Difficult start to summer for housing market with sales volumes down 16% in October and prices down in many regions

House prices are declining in Auckland but setting new records in some other parts of the country, according to the Real Estate Institute of NZ.

The REINZ's median house price in Auckland was $850,000 in October, barely changed from September's median of $848,000 but down 3.2% compared to the October 2016 median of $878,500.

That was the biggest annual decline in Auckland's median price since December 2010.

Auckland's median price has now declined by $55,000 (6%) from its March peak of $905,000.

The REINZ House Price Index, which allows for differences in the types of properties being sold, is also down 1.2% in Auckland compared to 12 months ago.

That suggests the decline in Auckland prices is across the market, rather than restricted to certain types of properties.

Prices were also weaker in the Bay of Plenty, where the median was $520,000 in October compared to $547,500 in September, but still up compared to the October 2016 median of $500,000.

Other regions where median prices fell in October compared to September were Northland (-$35,000), Taranaki (-$10,000), Wellington (-$29,100), Tasman, (-$52,700) and Nelson (-$33,500).

The figures suggest the real estate market could be in for a difficult summer, because as well as falling prices in several regions, the number of properties sold throughout the country in October was down 16% compared to October last year.

Sales volumes were also down in October compared to September in Northland, Auckland, Bay of Plenty, Gisborne, Manawatu-Whanganui, West Coast, Canterbury and Otago, when they should be rising at this time of the year.

The biggest declines in sales volumes were in West Coast -31%, Manawatu/Whanganui -24%, Northland -21% and Bay of Plenty -21%.

The outlook is particularly grim for Auckland, because although sales in the region were down 21% in October compared to October last year, the number of homes available for sale in the region was up 4% compared to a year ago.

However the markets remains buoyant in some regions.

Record median prices were set in October in Waikato, Manawatu/Whanganui and Otago.

The interactive charts below show the median price and sales volume trends for all regions of the country.

PDF iconThe REINZ's full regional report for October is available here.

Volumes sold - REINZ

Select chart tabs »
The 'NZ total' chart will be drawn here.
Loading...
NZ total
Source: REINZ
The 'Northland' chart will be drawn here.
Loading...
Northland
Source: REINZ
The 'Auckland' chart will be drawn here.
Loading...
Auckland
Source: REINZ
The 'Waikato' chart will be drawn here.
Loading...
Waikato
Source: REINZ
The 'Bay of Plenty' chart will be drawn here.
Loading...
Bay of Plenty
Source: REINZ
The 'Gisborne' chart will be drawn here.
Loading...
Gisborne
Source: REINZ
The 'Hawke's Bay' chart will be drawn here.
Loading...
Hawke's Bay
Source: REINZ
The 'Manawatu' chart will be drawn here.
Loading...
Manawatu
Source: REINZ
The 'Taranaki' chart will be drawn here.
Loading...
Taranaki
Source: REINZ
The 'Wellington' chart will be drawn here.
Loading...
Wellington
Source: REINZ
The 'Tasman' chart will be drawn here.
Loading...
Tasman
Source: REINZ
The 'Nelson' chart will be drawn here.
Loading...
Nelson
Source: REINZ
The 'Marlborough' chart will be drawn here.
Loading...
Marlborough
Source: REINZ
The 'West Coast' chart will be drawn here.
Loading...
West Coast
Source: REINZ
The 'Canterbury' chart will be drawn here.
Loading...
Canterbury
Source: REINZ
The 'Otago' chart will be drawn here.
Loading...
Otago
Source: REINZ
The 'Southland' chart will be drawn here.
Loading...
Southland
Source: REINZ

Median price - REINZ

Select chart tabs »
The 'NZ total' chart will be drawn here.
Loading...
NZ total
Source: REINZ
The 'Northland' chart will be drawn here.
Loading...
Northland
Source: REINZ
The 'Auckland' chart will be drawn here.
Loading...
Auckland
Source: REINZ
The 'Waikato' chart will be drawn here.
Loading...
Waikato
Source: REINZ
The 'Bay of Plenty' chart will be drawn here.
Loading...
Bay of Plenty
Source: REINZ
The 'Gisborne' chart will be drawn here.
Loading...
Gisborne
Source: REINZ
The 'Hawke's Bay' chart will be drawn here.
Loading...
Hawke's Bay
Source: REINZ
The 'Manawatu' chart will be drawn here.
Loading...
Manawatu
Source: REINZ
The 'Taranaki' chart will be drawn here.
Loading...
Taranaki
Source: REINZ
The 'Wellington' chart will be drawn here.
Loading...
Wellington
Source: REINZ
The 'Tasman' chart will be drawn here.
Loading...
Tasman
Source: REINZ
The 'Nelson' chart will be drawn here.
Loading...
Nelson
Source: REINZ
The 'Marlborough' chart will be drawn here.
Loading...
Marlborough
Source: REINZ
The 'West Coast' chart will be drawn here.
Loading...
West Coast
Source: REINZ
The 'Canterbury' chart will be drawn here.
Loading...
Canterbury
Source: REINZ
The 'Otago' chart will be drawn here.
Loading...
Otago
Source: REINZ
The 'Southland' chart will be drawn here.
Loading...
Southland
Source: REINZ

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current Comment policy is here.

200 Comments

Banks might have to offer 3.95% fixed for 12 months to stimulate activity

up
13

But who's willing to buy with median prices dropping.

up
11

Awaiting butt hurt in 3...2...1...

up
13

loosing 55k per property you own in Auckland does not sound like a good investment to me. Then there is insurance of course, and then wait rates dont forget, oh and maintenance, and of course possible loss of rent due to homes becoming vacant. The smart money sells before the crash ! I wonder what the medium lose will be next month ?????

Wonder what effect the Auckland property valuations will have on the rates bills after 3 years of massive price inflation? We won't know for certain until July 2018, but the valuation is timed perfectly for the top of the market.

Auckland rates are set by creating a funding requirement, then dividing that among the relative property values. If all property doubles then no ones rates change.

Ah today I learnt something new thanks! I just assumed that councils were greedy buggers that looked at any excuse to up the rates but i guess that's already performed at the funding requirement stage.

Yeah lol exactly, the greed gets baked in the cake at step 1 :-)

Yes, they're greedy, but cunning with it. The steps to TLA budgets (I've coded the rules and relationships into a very few of the cubes of the sort that most TLA's rely on for quickly estimating the consequences of various settings) run like this:

  1. Gather all the blue-sky budgets from every nook and cranny of the whole show and bung 'em into the hopper
  2. The 'Rates Required' parent object gives the first, horrendous result. As does 'Capex Required' which feeds back into 'Rates Required' via depreciation, and also (of course) feeds 'Cashflow', and 'Financing Required'. Everyone promptly utters a few well-chosen but un-minuted Anglo-Saxon words, and the real work begins
  3. Firstly, a general paring of obviously stupidly inflated budgets and admonishments to their managers (but Promotions for the most egregious....)
  4. Secondly, a concerted effort to move the less obvious budgets into areas that can have 'Revenue from Modest Fees' (and thus, entirely coincidentally, subtract from 'Rates Required')
  5. Trim 'Capex' (which trims 'Depreciation' and hence 'Rates Required') OR (and more subtly) move it sideways into - ya guessed it - Activities with Fees Income
  6. Take another look at 'Rates Required' and see if it passes the obvious Smell Test - will Councillors pass this?
  7. Take a cursory look at the Fee-generating activities (where most of the sideways dumping has occurred) and see if They look acceptable (or are levied on such odious categories of subject that no-one cares - landlords, large businesses, car salespersons, hoteliers).
  8. It's highly likely at this point that 'Rates Required' is still way beyond the pale, so Phase 2 commences - alter the incidence of Rates via uniform charges, separate rates, more Modest Fees and so on.
  9. So 'Rates Required' is now fed by a plethora of Rates, Charges, Special Rates, Fees Income, and Differential rates. Note that the total has not altered - that is too obvious to mention at this point - the main effort is to disguise it as competently as possible
  10. The final check - are all the now-diffused sources of 'Rates Required', 'Fees and Charges' etc - sufficiently opaque as to survive public scrutiny? If Yes, carry on and levy 'em, else go back two clicks and obfuscate some more

One should never watch Laws, Sausages and Rates being made, to extend a very ancient saying....it could shake one's faith in Human Nature....

Auckland house prices likely to oscillate around current levels for foreseeable future.

Underlying economic indicators remain remarkably solid.

Longer term outlook for Auckland housing market continues to be very strong.

TTP

If the market becomes static for the foreseeable future then the specuvestors that are geared for capitol appreciation will be selling en mass. I suspect that these sales will have a significant effect on the market...

up
13

Who to?!

up
10

A bigger fool if they can find one.

up
12

Good timing for the government to remove negative gearing, eh.

x2

up
11

To the Pt
If nothing else works, a total pig-headed unwillingness to look facts in the face will see us through.

Hi Smalltown,

Speaking of the actual facts, a large volume of (lower-priced) apartment sales has skewed the Auckland data.

If these apartment sales are taken out, then house prices in Auckland are holding well.

But, of course, the majority of people here don't want to know that.

TTP

The REINZ House Price Index, which allows for differences in the types of properties being sold, is also down 1.2% in Auckland compared to 12 months ago.

Down 1.2% apples to apples is holding up well? And we know it's going down faster in recent months. The 12 month index will be going down down down in the upcoming REINZ reports.

"And we know it's going down faster in recent months. "

WRONG. October showed a 0.2% gain in the HPI vs Sept. Last 3 months shows 1.3% gain. So the 1.2% year on year fall suggests the falls are more than 3 months ago.

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2017/Residen...

up
15

TTP, to add a level of insight to your comment, if prices were to "oscillate" around current levels this would indicate increased buyer support. A leading indicator would be increased clearance rates, reduced days to sell. Um-no this is not happening and Auckland house prices are falling - period.

Hi Retired-Poppy,

Clearance rates oscillate as well, my friend. (Go look at the historical time series.)

TTP

up
16

what, like dead cats bouncing?

Sales volumes have fallen 21% despite an increase of 4% to the available stock. House prices have fallen 3.2% but remember that's only measured on completed sales. For obvious reasons, it's much easier to accurately measure average house prices in a market heading upwards than it is in a market heading downwards.

Hi TTP,

“Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’ as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.” from Nassim Taleb’s 2007 book “The Black Swan.” (recommend reading the book if you haven't)

Philosopher David Hume summarizes:

The supposition that the future resembles the past, is not founded on arguments of any kind, but is derived entirely from habit.

Philosophers are very overrated individuals who have contributed little or nothing of practical use to humanity. Imagine living a life devoid of habit.

Zachary,

The first sentence is stunningly arrogant and ignorant The second sentence is meaningless. This is about par for the course for you.
David Hume was one of the major figures of the Enlightenment and he is known today-nearly 300 years later-because of the power of his thinking on many issues. For example,he was one of th first to support American Independence and saw very clearly that opposing it would have to engage in a brutal and financially ruinous war. To quote him; "Better to let them go,to govern or misgovern themselves as they think fit".
If however,you retain your contempt for those who merely 'think',then you might listen to Mlodinow,a well known physicist. I suggest you read hi book The Drunkard's Walk, How Randomness rules our lives.

Typical boomerist jibber jabber linklater01. We are witnessing the twilight of the Boomer faith in the "Enlightenment". Generation Z will reject these old gods and idols and forge a new path forward.

This rubbish merely prompted me to uptick Linklater's.

Unbelievable denial by the Real Estate Agents.

Agents will happily sell for less as they still get paid. The denial is sellers.

up
15

A lot of those agents are also highly leveraged investors who won't want to see the market tank.

When brokers behave like NZ RE agents it's called "Insider Trading".

Bad...luck for them. Would be good European car (repo) buying in mid to late 2018

Too true agents only wants sell even if it means they have to convince the seller to go 1$ reserve on trade me XD.

you mean over 20 years?

dp

the underlying indicators may appear solid - but they are certainly weaker than two months ago - less immigration, more land being opened up - intention to build more prefab housing -restriction on chinese capital flight - more challenges to foreign ownership - 5 year bright line test so a certain weakening from prior -

Perhaps more relevant to the point ....is that the indicators whilst positive, were not reflective of the massive price rises that have occurred - that had a large dose of investor sentiment, speculation and greed - all of which has exited the market - and been replaces with negative expectations of price rises and fear

I suspect they will be the drivers for the next couple of years - and only then will your underlying indicators start to play a part

You would make a good Dj in the old days with records. Ever thought about working for Trump, you might make a fortune.

https://www.youtube.com/watch?v=PGNiXGX2nLU

You spin me right round, baby
Right round like a record, baby
Right round round round
You spin me right round, baby…

TTP,ZS,DGZ,all the same person. I think there favourite band is the Spin Doctors.

up
17

It's a start but we really need sustained years of ~3% drops yearly to reach affordable levels someday. Then maybe some investment will start shifting to productive sectors rather than being used to drive up the cost of housing.

up
11

We shall see as to what the future brings. My expectation is for around 10% decline per year for two or three years. The rate of change in price is not quite yet to that rate but getting close now. The leading indicators (sales rate and listing rate) suggest an increasing rate of decline in the future, as per expectations.

"My expectation is for around 10% decline per year for two or three years."

No such luck for you, Yankiwi. (If house prices went down that much, I could buy too.)

up
13

As I said, we shall see.

We haven't seen Eco Bird lately. The Eco prediction was that we saw the low a couple of months ago. It appears that it wasn't an Eco sound prediction.

As to house price depreciation, decreasing prices would be detrimental to me as I am a home owner. Of course, my home ownership isn't considered to be a financial investment but rather a fiscal inefficiency. My wealth increased much more quickly during my decade of renting than the two prior decades of home ownership. Let's just say that I am amused at the kiwi perception of owning property being the key to financial success!

up
10

^^ nice comment Yankiwi^^ (re home ownership)

Yup Ecobird say the bottom was last August. And it appears that we had lower to go, and increasingly looking like lower yet still ahead.

up
12

RE's like Eco Bird and TTP will say anything in a desperate attempt to keep house prices up! We all know that once the top end buyers are gone prices are naturally going to fall back down to when the top end buyers originally entered the market.

At an educated guess we've got at least a year or more for prices to bottom out. Probably falling back down to 2013 levels and much further for those in central AKL.

Hang on... What were you investing in during period your periods of renting that had a better return than housing over the last 10 years? You sure you are calculating you're net wealth correctly?

Also why is it a fiscal inefficiency?

Bitcoins.

My guess would be stocks. Nzx50 index has more than tripled since the bottom in 2009, s and p 500 has quadrupled. Obviously some individual stocks have done much better if you get lucky/invest wisely.

He is comparing his specific situation. If you include debt then housing crushed the S&P etc.

Sure did!

Laminar,

My data (and experience) suggests that you are incorrect in your assessment.

Yes, my gains occurred primarily via equity investment. I was (pick one) either wise or lucky in that I did appropriate market timing sales and purchases for the dot com crash in 2000 as well as the GFC that started in 2007. This resulted in gains that were a wee bit better than the basic index gains (which do not reflect additional gains from dividend payment). The resultant gains were far better than the equivalent investment in housing, with less overall risk in my opinion. Worked for me, YMMV.

When you account for the higher interest rates charged on margin shares, the amount of the asset you can purchase per $1 of capital, rent, dividends and inflation, then you will see that cash stocks outperform cash housing and that margin housing outperforms margin stocks.

I see differently than you.

Eco has actually been correct so far, markets short term bottom was July. He said 'im calling that this is the bottom' and prices have risen in both months since his statement.

Not for Auckland it isn't, property prices here have far, far further to fall to reach affordable levels. We've at least another year to go and those paper millionaires are out of luck.

I wouldn't be surprised if DGZ/Zac were out there selling off their investments right now before the foreign investor window closes. ;)

The short term low for Auckland was July. So far Eco has indeed been correct. The above posters have made a mistake and probably confused % growth (year on year) with house prices, or possibly they are just wrong. Auckland bottomed in July. It may go down again but for now EcoBird's statement holds true.
I wouldn't be so sure about DGZ and Zac. Ive seen a few of their posts and my guess is they have seen prices rise and fall a few times and probably consider it business as usual.

Laminar I think you're forgetting that Auckland's house prices are still falling and will continue to fall for some time. Will you still be claiming that Eco Birdy is correct about the market having bottomed out last August when prices are still falling six months from now?

I'm not forgetting anything, you are not making sense. Eco bird claimed the market bottomed about 2 months ago, he did not claim it bottomed last year. Since his call the average adjusted price has only risen. Auckland put in its short term bottom in July 2017 (read that carefully; short term bottom). I dont know if that will hold, i certainly wouldn't want to bet on it rising from here but the claim that he is wrong is premature as data has actually been in his favor since July 2017. My point is that the comments here are so emotionally driven that they cant even read data correctly and incorrectly thought Ecobird had just been proven wrong by the latest data.

That's ok I'll be here to rub it in next time round. My point is; look at the change in the market conditions, look at what previously drove the Auckland property market basically Foreign buyers and Speculators both of which have had the breaks thrown on them this year. So it's not surprising that the Auckland market will continue to fall because the big spenders are simply not here any more and are highly unlikely to return.

You should also remember that it's not just our new Government that put a stop to their spending sprees.

Emotional or just reading the writing on the wall?..... and it's pretty unlikely at this point, with low sentiment, credit tightening, changes to legislation, rising inventory etc, that the market is going to do anything but return to the long term average. Which means that July/August will definitely not be the bottom.

Yes totally agree with you Ginger, people should listent to those who have been though previous property crash during the GFC. It's annoying enough that we're having to go through it again.

So price of stock sold in BoP down 5% ...in a month! She's winding up......
What we need to do is relax the LVR's and drop interest rates......Oh.....

Auckland Properties for sale to hit 1200 this week?

12,000?

yes :)

Of course.

Many property commentators say that there is a shortage of new supply to meet demand and that this will continue to result in rising property prices (or they have a vested undisclosed self interest in rising property prices). What many property commentators lack understanding about a "market" for buyers and sellers is that existing residential dwellings being listed for sale are increasing supply to the "market" for buyers and sellers. There has been an increase in property listings for sale in Auckland from about 9,800 in July 2017 to almost 12,000 currently (source is trademe.co.nz) - about 20%. This will have a potential impact on prices. With households at record debt levels and with banks restricting credit due to the stressing of interest rates on mortgages to assess debt servicing, many highly leveraged property owners with negative cashflow properties may find themselves under financial pressure to sell when the bank reviews their maturing interest only mortgage and find that they need to go onto principal and interest terms (where monthly repayments could increase by up to 50%)

There's a shortage of Ferraris in New Zealand as well! 100,000 people want one, but shipping in 100,000 more isn't going to allow them to buy one....at the current prices. And that...is the difference between Supply and Demand, and Price. When prices fall, of whatever it is, to a level that people **CAN PAY then, and only then, will sales increase
(NB: ** Affordability = Current Assets at Realisable Value + Debt)

It is interesting how the banks have "enabled" a buyers affordability to increase from the levels in 1990's. Firstly the banks previously used 25% of income as debt servicing, which was increased to 33%. They previously only applied 25% of income to debt servicing to the main income, now they apply it to both incomes. Then the banks increased the term of the average mortgage from 20 years to 30 years which results in higher loan amounts at same monthly repayment levels.

Refer - https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Discussi...

Then finally they also allowed borrowers to go from P&I mortgages to interest only loans (especially for many property investors) - up to 40% of new loans in some months in 2015 were interest only. The two other drivers for larger loan sizes are higher household income due to wage inflation, and lower mortgage interest rates from 14.8% in 1990's to 4.5% level currently.

As an illustration, if you adjust mortgage loan sizes for only wage inflation and interest rates, then mortgage loan sizes today would be 4.7x that of the 1990's. After you adjust for the increase in debt service as a percentage of income from 25% to 33%, extension of mortgage term from 20 years to 30 years, then mortgage loan sizes are 7.7x that of levels in the 1990. Then if you adjust for allowing interest only loans from P&I loans, then the mortgage loan size is 10.6x than of 1990 levels.

So as a result of banks changing the terms and making debt servicing payments more affordable for borrowers (i.e. increasing the debt servicing as percentage of income, extending loan maturity terms and from P&I to interest only), bank mortgage loan sizes are 65% to 125% larger of what they would be, had all these terms remained unchanged.

Also those marked "reduced" in Jan this year was 70, hit around 150 in March before dropping back to 90 in July, now 178. Will be interesting to track over the next few months..

Good value add insight. #unlikeTTP

What I like is the REINZ figures for median house prices. Since 1997 over the past 20 years prices have moved up and down with boom and busts, however the trend has been in an upward curve. Yes Inflation in there along the way, but for long haul investors it's business and usual and property will always be a viable investment so long as you are not speculating. The number of how many people have indeed speculated remains to be seen so it's anyone's guess as to how many people will be in a tricky spot in the short term.

Saw that. Agree they have been a definite factor, but its also oversea speculation, stupid council, building material cartel. In short they cant take all the credit for it. Hurry up and bring in ring fencing (as promised), and make it specific to each property so positively geared stuff cannot prop up loss making stuff. Aka, you pay tax on your positively geared stuff, and then prop up your loss making stuff with money already tax paid.

Thats not possible as they will adjust the debt on each property to avoid that problem. Your over complicating a simple issue, losses shouldn't offset PAYE but you sound like you want blood not sensible legislation.

nymad,

Nice article... of course, it just puts forward the rather obvious result that somehow doesn't get discussed much here in NZ. That being, property investment is nearly a pure capital gains investment. The higher % return investment homes are also the high risk homes due to the increased risk of... shall we politely say, sudden capital depreciation... :)

In the past decade one would have done very well in Auckland regardless of investment strata. In contrast, for Hawkes Bay the property investor was subsidizing the renter during the past decade (well, until 2016 to be honest). I was a beneficiary of this de facto subsidization. I did far better than my landlord via term deposit purchases than they did via buying homes for investment.

So IRD should be applying a CGT to 97% of investors as clearly there isn't an "intention" to earn an income.

An excellent point!

Long haul investing is not a wise strategy anymore. Markets are so manipulated now that holding for the long term is not the best return on your money. There is a massive crash coming to correct the manipulated boom, and then it will most likely end up like Japan with very low inflation for donkeys years. The smart money leaves before the crash.
https://www.youtube.com/watch?v=PNjtNSzdOBY&t=7s

Hi John, it depends on how you are investing. Positive Cashflow houses are a different story, Ultimately it's increasing money weekly/monthly whilst having mortgages that are decreasing (not your own money) so ultimately the houses will be paid off regardless of the CG or not over the term and although interest rates change over time the reducing mortgage will help ensure Cashflow increases(as rents go up with time as well). Long term investments in this regard are still a good option in my opinion. But like anything it's always good to spread your risk around alternatives to housing as well.. If you have to put your own money into a property investment weekly and on-going in the hope it goes up on the CG side of things, yes it can be a gamble and an on-going cost/risk long term.

All property is cash flow positive 'one day'.

Well yes, but if you are the guy that caught the falling knife and got turned upside down, and then foreclosed on, it's not much consolation that the next guy wasn't overextended and made money on it while you are working to pay the bank back.

In fairness if you dont do your numbers then a capitalist market is going to reallocate your capital to someone who can do math and that's (somewhat regrettably) the point of the system.

But what numbers do you use?

What is your income in 6 months time.. it depends
How many of your rentals will be vacant?
Will you still have your day job or have you been made redundant? Or your partner? Or ill-health.

Looking further out you need to take a stab at what the mortgage rate is once you fall off a fixed rate. There is no guarantee that you can re-fix if the market has turned to custard, and your numbers are looking a little marginal. And god-forbid a tenant turns out to be a turkey and uses your house as a P-lab, or stops paying rent and forces you to go to the tribunal to evict them.

You can mitigate some of the risk with prudent behaviour, but the unexpected, or just extreme swings in market conditions can happen.

Yes those are some of the risks and that is why there is an expectation for decent returns. As to what numbers to use, well that's part of what separates average investors from great investors.

I believe that many investment loans are interest only - so never gets paid off (and STILL loss making)

You dont need to repay a loan to have a cash flow negative asset become cash flow positive. Inflation alone will sort that out over time. I displayed the math on this in detail a number of times. Its one of the most basic tenants of asset valuation.

Not sure how it becomes cashflow positive based on asset valuation, only based on income, debt and cost to service the debt and asset. Wouldn't matter if it doubled in value if the rent doesn't double. Insurance and Rates would go up though. If rent outpaces these, then sure, otherwise nope.

There is far too much obfuscation in these threads. The bottom line is that we are at a stage in the property cycle and most especially in and near Auckland where buying into the market is currently very very very RISKY. Yes it really is that simple.

I could have sworn that house prices were going to continue to infinity and beyond after the wet winter and the elections were over....

Sounds like a Buzz Light-year quote. Were you watching Toy Story the other weekend when it was raining?

Hi Independent_Observer,

As much as you might have yearned for ever-rising house prices (in you greed), in reality housing markets have highs and lows. Sometimes these "highs and lows" are referred to as "cycles".

I suggest you read up on housing cycles. There has been quite a lot written on them over the years. The literature explains why, for example, house prices fluctuate.

Finally, note that "housing cycles" are a fundamentally different concept from "motor cycles".

I think you have much to learn......

TTP

up
27

Hi TTP,

Some also have irrational exuberance followed by crashes....they are called 'bubbles'.

I suggest you read up on housing bubbles. There has been quite a lot written on them over the years. The literature explains why, for example, house prices crash.

Finally, note that 'property bubbles' are a fundamentally different concept from 'bubble bath' - although some may soon take a bath...

Your over confidence might be your downfall...

IO

up
10

I think TTP's world will come crashing down with this comment.

He is not over confident. It is evident from his hysterical spruiking that he is desperate.

I'd say TTP has never heard of Hyman Minsky.

I doubt he would understand it if he had.
It seems the only doctrine of logic that TTP prescribes to is his own crazy ramblings.

Doesn't TTP say property goes up and down and thats just how it is. That sounds pretty accurate. Ive seen him say if you hold for the long term you are probably fine and thats probably true. You lot seem emotional about it which likely means your pretty bias.

Holding for the long term still depends very very much at which point in a cycle one buys. Encouraging buying in this deteriorating market may result in disaster.

Actually, over paying results in disaster. You can buy badly regardless of the market and you can by well now. But as Laminar points out a lot of these posts are emotional not logical.

And fair enough, the Bears have been getting an ear full from the Bulls for a long time so it's no surprise they are getting there hits in.

Absolutely. There are a number of markets where the prices never recovered to bubble peaks - in all asset classes, whether the dotcom bubble or japan housing bubble. It's the nature of the beast.

Of course, there's also the mentality of those that refuse to cut their losses and run. I guess time will tell what plays out here.

Thats some of the worst comparisons to Auckland housing that ive ever seen.

In what way? I would say most people in the midst of a bubble assume it can't be a bubble. Including dotcom investors and property investors in Japan in the 90's.

That does sound familiar, not sure where I have seen that. But NZ is different.

Ooooh not even aloe vera will help with that burn

So if the prices have been going up for the last 5+ years, and the market is cyclical or "oscillating" you tell me where it's going for the next 5 years. Even John Key has sold up.

I just read elsewhere Auckland prices rose 0.8% over past month. Is this true?

Must have been asking prices.

Penguin, it is mentioned in the REINZ Monthly Property Report in the details for Auckland:

On a seasonally adjusted basis, Auckland's median price had a 1% increase compared to September, indicating that the median price was a touch higher than what we’d expect in October.

A tidy 17.1% drop for Auckland City. Good news for bargain hunters in the leafy suburbs.

What are you talking about?

I think they are trying to start a rumour

Probably just rumourmongering, but to be sure read page 7 of the link to n the article

oh I see what you are saying now, there it is.

I've always been suspect about our housing data, but when you have Auckland City which represents almost 1/3 of the Region drop by 17% but the full region itself only drop 3% makes you wonder how useful this breakdown is.

17% down is a crash, that should be front page material, but our only newspaper is beholden to the RE industry....

Auckland City median at $850k is $100k below the $950k average of monthly medians for the last 12 months, and it is $220k below it's March 2017 $1070k peak.

House prices might be down 3.2%, but that only encapsulates the houses that succeeded to sell at a seller's expectation. A true reflection of actual house price values may not be seen for a while, but some assumptions can be made based on the sales volumes which are down 21% YOY despite an increase (albeit marginal) of 4% of houses for sale.

I've been keeping 'back of a napkin' listing stats from realestate.co.nz and TradeMe, starting with the date Winston announced he was going with Labour. Hamilton City listings are up 12.5% since that date. There's certainly been a surge in the past month and I expect that to continue. I'm not saying the surge is solely because of the new govt, but I suspect it is a factor, along with the usual spring market behaviour.

Sincerely hope that NZ would be the first developed country where everyone live in their own house.

up
13

Past NZ governments actually went to a lot of effort to work towards that. It's only in recent decades that ideologues took the affordable housing they'd received from their predecessors and turned it into an investment vehicle instead of thinking of the housing needs of NZers like previous generations had.

up
20

"Dear Millennials,

I'm alright Jack, pull up the ladder.

Love,

Your friendly neighbourhood boomer housing investor x x

PS stop eating smashed avocados and whining"

Oh the irony when baby boomers blame millennials for spending too much and not saving their 'hard earned dollars' in the consumerist and capitalist world they've created for them to live in.

On the subject of avocados, seeing the lengths Auckland homeowners are having to go to to protect their trees, perhaps planting some in the back yard is a way to keep the value of a house climbing?

pin3cone, I don't care what house prices do long term after i've bought a home to live in, but you better believe i'm going to be planting a damn avocado tree as soon as I get that home!!! hahaha

Hamilton: Nov 2016 for sales trademe 580; now sitting at 701.
This is a 12 month high,trending up (albeit slowly) from July 605.
But up 46 in the last month.
The rush to the exits is underway..........

Realestate.co.nz - Hamilton City listings: 19/10/17 - 821 Today - 924

For me, this is the good news story, as it reflects to slowing rate of sale vs stock available. This is what's hurting developers now as they are chasing cashflow. Money tied up in stock:
"There are now 21 weeks of inventory in the Auckland region, an increase
of 8 weeks compared to October 2016."

Auckland market is on a knife's edge, a stalemate if you will. For any significant movement from here will require a catalyst, and baring any number of global catastrophes hitting us first, I'm picking distressed sales from developers to keep the company afloat.

A nearly 40% increase in inventory backlog... That is a rather dismal statistic.

I missed that one, guess I need to read the full report.

yep Trade Me currently at 11740 in Auckland and going up by about 80 a day

Sales are stagnating as listing are rapidly increasing. If this continues there will be a glut on the market and all the dumps (of which there are plenty) will have to take a reasonable hit if they want to sell.

Yep next stop is the Auckland rental market will be flooded in six months with all those properties that weren't selling at the over inflated prices. The good news for people renting is that it will bring down rental prices as the market becomes more saturated. This in turn will gradually bring down the cost of living in Auckland along with falling house prices.

Currently the inventory for both sale and rent are mounting in Wellington too. 745 (497 in the city) properties available to rent, 2129 (644 in the city) available to buy. Remember all those hysterical headlines about Wellington running out of housing stock?

X2 I'm not surprised. I suggest that in the event of full blown slump like GFC, the population will trend towards more person per house leaving even more vacant - the reverse of the great spreading out. In times of hardship people don't have any choice but to become resourceful - cut costs. It's only a housing shortage when loads of finance enters the equation! The labour markets swing just like asset prices.

Ginger, seeing as we're both watching the wellington market - is this the beginning of the slide? RV $540k, asking $530k, no obvious signs of weather tightness issues. Interestingly it sold under RV in 2009 too, but that could possibly be attributed to the GFC. A diamond in the rough or the slip before the landslide?

https://www.trademe.co.nz/1434577676

I'm a born and bred Wellingtonian who has lived in Auckland a long time. Wellington almost always follows Auckland with falls. I'd expect that to happen again.
While I can understand buying in Wellington as an owner occupier (you can't 'not live'), I'd NEVER own rental property in Wellington.
When (not if) the big one strikes, there will be big problems for landlords.

Labour in power always grow the civil service - which will increase demands for wellington housing. Wellington property won't drop.

Famous last words!

pin3cone I think the slide is *just* starting yes. If you look at properties on the Kapiti Coast, you can see even very fancy houses coming on at below the RV, only by a little, but when you consider how hysterically frothy Kapiti prices have been the past year, then it's very telling.

In Wellington City (which is my main interest) things are also softening. Houses sent to auction are almost all passed in and back on the market with asking prices after. Some have been relisted several times. Inventory is mounting. I am seeing LOADS of asking prices and "offers in region of" rather than the god awful tender process, that was very prevalent last year.

In the city the asking prices are still often above the RV, but less % above than they were last year.

If you look at homes.co.nz and trademe estimates on prices, these have certainly come down. And some houses that I looked at last year are now worth $100k or more less than their 2016/2017 purchase price according to their current estimates.

Case in point; this sold for $1.34 mil yet it's current value estimate is $1.12 mil
https://www.trademe.co.nz/property/insights/address/Wellington/Brooklyn/...

I know plenty of savvy Wellingtonians home owners and investors in this neighbourhood, who pretty much all thought this buyer overpaid. Clearly they could afford to! And it was a tender process, so maybe they just *REALLY* wanted that house! But still, I could list many such examples all over Welly. Houses that were bought in the last 18 months and now estimated to be worth a chunk less.

I imagine that it will be many months, before true price depreciation shows up. Myself and other friends who are in the market are putting in offers, and these are being rejected by sellers, who have very high price expectations. However, none of us are about to capitulate and overpay, so there is a bit of a stand off. I am inclined to wait, and am guessing we'll be looking at spring 2018 for prices to really return to the long term average.

CJ,

The rental price decline you describe happened in the US about a decade ago. Before we moved to NZ we got to rent a grand 180 deg ocean view home for an annual rent of about 2.5% of the home worth. At the time, term deposits were paying about 7%. The owner had put the home on the market but had zero interest so they put it out for rent while waiting for the market to firm up. Turned out that the market got less firm. The rent payment covered their rates and insurance. The lost opportunity cost for the owner for that year was more than $100k... instability in prices can happen on the upside (past) as well as the downside (future).

After an amazingly strong and extended run up in prices it isn't surprising to see some softness in the market.

Yes I was in a similar situation during the GFC in the UK when we were looking to move to NZ. We wanted to sell but the market was crashing so we were advised to rent out our property rather than sell, which seemed a good idea at the time. By the time we put our property on for rental. Tenants were already driving down the rental prices so we only just managed to continue to pay for the mortgage, which we frequently had to supplement.

If this property decline follows a similar path to what we experienced in the GFC then those people who can't get the sales prices that they're expecting and have to relocate will therefore put their properties out for rental and that is likely to flood the rental market driving rental prices down.

The interesting aspect is that the landlords are already subsidizing rents in Auckland. Just look at the rent price increase history as compared to the home price increase. The rate of return is below the return from term deposits at present. The spectre of rents dropping further from here is not healthy for the market.

Except that all those potential owner-occupiers who are unwilling to pay the sellers price, will now be in the rental market, creating extra demand equal to the extra supply.

It's a zero sum game, owner-occupier or investor/renter does not change the number of houses in a market nor the number of people seeking shelter.

What has clearly changed lately, are the number of people that have sold up and left Auckland for the regions. Many have been moving here to Hawkes Bay. This has been shown on an anecdotal basis, as well as via the rather hot real estate market here in the past 12 months (and unfortunately, the surprising increase in traffic of late). If the borders are not closed, it isn't a zero sum game. Also, some of the homes going to rent or to market had been unoccupied as the hassle and risk of renting wasn't deemed to be appropriate in light of the high capital gains being made without renting the property out. We've all seen articles about the ~30k unoccupied homes in Auckland... I suspect that this number will be decreasing rather soon.

It's perfect time to introduce Capital Gain Tax..

"Houdini" Key does it again! As he has done throughout his working life.
Not only did he get out and leave the sinking ship to Bill, but he magically sold his pad for an 'unbelievable' amount.
So, given his track records, how should we handle the future?
The day you see John Key leave Air New Zealand or ANZ Boards - sell them if you have them...!! (Oh, and if you didn't managed to sell your property portfolio, when he did, then.....good luck!)

Once you see him leave, it's too late!

I agree had to laugh when i saw in the paper that john Key had sold up and downsized to a new place on the old tennis court. After all the warnings from ratings agencies and warnings from the reserve bank any speculators still holding out for capital gains are delusional. I think drawn out lowering of prices for the next five years with med to high risk of implosion due to external events that will be beyond the control of our government. I Expect to see the current trend gather steam as home owners try to realize capital gains of the past 5 years only to realize it's already too late

Finally , we are starting to see prices deflate ........... they have a mighty long way to go yet

Didn't take long to find an amibitious asking price vs yield

https://www.trademe.co.nz/Browse/Listing.aspx?id=1447236197
Asking $699k, renting at $450pw = 3.3%

You can get 4.25% on a 5 year term deposit with Rabobank, why would you bother with tenants they just "dirty the carpet". $572 per week on $700k invested.

Because its way better long term to do so.

Until...(as you suggested yesterday; incomes determine asset price rises)...income start falling.
Demographics is going to do that all by itself - as people 'retire' their income naturally falls as the day-job goes, and that is happening at an ever-increasing rate. Add in all sort of other income depressing factors ( a deflationary environment a la Japan to come to us all? Isn't that what a flattening yield curve is telling us is coming?) and the driver of property prices - incomes - might just be about to fail....

@bw Over very long time scales income sets the price of assets, that's axiomatic. Its very unlikely that Auckland will let its growth rate sink to negative levels for long, it would sooner open the flood gates to immigration. If it did let its growth rate sit negative for an extended period it would be the end of the country as we know it.

The current "as we know it" includes massive overcrowding, inadequate infrastructure, and increasing inequality. Maybe a change to this status quo would be a good thing!

And a conflict between those who want to flood the market with money from overseas for their own profit and at the expense of young New Zealanders, vs. young Kiwis who are becoming aware of this selfishness that's in contrast with the efforts of previous generations.

Leaving a legacy vs. making a quick buck.

Some truth in that Yankiwi,

You hope.
Winston won't let the flood gates open.

I dont hope actually but thats the reality. If they didnt let immigration pick up the slack then the people would change the government. If they didn't then kiss goodbye to superannuation and moderate taxation.

Ah yes. But there is 30% (/) Tax on that - so call it a net $400. The $450 on a rental will have all sorts of negating tax off-sets, but whose taking any notice of that? Maybe.....the new Government?!

Nice big lawn to operate as a private cars wrecker

Down 6% from peak in March. Back then I called a 10% decline from peak. Reckon it will be at least 10%

Title of the REINZ report upon which this article is written:

"Prices rise in every region in New Zealand bar Auckland and Nelson – leading to record price for NZ ex Auckland"

Sounds very different from this article.
Check it out, it's at the bottom of the article before the comments

The REINZ report's main paragraph:

"Prices rose in 14 of New Zealand’s 16 regions for the year to October, leading to the median house price for New Zealand, excluding Auckland, to reach a record price of $440,000 (an 8.5% increase), according to the latest data from the Real Estate Institute of New Zealand (REINZ) – source of the most complete and accurate real estate data in New Zealand."

I guess Bay of Plenty, Northland, Wellington, Taranaki, and Tasman are not considered to be regions as they also recorded declines in addition to Auckland and Nelson. Counting on my fingers, I get seven regions that experienced declines in value over the last month. Not sure how they can justify the sentence that you have quoted.

Bullshit merchants

I get it now. Your comment on increasing prices is about the year on year price change rather than the current price change. It usually takes at least a half year of declining prices to get a declining YoY. To me, it looks like we will see the YoY deltas turning negative rather soon as the rest of the country catches up with the market leading Auckland region.

Here is what I don't understand and is possibly yet another black mark on RE agents. Why are there still so many houses going on the market for auction. Just look at the results. 12 - 40% overall results coming through over the last few months.

Obviously their sales pitch does not include "pay me this large auction fee and there is a 12 - 40% chance your house will sell".

This is just based on the figures https://www.interest.co.nz/property/90901/more-properties-are-being-auct..., but look back at the results and none of them have been over 50% overall recently.

REA's working in the best interests of the vendor?? Good Tui ad right there.

Well, is it possible we all work for our own best interests, including you and I ?

Mmmm a good professional will always put client's interests ahead of their own.
Doing the right thing and doing a good job will usually mean a professional reaps sufficient reward - at least in the longer term

I do work for my best interests but that is referrals and return customers. If the customer knows I have done the best job possible and gave them the best price possible, then hopefully they will refer me and come back.

RE's use the auction as part of their conditioning strategy to get vendors to decrease prices. After all no sale + no commission

"Why are there still so many houses going on the market for auction".
That's because your local/favourite RE agent knows best. He/she has massive wealth of knowledge on the current market and you as seller should take their advice on the best way to offload your overpriced property.

There's also the chance too that any rogue foreign investors with too many dollars and not enough sense will pay a silly price at auction...

Well, 869 houses sold by auction last month and 464 were in Auckland. Also if I remember correctly the auctioneer's fee is not all that high. Selling at a good price by auction is great for the seller and the REA. Once a property has gone to auction a lot of the work has been done with marketing so it is an easy transition to sale by negotiation if it fails at auction. If I were selling right now I would try an auction first.

If I were a speculator and wanted to cash in as close to the top of the market as possible, I would be selling at auction. So in the near future, I would expect to see an increase in properties going to auction.

That won't of course mean they will sell (if there are high reserve prices) but more auctions should be expected.

Will SOMEONE please... look at the money supply figures of the last 12 months. Then consider that 11,000 houses fewer will sell in Auckland in 2017 than sold in 2015. Next, consider that about 75% of those NOT taking out loans to buy would have had a mortgage of $500,000? Then do the maths. See how much money supply has been withdrawn??? And you think that is not going to induce a recession? In 6 months people will talk about where has this come from....

Hmmm, I don't think recession is on the way (save a global event), but I 'do' think growth will be a fair bit slower.

Lodge real estate in Hamilton sold just 2/16 at auction today, with 2 withdrawn prior, so really 2/18

Oh dear. Must be the oscillations TTP was talking about.

You gots to watch out for them oscillations when you are peeing into the wind

It's kind of weird how Auckland City had 537 sales in October compared to 455 in September. There is a mention in the report of an unusually large number of apartments selling but no breakdown in the figures. It would be really interesting to find out why so many apartments sold. Did they sell to overseas buyers getting in before the rules change? Did about a hundred more apartments than usual sell in Auckland City in October? Does anyone know the numbers?

don't know, but I did say here a couple of weeks ago that the apartment market will slump with the looming crack down on student visas.
Can't say for sure if this is evidence of investors trying to get out before the slump.
It might also reflect off-plan sales for new apartments?

I'm surprised that you guys haven't picked up on what the Herald has been broadcasting today, especially this quote:-

" Within the old Auckland City boundaries (the CBD and central suburbs) the median price has fallen 17 per cent from $1.025m to $850,000 since October 2016".

Again they blame this on the sale of apartments but then there have been very few sales of multi million dollar properties and Barfoot & Thompson's auctions also point to a large drop in sales.

Humm.... I wonder how central Auckland's property sales will fair after the foreign buyers ban is introduced early next year??

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=1194...

hmmmm
Presumably they mean the old 'Auckland City Council' boundaries?
If so, that extends MUCH more widely than just the central suburbs ie. it includes Avondale, Hillsborough, Otahuhu, Glen Innes, Glendowie, Panmure etc

And the article says prices are down 14% in the Maungakiekie Tamaki ward. There haven't been very many apartments in that location. Stonefields is outside of that ward.

REINZ say the main reason for Auckland City's 'massive' drop was a much higher number of apartment sales.
But there's no data in their report to verify that.
Interest.co.nz - any chance to try to dig to produce the evidence (data) ? eg. apartments as % of sales YOY?

From the report:

“Looking at the REINZ House Price Index (HPI) for the legacy Auckland City it only decreased 0.8% year-on-year, whereas the median for the same period fell by 17%, highlighting that the drop in median price is
not as dramatic as a fi rst glance would suggest.This is because the HPI considers the mix and value of theproperty sold, not just the sales price,”

Nevertheless, I agree, it seems like it would be good to see the numbers.

Yes it would be good to break down the actual numbers but you have to admit there's only been a trickle of auction sales in comparison to this time last year for the inner city areas.

Oh by the way; TradeMe's Auckland listings are now at 11,850, I think they're increasing on average about a 100 property listings a day. Well they'll eventually sell at the right price.

So I'm sure we're in for a lot more drama as those inner city property listings build up and there's few takers that can purchase a multi million dollar price tags.

Still well below 2008's 20,000 listings.

At the rate that the current listings are accumulating it wouldn't take long to catch up. We may well be looking at similar to the 20,000 listings mid 2018.

2018 - The Year Of The Crash.

Hi Zachary, it appears you have access to historical TradeMe property listing stats. Can you post the link cause I'm interested in breaking this down by region. Realestate.co.nz has Auckland listings this morning @ 13323, this is clearly turning into a torrent. One thing I noted was the lack of listing pageviews - weak buyer interest at these levels so it has way further to go. Unwinding of QE might see falls steepen?

With the unwinding of the QE Fed, there'll definitely be an "inhale" of funding that once inflated this balloon. Will have to keep an eye out for the Bank of England, as both unwinding together would be pretty scary.

....and this is just the start of it. All those underwater, do not to panic - it's your GP that has a solution, not your bank.

For those struggling to make mortgage payments a 12 pack of Codys would wash away any memory of financial problems.

The alcohol by volume will need to be matched by any future interest rate rises...

I've read all the comments and have to chuckle at some forecasting the market to decrease by big %'s. These people tend not to have looked at real estate cycles and how consistent they are. The "fluctuations" will continue (as they have in the cycles in the past-have a look at stats since 1993) for about 2-3 years and then real estate will upturn again. Has been doing this since Adam was a boy. And just to give a bit more historical perspective, when I was 30 yrs old governments were saying that there would be no or very little superannuation funds by the time we hit 65yrs. So what did my generation do? We invested in an asset class which is inflation proofed and provides income, and at the time had depreciation tax advantages. Why wouldn't we invest. Bought in 2005/6, Now I have 7 properties (besides my house) and they are worth about $2.6M with a interest only loan of $1.2M (purchase price) with income before expenses of $150K. This provides an passive income of around $50K. Another 10 yrs and they will be worth $5M and the loan will be similar, however the rent will have increased at an average of approx 5.4% per year.(Haven't worked out but reasonable increase in income) Obviously others have done the same. All this wealth will be going to my kids when I pass from this life. Its not about the capital gains for me, its about passive income. And this is what serious investors in real estate do, they want the passive income. If values decrease over the next couple of years, they will not be phased. If rents decrease then that might hurt some who have slim margins but overall most investors are careful and have back up plans that exclude selling. So stop talking all the crap about real estate market unless you really know what you are talking about. It belittles the whole website.

Good for you, so you’re confident beyond certainty that a Japan Housing situation couldn’t happen here?