

The market is so volatile here. It may not crash as badly as other countries but the tide suddenly turns just like that, doesn't it?. North Shore agent telling me buyers are spoilt for choice and that they can now be aggressive with offers. Nov sales prices will be lower I expect although sellers still being unrealistic.

by Boatman | 14th Nov 16, 1:39pm 1479083993

We need to help each of our three children own their own homes in Auckland , the first needs a home now and they all do within the next 5 years ( at the most) , so I am also hoping prices collapse .

Somehow I just don't see a collapse anytime soon , so we just wait .

I wonder what happened to the Labor Party's plan to build houses for under $300,000 .

Is it still on?

by Simon | 14th Nov 16, 2:49pm 1479088193

Not how the market works unfortunately.

recent sales end up revaluing all land to be developed, and even if you build a house for 300k you're still looking at 650k plus for a semi detached town house in a greenfield development.

Apartments could be in around 350k prehaps, maybe your children will need to accept that if they want to live in auckland. Or buy some stand a lones on quarter acre in Palmy today to 300k and rent them out as they double in value and use them to get back into auckland in 5 years or so (auckland will be flat for a while much like mid late 2000s.

by diy-guy | 14th Nov 16, 3:23pm 1479090183

@simon no one wants to live in Palmy bro - like I personally cant think of a worse place to live in New Zealand (maybe invercargill... maybe). Can't imagine house prices doubling -- be lucky if they don't halve in 5 years time.

by Simon | 14th Nov 16, 4:05pm 1479092708

All want to pay best part of a mill to live in South auckland slums? Nz exists beyond the Bombay hills, and having lived both sides I can tell you more are choosing the south side..

86k and growing want to live in Palmy. Best schooling in n.z.(Joe Schmidt would agree) but happy to hear you won't be making it down 'bro'

by Simon | 14th Nov 16, 3:58pm 1479092313

And is that why houses are selling in 20 days in palmy Vs. 35 plus in auckland? Don't be sour you had a good run up there it could never last.. just hope prices don't go back to rational values up there cause that would be bad for everyone.

by Gummy Bear Hero | 14th Nov 16, 3:48pm 1479091735

Parnassus !

by Simon | 14th Nov 16, 3:56pm 1479092171

Still rather raise a family there than struggle my whole life trying to survive while raising a family in auckland.. it's a sentiment shared by many. Traffic and housing make auckland so grossly unattractive

by Gummy Bear Hero | 14th Nov 16, 4:13pm 1479093206

... what bothers me , is that the $ Million cost of houses in Auckland may encourage them to begin leaving that place , and to take up residence elsewhere ... amongst us normal Kiwis ...

I'm OK with having refugees as neighbours , Muslims , Hindus , Aborigines , Syrians , Lebanesians , Ukrainians , Afghans and Pakistanis ... all goody good as far as I am concerned .... nay bother there , Jimmy ... even Scots ...

... but not Aucklanders ... that is the giddy limit , is it not !

by Zachary Smith | 14th Nov 16, 6:07pm 1479100039

Scots or Aucklanders? That's a hard call.

by Gummy Bear Hero | 14th Nov 16, 6:25pm 1479101120

Och aye , Jimmy ... hae a wee dram 'o the Ardberg single malt whisky ... an' rethink that comment ... hoots , mon !

by Gummy Bear Hero | 14th Nov 16, 3:53pm 1479092005

The only hope NZ Labour has of constructing accommodation in Auckland under $ 300 000 is if they start building Wendy Houses for dwarf midgets ...

... anyone over 2 foot 6" need not apply ...

by ngakonui gold | 14th Nov 16, 1:48pm 1479084506

House in Hamilton .
Agents estimate 450k/500 August
Auction cancelled due to internal matters
Owner wants 450k oct
owner wants 430 late oct
offer of 410k accepted nov
New owner says it's a do up to sell.
Me thinks he's nuts

by Cowpat | 14th Nov 16, 2:28pm 1479086896

Without seasonal adjustment, on Auckland's October sales there are 16.6 weeks of inventory currently available .That is a momentous shift .

by Groen_mamba | 14th Nov 16, 3:13pm 1479089616

Just me, or have you noticed this REINZ report not mentioned in MM at all?

by gordon | 14th Nov 16, 5:49pm 1479098963

I feel sorry for those in Christchuches whose values continue to fall. They certainly will not be helped by the latest quakes. I will not be surprised if more Christchurch residents get tired of it all and move north.

by THE MAN 2 | 14th Nov 16, 5:56pm 1479099383

I've bitten Gordon.
Values are not falling at all.
Earthquake last night has done next to no damage to Christchurch whatsoever as far as I am aware.
Yes Gordon of course everyone in Chch wil want to move closer to Wellington and Auckland lol.
Classic!
Just resigned up 3 lots of existing tenants for another year at same rent.
With fixed rates down there is plenty of room for existing landlords to drop rents if they need to!

by nymad | 14th Nov 16, 6:39pm 1479101948

"With fixed rates down there is plenty of room for existing landlords to drop rents if they need to!"
Remind me..how does that effect yields, again?

Also, remind me what increased risk propensity translates to with relation to real value...

by THE MAN 2 | 14th Nov 16, 6:54pm 1479102892

If you were fixed at say 5.5 per cent and fixed rate loan term ending you can fix at a bit over 4 per cent so effectively you will being paying roughly 25 to 33 per cent less interest than previously so yes your yield will be well up.Not sure what you mean by risk propensity you are on about?

by nymad | 14th Nov 16, 7:23pm 1479104627

Yes.
I was more curious about how dropping rent relates to your asset yield. It should be greater than unity - i.e. a 5% drop in weekly rent should result in a greater than 5% drop in yield.
Doesn't sound like a good idea to me, if avoidable..

If you are an investor, you should really know how much of your return is made up from risk premium. i.e if nominal prices don't change, and implied risk increase (say, an earthquake occurs), the real value of the asset must decrease to compensate...

by THE MAN 2 | 14th Nov 16, 8:17pm 1479107867

We could drop rents by 20 per cent and still be better off

by nymad | 14th Nov 16, 8:43pm 1479109384

How so?
I'm intrigued..

From my perspectiv:
I've just told you, your investment yield is universally worse off when you drop the rent by any amount. Thus, the only reason to do so would to be if the market demanded it. i.e. you, as a landlord, has little market power.

Costs of capital cannot be a factor in rent value decisions, in a competitive market with imperfect information, so this alone is not a basis for dropping price. i.e. rent should not fluctuate relative to an owner's (aggregate owner's weighted) cost of capital where there are a greater number of renters than landlords. Recent Christchurch data shows that prices have been flat, so this is a fair assumption, in this case. Further i.e; you have no market power..

The only way you could be improving your position by dropping rents is to be gaming the market to sign forward contracts (1/2 year tenancies) at marginally lower rates in order to maximise your profit in the short/medium term. If you are doing this, unwillingly or not, you are essentially admitting that long run prices are expected to be declining..

My thoughts, anyway.

by THE MAN 2 | 14th Nov 16, 9:16pm 1479111377

Nymad.
Example. For every million borrowed for rentals previously some were fixed @5.59 say so interest $$55,900 p.a.
Now for every million borrowed interest is only say $41,900 on new fixed rates.
So a saving of approx $14,000 on every million borrowed.
So let's say 3 properties for every million means a saving of $100 per week on each property.
I know other investors who are fixed at just over 6 per cent and fixed rate nearly up,so their interest cost saving will be huge.
Depends really on what you have paid for your rental and amount of rent being received as to what your yield is!
Returns of 6 per cent are easily obtained in Chch with mortgage money at about 4 per cent.
Returns of 15 per cent can be obtained on some uninsured property in Chch with next to no downside really.

by nymad | 14th Nov 16, 9:40pm 1479112801

I think you miss my points.
Sure, you can reduce your borrowing cost, but you only save this if you don't change the rent. Lowering your rent by any amount universally lowers your yield by a greater than unity amount regardless of what you cost of capital is.
I know the argument you are making in nominal terms.
In real terms, though, you are not managing your investments well, at all, if you are only thinking in nominal terms and dropping price without the downward pressure to do so..

As I mentioned, cost of capital should not factor into rental prices in a competitive market. You are a price taker, not a setter. So, regardless what the cost of capital is, this is irrelevant in the short/medium term lag period.
Therefore, the only reason you would drop prices is if there was downward pressure on prices. An admission of this would then be an admission that medium term expectations of value are lowering; something that you vehemently disagree with.

The fact you highlighted the difference between 6% for a 'safe' property and 15% for an uninsured property highlights my point about risk premium that you didn't comprehend earlier. If we were to use arbitrary numbers of 4% as a rf rate, 2% of the 6% return would represent the market risk. In the case of the 15% return, 11% of the return would represent the risk premium. So, now that another significant earthquake has occurred in the Canterbury region, how much more risk premium needs to be attached to the value of both of those properties? Again, being a price taker, you cannot adjust for this in rents so your real value must decrease accordingly as your risk premium increases.

by THE MAN 2 | 14th Nov 16, 10:20pm 1479115226

God that is long winded.
Firstly if you have enough positively geared properties they will give a great lifestyle.
Secondly, if purchased well they will be worth more In Years to come, not that we need to or intend to sell.
Thirdly, not sure what you mean by safe property. 6. Per cent return minimum is an insured property the 15 per cent is an"as is where is" property that you can buy for less than land value and don't generally have insurance when you buy but you can get insurance under certain circumstances.
I don't look at any of our properties as being a risk, never have and never will unless you know differently.
Our debt load is not that heavy to worry about it.
The earthquake today hasn't affected anything as no damage and mostly insured anyway and people have done very well since the quakes.
If you are worried about an investment that you have then maybe you shouldn't be invested in that investment.

by nymad | 15th Nov 16, 8:21am 1479151269

"Firstly if you have enough positively geared properties they will give a great lifestyle." Yes, well as anything tends to infinity, the benefits also do.

What I am saying, because you consistently miss the point, is that your investment strategy is definitely not returning even close to optimal profit if you do half the things you advocate. I'm sorry if I sound like I am dragging this out, but on multiple occasions you have advocated your property investment prowess and every time the logic just does not stack up.

by gordon | 14th Nov 16, 8:33pm 1479108801

You know more than the REINZ about Christchurch values? I suppose you should as after all you are the man.
I also would be happy with 4.2 per cent growth in twelve months and dropping.

by THE MAN 2 | 14th Nov 16, 9:17pm 1479111454

Gordon, yes I do know the Christchurch market very well, and what is good buying and what is not.
The Christchurch real estate values from what Im seeing is not dropping at all.
Do some vendors sell their property for less than what it is worth? Yes they do.
Do some landlords underrent their property and get very poor returns? Yes they do.
Can professional landlords make an excellent living from property,in Chch? Yes they can.
Gordon, this gets tedious you trying to put "The Man" down.
It gets very hurtful, but that offer is still on the table if you are "man enough" to take the challenge, otherwise give it a break!

by gingerninja | 14th Nov 16, 6:44pm 1479102262

I wouldn't live in Auckland if you gave me a free house. I would chose Welly, Christchurch, Nelson or even Napier over Auckland. I stayed there for 2 months this year. Never again! I have no idea what the appeal is. Just a massive suburban sprawl with no soul.

by Ngrrk | 14th Nov 16, 7:29pm 1479104973

Im no fan of Auckland but Christchurch?? If by `soul` you mean dead then maybe.

by gingerninja | 14th Nov 16, 7:32pm 1479105163

Yeah. Sadly. You're probably right about Cchurch

by muntijaqi | 15th Nov 16, 1:02pm 1479168163

I agree, Auckland has the worse of the big cities and lacks the best of the big cities.

by THE MAN 2 | 14th Nov 16, 8:19pm 1479107980

Chch has got soul and not affected by today's shake at all
It is kaikoura and Wellington I worry about

by frazz | 15th Nov 16, 8:33am 1479152012

Don't worry , 1 day off from work and Wellington CBD is back to normal sort off. Strong buildings and strong population gives this town a strong SOUL. Now all we need is some good weather dang it

by Joe Public | 14th Nov 16, 9:39pm 1479112775

Auckland up 16% or on dollar terms over 100k.
2 times more than the average wage
It would take 5 to 7 years of savings if earning the average wage of 50k to save that

Bring in debt to income... put the investor interests aside
National have failed to listen to the people and will suffer the same fate as the Democrats

by THE MAN 2 | 14th Nov 16, 10:10pm 1479114636

Joe, let's hope that Kiwis have more brains than to think that a Labour/ Greens etc. would have enough ability to run the country.
Personally think that wouldbe the biggest stuff up in history.
How on earth do you think that the Greens could possibly grow the country financially, grow and legalise grass like they wanted to do when Nando was around

by Sluggy | 15th Nov 16, 9:00am 1479153625

Legalising "grass" would - bring in a lot of tax dollars, free up Police, create an industry and jobs around it.
Alcohol is the drug that causes so many of this countries problems.
I don't see how you think National have grown the country Financially apart from creating a massive debt bubble.

by Joe Public | 14th Nov 16, 10:29pm 1479115745

Strange thing is I was against grass (and don't use) however look at Colorado and California legalising it. This takes the crime element away so the police can focus on other drugs such as P. Not sure what the long term effects will be on those states.

Labour have run the country before and can do so again... not sure why you believe National is any better considering what is happening to the middle class in NZ at the moment. They are getting squeezed just like in the US and UK.

When people can't afford to live in their own cities because the investors are allowed free reign to buy up all the property ... the future does not look too bright....

The Establishment (National) have looked after their own (the rich investors)

by THE MAN 2 | 14th Nov 16, 10:41pm 1479116507

Labour are pure and simple a dreamers party.
They come up with ideas such as building affordable houses in Auckland.
They really had no idea as to how they were going to do this but they think it is a great idea.
Labour would need the Greens as they wouldn't get close by themselves, and that would be so conflicting and how the hell is the Greens going to be,productive?
Finally, the average Kiwi has down very well since National has been in power and our standard of living is far superior to most countries in the world.
Labour will always appeal to certain types of people which I am not able to label on here!
Yes I agree that housing is far too dear in Auckland and I have been saying this for along time, but it is not NZ investors that is forcing the prices up to the unrealistic levels.
DTIs is certainly not the answer as all it will do,is shut out first home buyers from buying forever.

by Joe Public | 15th Nov 16, 12:01am 1479121274

Apply DTI to investors only... easy solution

What has National done ... has NZ living standards really improved in the last 8 years with National in power... by what metric have they improved ?

by nymad | 15th Nov 16, 8:25am 1479151549

"Finally, the average Kiwi has down very well since National has been in power."
Evidence, please.

by two otherguys | 15th Nov 16, 9:12am 1479154354

Platitudinous nonsense

On "average" there are a lot more homeless, a lot more living in garages, a lot more living in cars, there are a lot more people living at home with their parents, unable to afford the cost of leaving the nest, there are a lot more FHB's unable to get on the property ladder ..... &cetera

Many people have seen their equity in their houses go up
Many people on the lower tungs of society have seen their positions deteriorate

However it is now said the "average Kiwi" has done very well since National has been in power

Which contradicts the view the "middle class" has been hollowed out

by Joe Public | 14th Nov 16, 11:58pm 1479121139

"Tonight, Helen Clark should look in the bathroom mirror and ask: "What have I done for housing affordability in the past eight years?" She'll have answered before she's squeezed out the toothpaste. Nothing.

2007
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10455931

by fat pat | 15th Nov 16, 6:00am 1479142814

That's the epitome of hypocrisy from the National party isn't it! Here from the same article...

International surveys rank New Zealand as having the second worst housing affordability problem in the world. Auckland is one of the 25 least affordable cities on the planet. But it's not just a problem in Auckland. You can buy a condo on the Miami waterfront for less than the price of the latest beachfront apartment on the Kapiti Coast.

by fat pat | 15th Nov 16, 12:14am 1479122081

Not surprised by the headline. Look at it the other way around. What dynamics would you expect to see if you knocked out domestic buyers leaving only well heeled foreign buyers to pick over the high end.

by gordon | 15th Nov 16, 8:48am 1479152891

The latest earthquakes are a serious reminder of just much risk is associated with having a lot of residential and commercial investments in the South Island and Wellington. Anyone who is in that position and has half a brain would have to be thinking about joining Simon in Palmy.