Average prices and the number of sales take a tumble at New Zealand's largest real estate agency

The average price of homes sold by the country's largest real estate agency dropped by just over $20,000 last month, with the average price dropping almost $60,000 in Auckland.

The average price of all the home sold by Harcourts in August was $557,462, down from $577,595 in July and barely above the average price of $550,573 in August last year.

The decline appears to be mainly driven by falling prices in Auckland and Wellington.

In Auckland, Harcourts' average price dropped well below the million dollar mark to be below where it was a year ago, falling from $1,009,090 in July to $940,569 in August, which was also down from the August 2016 average price of $965,836.

In the Wellington region the average price dropped from $457,354 in July to $420,915 in August, although that was still up 5% compared to August last year.

In Harcourts Central North Island District, which includes the Waikato and Bay of Plenty, Harcourts' average price fell slightly, dropping from $476,187 in July to $471,616 in August.

Prices in the South Island went against the trend, with the average price in Christchurch rising from $488,079 in July to $524,159 in August and in the rest of the South Island it rose from $381,327 in July to $398, 256 in August.

 However while average prices were falling in most parts of the country, the number of homes Harcourts sold was up.

The agency sold 1812 homes throughout the country in August compared to 1627 in July but still down 11.4% on the 2046 it sold in August last year.

That trend was reflected in the number of sales in all regions except Wellington, where sales were flat in August compared to July but still down almost 6% compared to August last year.

Harcourts chief executive Chris Kennedy said new listings in August were down 21% compared to a year ago.

"This is to be expected in the month leading up to an election, with listings generally down by around 20% before an election," he said.

"However it is also undeniable that there has been a general slowing in the housing market across New Zealand,and particularly in Auckland, due to Reserve Bank restrictions and a sharp decline in the number of foreign buyers."

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42 Comments

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28

Utter rubbish, property never goes down and foreign buyers only made up 3% of sales or something.

I guess I'll be getting a rent increase on the back of this news.

Kind of meaningless media release when it doesn't give any indication of sample size at the local level. Mind you, it's quite interesting that the sales volume is only down 11% yoy at the national level.

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23

"However it is also undeniable that there has been a general slowing in the housing market across New Zealand,and particularly in Auckland, due to Reserve Bank restrictions and a sharp decline in the number of foreign buyers."

So foreign buyers are having a noticeable impact on the housing market! I thought they only made up 3%? I guess National lied... Again.

I think you would have to question the author of this media releases. How do they know the drivers (restrictions and foreign buyers) of the slowing? Where's the evidence?

Yes, I agree. Just having a bit of fun :)

Data on numbers of sales, property values at the time of sale etc is collected by Harcourts, so they would see the trends and market movements from the effects of LVRs, the election cycle and credit tightening. As far as I know Harcourts doesn't record any data on foreign/domestic buyers, so there would only be anecdotal evidence then from Kennedy et al. Therefore, either he has seen the amount of foreign buyers in the past and their lessening impact now, or he is lying about foreign buyers having an impact when in reality their effect is negligible.

Yes, but you're sort of reaffirming what I am suggesting: these media releases are rather ambitious with their claims. They believe the sheeple won't bother to ask the question "why" and will accept what they say because they are the "authority." If they can't back up their claims, they should report the data and trends. Nothing more, nothing less.

I agree with you, as soon as the prices go up they will turn around and say that its due to high demand because we arnt building enough houses, they just pull these reasons out of thin air sometimes

JC are you saying that sentiment has not changed in Auckland RE ?
I have a nice bungalow in Greenlane for you only $2.3million with a block of flats behind on a shared driveway
Strange but this property was sold multiple times over the past 2 and a half years yet now is wanted by no one!
They call that a change in market sentiment JC

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15

Nothing compared to the drops to come after National and their infiltrators are booted.

Infiltrators? Or masters?

You mean Chinese Overlords....

In my view this is just a blip. Prices are still up massively . A while back they said chinese buyers had stopped buying, now this. . . it is a remarkable that the chinese apparently have all power and no power depending on who you talk to.

However, if the blip is sustained it will be interesting what occurs to those now stuck with houses they had never intended to be owning for much longer than a few days.

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10

More scary is if prices go down to much at what point do the overseas (3% haha) investors sell in mass or the banks or government in China force the sale. Keep a eye on any big lifts in listings on trademe. When the GFC hit in 2008 trademe listing jumped to 18000

That's right. Might be a blip but how many overseas investors will get up in the morning, read the news and decide nows the time to sell before it drops any further.

None, but keep daydreaming lol.

Overseas owners with a secure offshore asset will really be in a rush to sell, given the prospect of legislation change meaning they will not be able to rebuy an existing well located asset in this jurisdiction. You can sell, but had better be sure, as an offshore buyer ban means you will be excluded from buying back in.

History teaches some anyway
Plenty of Howick homes were put on the market by their Hong Kong owners after the successful changeover from UK rule to China rule. I know I bought one at a heavily discounted price
Doesn't anyone in NZ track foreign cities which are seeing correction in prices ?

Hi Surfisup.

"In my view this is just a blip. Prices are still up massively."

As much as I hate to admit, you're correct.

Take from this what you will but Tony Alexander is telling real estate agents to get another job.

https://www.stuff.co.nz/business/96864107/tony-alexander-warns-real-esta...

"According to his figures in the year to June 30, 2016, 95,000 houses were sold by registered agents, while in the 12 months to July 2017, that number had eased to 80,000."

"BNZ warned that the number of sales would continue to fall.

"The chances are that within a year or so the annual number will be near 65,000 with downside risk," Alexander said.

While previous housing downturns had seen annual sales in New Zealand drop to 55,000, Alexander said the fall this time was unlikely to be that hard."

Be nice to see Aucklands figures alone on houses sold. Auckland seems to be dropping before the rest of the country . I would think last July to this July to look not that bad over the hole country because the rest of nz didn't drop in sales be Auckland should be worse

Take from this what you will but Tony Alexander is telling real estate agents to get another job.

The smarmster is back in action. I don't like the expression "punchable face", but I heard it used about this guy. I think that was way out of order. The smarmster is far better.

Hi swapacrate,

Nice to see Tony Alexander being quoted in a respectful way.

Usually, people here try to run him down.

Like other economists, he doesn't have a crystal ball and he can't see into the future, but I'm sure he does his best in making forecasts/predictions.

It's nice to see him given the time of day - for once.

In fairness, I don't recall anyone mentioning him much prior to his ridiculous "buy a meth house" column. He got a bit of derision for the sheer volume of inanity squeezed into a single column.

However, I think most people regard him as an economist with a record largely like any other.

Been quite a few blips since February

So if you want a spruikers view everything's OK right tothepoint ? Laughable!

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14

The sale of John Key's house should lift the Auckland average for September.

One smart cookie, sold before the labour government from sept 24.

In another 3 months yoy statistics on house prices won't have last years high October November and December figures to help. Sales after the election should pickup, I'm guess people will be more realistic in there prices. I can't see a happy outcome to be a bull in house prices after the election. The chances of national getting in without peters is pretty slim

Yes!

There is a lot in the media and from financial institutions recently about liar loans and a crash pending in the Australian property markets (Sydney and Melbourne specifically). What I don't see, is much discussion on how that will impact in NZ. Many of these articles highlight how exposed the Australians banks are to a big crash in property. And these are the same, main banks in NZ also. If Oz market crashes, placing strain on the banks, stock markets (heavily exposed to property markets) and pension funds (also heavily exposed) surely that would have a huge effect here? Would an Australian housing crash not provoke a credit crunch in both countries? Especially considering the amount of overseas lending these banks rely on?
Why do property bulls in NZ never discuss this risk?

It's a good point. If Australian cities are a cornerstone of the "Auckland is not overvalued" argument, then I suppose it doesn't compute that those cities are also overvalued. Most property bulls on this website don't discuss any of the risks. We're talking about something close to a religion. Australia is caught in the same trap as New Zealand except with even higher private debt.

Digital finance analytics provides some good 'under the hood' data for Australia.
http://www.digitalfinanceanalytics.com/blog/category/household-finance-c...
The six charts about half way down the page show a steady deterioration in household finances.

Forget Sydney, a 1/4 acre in New York will cost you $600 million, talk about the mother of all bubbles!!!À¿

Where Sydney goes Auckland will follow.

The interesting thing about the liar loans is that few of them are in arrears. I think I read that on average they were more reliable than the entirely honest ones. Also that are not totally lying about the income, just embellishing it somewhat.

Australia and New Zealand have followed a remarkably similar policy path. Both have had very high immigration and private debt expansion for some years now.

Why would a liar loan be more reliable? Australian interest rates have trended down which masks bad lending. Note how quickly mortgage stress in Australia has risen in the past few months with very minor increases in retail interest rates;
http://www.digitalfinanceanalytics.com/blog/mortgage-stress-still-on-the...

I suspect Auckland is more vulnerable than Sydney though. More political will for change. Less underlying strength in the economy. Both economies will struggle to improve even with a lower currency, because both have so little exporting power now there isn't much left to benefit from it.

Doesnt that raise a red flag for money laundering ???

If you have to lie about your imncome to get the loan but then are more reliable payers that the rest of the market.... just doesnt add up!

More data on liar loans is needed. Anecdotally (yes I know!) I've talked to a few people who have included their bonus in their income. That's ok in the good times but bonus' are usually one of the first things to go in a downturn. One example is an acquaintance who has a fairly low salary but gets around a $40k bonus annually and has that and her salary as her total income.

Listen to Zachary he learnt much up a post working for the post & telegraph Ha!

Why would a liar loan be more reliable?

No particular reason other than that the banks stated, up until now, they defaulted a little less than the others. At least that's what I read in an article about it.

I would assume liar loans would be more likely to buckle under pressure of higher interest rates than honest loans. Hence why this kind of property market is often referred to as a house of cards. There are numerous factors on the horizon that could destabilise any segment at the bottom of the market currently.

Could be foreign lenders raising interest rates (either because they are tightening themselves or because OZ banks are perceived as higher risk), could be reduced trade from China, could be decreasing housing market activity or values, could be decreasing net migration, change in political sentiment, change in market sentiment owing to negative media reporting or some/all of the above.

Possibly these storm clouds will just blow away and amount to nothing but at the point, I personally doubt that.

As ever, sensible, long term investors will have healthy enough yields to stay the course. But the vast number of negatively geared investors might be in trouble when the banks watch the LVR's deteriorating and without cash flow to see them through a down turn.

The Aus. liar loans are partly about people embellishing a bit on their application, mostly understating expenses apparently. So a significant proportion of them aren't really that big of a problem and the banks compensate by testing the ability to repay at a much higher rate than current rates. Little bit of a beat up, makes a nice headline though.

Christchurch prices up by approx. 36k.
The reality is that Christchurch market is undervalued compared to the quality of life you can have.
The average prices that have been quoted over the past few years have been seriously inderquoted as they always included all the "As Is" property and investor are doing very well with their rental returns.
I can also confirm that there are a hell of a lot of buyers from Auckland buying as they can see better value than In Auckland.

I can't see the Christchurch property market taking off like Auckland/Tauranga/Wellington for a while, as the post-earthquake Fletchers/"cowboy" builder repairs will still be a dead weight. Buyers are still being thorough in their due diligence and sensitive to having to fork out for any needed additional repairs (exterior cladding, ring foundations, piles, leveling, sub-floor etc) on top of what they pay for the house itself. Not to mention the potential that the seller/REA is trying to hide something. The new builds that sell slowly are dampening the market as well, with construction starting to wind down. It's a pity so many are God awful cookie-cutter subdivisions like the ones by the Racecourse or Pegasus though.

As for the market being undervalued, I would have to disagree. The market down here is a lot more in line with what is considered affordable in NZ, and with what you get for your money. Besides, the last thing NZ needs is another city with over-inflated house prices.