Barfoot & Thompson's sales running ahead of last year, but inventory levels remain high giving buyers plenty of choice

Auckland's housing market is starting to slow as it heads towards winter, with Barfoot & Thompson's sales taking a seasonal dip and prices easing back as well.

The agency, which is the biggest in the Auckland market, sold 731 residential properties in April, down from 1064 in March, which is traditionally the busiest month of the year, but up from the 664 it sold in April last year.

With the exception of April last year, Barfoots sold fewer homes last month than in any April since 2011.

Prices also eased slightly, with the median dropping from $860,000 in March to $830,000 in April, which was also below the April 2017 median of $850,000 and significantly below the record high of $900,000 set in March last year.

The agency's average selling price was $930,223, down just a tad from $931,292 in March and below the record high of $968,570 set in March last year, but up on the April 2017 average of $917,079.

New listings and inventory (the total number of homes the agency has available for sale) also dropped compared to March but were running ahead of the levels in March last year.

Barfoots signed up 1358 new listings in April, down from 1689 in March and up from 1292 in April last year.

The agency had a total of 4678 homes available for sale at the end of April, down from 4814 at the end of March but still high compared to previous years.

Inventory was the highest it has been for the month of April since 2011, suggesting buyers still have plenty of choice, and with prices being flat at best, vendors will need to be realistic in their price expectations to achieve a sale as we head towards winter.

"While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome," Barfoot & Thompson Managing Director Peter Thompson said.

Barfoot Auckland

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173 Comments

So prices are flat and have been since about December.

This is great news, no death spiral, no run away freight train.

Now .. can we look at the downward pressure on incomes and see what we can finally do about increasing real wage growth, rather than importing cheap labour?

Didn't you hear minimum wage is going up up up?

How many people are buying houses on minimum wage?

Actually on minimum wage, or on minimum wage from the family business for the tax man? I suspect the second group significantly outnumbers the first.

keep it up.. it's now "Living Wage"

So people on living wage are stuck as tenants and get paid welfare supplements which get directed straight to the landlords pocket, while the landlords has been negative gearing to avoid paying taxes, the taxes that the government needs to pay to those stuck on the living wage so they can afford to live in the landlords rental? Seems fair...

Anyone else see a problem with this financail death cycle?

I.O. the world is not fair. It's not fair that you and I sit on our bum commenting on this site while others are starving, at war, without shelter or fresh water or power etc...

... talking about South Orc Landers ... or those living in Aranui , Christchurch ?

Take your blinkers off GBH the world is a lot bigger than NZ

That is a bit rich Yvil, our loveable Gummy Bear has been around the traps a lot longer than you. I would propose that based on the your posts around this joint that Gummy has the broader world view.

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"While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome," Barfoot & Thompson Managing Director Peter Thompson said.

LOL

If I had a dollar for every time I read a comment saying house prices are gonna crash............ I would have enough to buy a house in Auckland.
LOL

lol! skudiv, try selling your Auckland house and discover how good this market is for you! Adjusted for inflation, prices are falling. This is something, you for one, never thought would happen.

Well now that's clearly not true, as I have seen this cycle before, and small drops are about all you get in Orcs, even in the great recession. Whereas the price gains we have seen are something you never thought would happen, and are still in denial about.

skudiv, did you predict Central Bank money printing would send the finance world into uncharted territory or the earthquake in Christchurch? You're absolutely right on one point. Like many here (including you) I never thought such huge price gains post 2008 would happen but, sorry, I'm not in denial about it. Anyway, now that we're here, I take this opportunity to warn other clowns like you that are slow cooking in utopian denial about what comes next. All eggs in one basket, you've probably got no plan B either.

Except for the fact that it was all but a mathematical certainty that house prices would climb post 2008 and that anyone with a calculator could do the maths required on a single sheet of A4.

I suppose in 2008 you walked into every bank with a calculator and a single sheet of A4 paper and took out a tonne of mortgages?

Not just houses, it was a near mathematical certainty for most assets.

Laminar, your mathematical certainty, when applied to Irish house prices in 2008, comes in as a big fat negative for 2018. Click on the 10-year tab here; https://tradingeconomics.com/ireland/housing-index

Click on unemployment :-)

Ha-ha-ha:) Good point!

Remember not to confuse causation with outcome. Rising unemployment was the outcome of another key factor. As a result of rising unemployment, the inability of households to maintain mortgage payments led to further distressed sales and mortgagee sales of real estate. The number of distressed sales led to an oversupply in the market, as they overwhelmed the number of buyers in the market - this latter cause of supply / demand imbalance is frequently not considered by property market commentators yet it impacts house prices ...

Your not making sense.
The severe capitulation of the Irish economy caused extreme unemployment which crippled housing. Supply and demand are always dominant forces and is/was the core reason i expected/expect Auckland to correct. However this in no way means that Ireland is a case study relevant to NZ.

Perhaps I misunderstood the point you were making when you said to look at the unemployment chart. Can you clarify the point you were making?

Yes sure, I made a comment that it was nearly a mathematical certainty that most assets would rise in value following 2008.
This was rebutted with Irish stats on housing, a person could also have used Spain or derelict parts of the USA, Greece etc.
I pointed out that Ireland, indeed most failed property markets, fail off the back of high unemployment. The implication been it was clear that NZ (and most markets) would not see catastrophically high unemployment and thus 'most assets' would rise on the sea of money.

.

I have done a search on this entire article and the only "falling" word I can find is from you. How charming RP but I don't expect anything less from you LOL!!

In the article they used the word 'below'

'Prices also eased slightly, with the median dropping from $860,000 in March to $830,000 in April, which was also below the April 2017 median of $850,000 and significantly below the record high of $900,000 set in March last year.'

happy to help.

I still can't see the word "falling". Have you forgotten to wear your glasses today?

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Lol, someone needs to add some synonym to their diet.

"falling" is not a synonym of "below", for example prices could be below last year's but rising.

My quote also included 'dropping' if you want a more direct synonym.

Hi DGZ,

They have no brains as well as no glasses.

TTP

They certainly have noses so that they can perform nosedives LOL!!

Well spoken, DGZ!

Enjoy the rest of the week - at the expense of the DGM!

TTP

DGZ, it's obvious you didn't read the article properly. Typical resonance from another TTP clone. When adjusted for inflation, prices are indeed falling in Auckland. Barfoots use the word "easing" by their measure. The effects of ring fencing is yet to come so get used to it!

Perhaps we should help poor DGZ out. We could list all the words that the RE crowd will use to say prices are down without actually saying down or falling..

Easing
retrenching
mellowing
relaxing
declining
correcting

Join in people :)

Skidding, downtrend, downshift, drop-off, dip, holy cr*p!

For those here that prefer not to oscillate, use these;

Dive, plunge, nosedive, nosebleed, pummet, pitch, keel over, collapse and the all time favourite - crash.

Consolidating
Poised for further increases
Taking a breather

slipping
sinking
dwindling
moribund
dilapidated

slump
stablise
meltdown
downward pressure
buyers market
soft landing
sideways trajectory
downturn
revaluation
autumn apprehension
adjusting expectations
winter woes
spring slowdown
summer slumber
Chinese on holiday
positive long term outlook
bargain prices

Presenting the word cloud of doom: https://i.imgur.com/X1XSVge.png

When YIELD (e.g. rental income) is taken into account, the numbers for Auckland still look quite reasonable - especially in the inner city areas where house prices continue to climb.

We have only to remember back to yesterday, when Retired-Poppy forgot to take yield into account in his analysis of the housing market - causing himself great embarrassment. (Reference: see Retired-Poppy's comments in David Hargreaves item, "Housing Market Continues to Slow")

Clearly, yield is fundamental to assessing the performance of any investment. Who would buy a property without having an idea about its rate of return?? Forgetting to include yield is unforgiveable, as it can only mislead and deceive people.

TTP

I don't buy this argument. No-one is buying in Auckland for the yield as even if you restrict yourself to property investing, virtually anywhere else in the country is better. I pointed out in the thread you reference that when you add in the mortgage which the vast majority of investors will have, the yield is reduced even further.

I am also interested to see the central suburbs performing better than other areas this month, it has been a different story recently. Perhaps I will find the time to strip the numbers out of the monthly sales reports to get an idea of variance and trends sometime.

Hi MFD,

Rental return (yield) is obviously important to the many people who rely on a stream of income to pay for the costs of property ownership - including the mortgage!!!!

Can’t understand why anyone would doubt that!

TTP

TTP why did you disappear when asked the question "what's your forecast timing of the next upswing"? Lately you've commented that house prices are going to fall by a small amount. This is certainly an embarrassing backtrack for you. Rather than changing your predictions post the facts every quarter, step up to the plate and make a sound projection using some foresight and STICK TO IT. Go-on - surprise us!

On a risk weighted basis, rental yields are paltry. It's no wonder novice Speculator/Landlords want out now that the capital gains have largely vanished. Term deposits are a winner for FHBs when, adjusted for inflation, houses in Auckland are indeed eroding in value.

TTP, naivly assumes all FHB'S are destined to be Landlords and would chase yield! Being the predictable bitter one, he resorts to lies by suggesting I'm somehow embarrassed? ha-ha-ha :)

Hi R-P,

My position for several months now is that Auckland house prices will remain much around there current level for the foreseeable future, with small fluctuations up and down. (Everyone who visits here regularly knows that.)

And that’s exactly what has transpired.

I have made no attempt whatsoever to forecast the actual timing of the next upswing, or anything to do with it’s nature, duration etc.

TTP

TTP,

Yield-gross or net? When things like rates,insurance,maintenance and for most,mortgage interest,then in Auckland at least,we are talking Negative yields for many 'investors'. Since for them,a profit can only be achieved through a sale,they are not investors,but speculators,as i am sure you would agree.
As a landlord at the Mount with a mortgage free property,I still do much better in terms of net yield from my share portfolio.

linklater01, exactly - well said although, TTP may not be able to understand the question :)

@linklater01 That completely ignores future rent increases... Your core error is that you are running a debt free rental and comparing it to your shares (which may have borrowed internally). Its long been known that ungeared shares out-compete ungeared property, however geared property out-competes geared shares.
Either you have assembled yoru portfolio incorrectly or you are de-risked in which case you need to adjust the return for volatility and youl probably find your property and shares on a risk adjusted return are about the same.

Hi Linklater01,

Generally, I prefer to use net yield after tax - but I tend to be cautious and risk-averse by nature and, thus, in analysis.

It really depends on the purpose. Gross yield is perfectly legitimate in various circumstances and is often quoted.

It is not legitimate to ignore/forget yield - as Retired-Poppy has done. That would be incompetent to say the least - and plenty would argue unethical. Nobody should seek to mislead or deceive.

TTP

Nope, like I thought, TTP doesn't understand the analysis of true yield using some foresight. Once ring fencing comes in, where does that leave the yield for the negative gearers? Most tenants are already tapped out to the max from yield thirsty Landlords. My Rabo term deposits yield 3.7% after tax, I sure don't pay insurance, maintenance, rates on it and I dont have the risk of dodgy tenants. Capital gains are unbanked, my term deposits are. Then there's my Kiwisaver I contribute decent amounts into.

TTP is correct and you are the one who is WRONG. The market is cooling not falling so stop your common DGM BS.

...another bitter ring fencing victim. Two rentals heavily mortgaged, family home mortgage free. If your previous comments were indeed the truth then it's hardly misleading. It was you that previously commented on ring fencing "that's one refund check I will no longer receive" Do you not keep a mental record of the stuff that's actually true?

Dreams are free. You're the one who should be put into prison for misleading the public.

Retired-Poppy doesn’t understand that yield from rental income exists no matter the level of any ring-fencing.

When I read R-P’s posts, I’m reminded of the old proverb, “Empty kerosene cans make the most noise”.

TTP

Now-now TTP, of course the paltry yield still exists post ring fencing. It just becomes even more paltry - lol!

I'll now leave you jealous spruikers to mourn your losses.

one of my personal favourites to catch readers out and put a positive spin - "negative growth" ...

I think at 1.1% its hardly going to invoke tears and is frankly irrelevant. I expect/expected a 10% to 15% decline and if you ever catch me arguing its going down because of inflation, then you can kindly let me know ive lost the argument.

"with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome,"

So is a decline in comparison mean "falling" and forecast a further decline is least likely. So is that a finger in the air forecast, hoping further falls are unlikely.

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

Haha true. These commenters here have no idea, actually everything I have looked at is still selling above last year although I'm looking at Central Auckland suburbs mainly. However with other Auckland areas, the rent yields are getting too decent for prices to move down anymore before investors jump in. Regardless of changes through govt, we still have a very favorable investing environment - no stamp duty, no holding costs such as land taxes, etc. Plus geographically, Auckland is tiny compared to the big Aussie cities so land supply is very restricted plus ffn council and building restrictions, RMA, ffn Greenies, etc - supply not improving before getting a Whole heap worse. The commenters here probably haven't had enough investing experience in NZ and abroad to work this shit out.

DGM's prefer a crash so that the market can live up to their name LOL!!

Very sad that "LOL" is the comment of the day. (the sentence being a quote of the article)

... yes ... that quote from Barfart and Thompson deserved at least a ROFLMAO .... if not a full blown ROFLMAOSHISMGN ....

I was hoping that on a business website, the quote of the day would make a point, supported by arguments, data... or at least write a whole sentence...

... fair point ... I'll take it up with David Chaston when I turn up on pay day at the interest.co.nz office ...

A good writer should be concise and get to the point. The point was made, and you don't get much more concise than 3 letters.

AKL house price is hard to increase and is even harder to drop.

Very wise

Oh okay, so the already "cooling" market is "cooling" further as we enter the typical winter "cool" down period. At this rate, come spring, the "cooling" must surely speed up under the weight of impatient vendors up against buyers with much "cooler" heads.

All this cooling - maybe it's that climate change thingo everyone is on about.

Isn't that "global warming"?

Heads into autumn? We're heading for winter aren't we?

Winter is here.

I fear that interest.co.nz is becoming a tabloid with 'breaking news' banners that refer to reports of seasonal (expected) changes. Please save the 'breaking news' banners for actual breaking news.

Are you invested or over-leveraged?

March and April are usually two of the best months for Barfoots but the combined tally for those two months in 2018 has been the lowest since 2011 - that sounds like a very flat market to me. 3,047 new Barfoot listings in March/April but only 1,795 sales.

While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome," Barfoot & Thompson Managing Director Peter Thompson said

Unsure how it gets to that conclusion when B&T are listing properties at twice the rate they are selling them, that the inventory is the highest since 2011. In fact price increases are the least likely, and his comment about being realistic during winter is actually code for a further decline.

Yep. Being polite; just house sales person speak or spin. There are many other less polite terms we can all think of.
Its all part of conditioning both potential sellers (yipe, we can get you a good price) and buyers (yipe, you have to get in now).

Aucklands property bubble has two components: an underlying trend that prevails in reality and a misconception (elevated by spec spruikers)relating to that trend. A positive feedback developed between the trend and the misconception, (ordinary folk joined with the spruikers ) which set in motion a boom market . The subjective reality ( or feeling the market can only ever go up ) creating & reinforcing the true reality (True reality being a product of the subjective reality created & those drawn into it as new believers ) The Auckland market is liable to be tested by negative feedback along the way (The Chinese no longer arriving in by the van load to auctions & govt restrictions put in place ) and if it is strong enough to survive these tests, both the trend and the misconception will be reinforced ( The market will remain omnipotent or maybe not ) So all here are right at this point The test is on and we will see the result in due course.

Real estate agent speak: "Prices also eased slightly, with the median dropping from $860,000 in March to $830,000 in April, which was also below the April 2017 median of $850,000 and significantly below the record high of $900,000 set in March.
Everything is relative.
To a FHB earning $75,000 before tax; $30,000 drop the past month and $20,000 over the past year is significant representing close to six months income after tax.
To FHB; in the short term (and certainly this winter) expect prices at best(worst) plateauing and more likely cooling further. Ther is no immediate pressure; take your time, look around, get that house you feel good about (and probably couldn't afford last year). The tide price has and will continue to turn for you.

I wouldn’t be giving FHB any advice to shop around at all
This market is being tested & it remains yet to be seen the result

From a purely economic/financial perspective I agree.
However, what dollar value do you put on the intrinsic value of home ownership.
I agree with your (implicit) view that house prices are likely to cool over the winter season.
As to the long term outlook, I think at best (worst for FHB) prices will plateau but may well cool further for the medium term (1 and possibly 2 years or more).
The spring figures for September/October months will be telling as to where prices are likely to head in the medium term.
In the mean time, prices will cool over the next four to five months but at what stage do FHB say there are intrinsic values which will cost that I am prepared to accept.

Perhaps the intrinsic hell of paying interest on a 30 year mortgage on an asset that's losing value? Which is not a completely unbelievable outcome.

In ten years the mortgage costs will be negligible, while the price would have increased significantly.

Dreams are free.

Skudiv - that is the trend since the 1980's, but it can't last forever! (cost of money getting cheaper while house prices rise). What happens when interest rates hit zero?

Is the comedy festival still going.. that one cracked me up! LOL

Always some impressive mental arithmetics involved here at interest.co.nz at framing every piece of real estate news negatively. I particularly applaud it when the evidence / factual situation used historically to point towards a downturn shifts into positive territory so a an alternative set of facts are adopted to justify the downturn. Then it reverts, and swings again, again, and again.

I've got a new breaking news tagline you can just leave on the front page forever, so save you sometime.

"Breaking News: Residential Market Meltdown Continues."

The headline is fait accompli anyway - regardless of the fact set.

Just countered the spin put on the press releases by the PR people at the RE agencies. Some prefer their coffee with generous helpings of sugar, some like it bitter and dark :)

One thing is for sure; the optimism of some is far less likely to cool than property prices. :)

That's the beauty of talking about housing, so much data, none of it definitive. By comparison the share market with minute-by-minute price updates is too clinical to have a good argument about.

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I think one issue is that many are framing data on monthly basis or in their experience in the market only (which has caused severe confirmation bias) - instead of looking back at the history of housing markets over the last 100 years and internationally, not just New Zealand. Robert Shiller has done some good work on this in his book Irrational Exuberance (and Animal Spirits). Our housing market gains the last 10-15 years would surely be considered extreme in the history of housing markets - which have typically only just out performed inflation, historically. But for some, it would appear that this type of performance has the interpretation of being 'normal' housing market behaviour. That surely has to be a very risky mindset to have.

IO; I agree totally.

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You’re wasting your time with this type of approach on this forum. Shiller, what does he know?! Auckland always goes up and never materially goes down. Everyone knows that. And all those property markets that have fallen significantly in the past, they are all so far away, and anyway we live in a small island nation where everyone wants to live. So we are different. Duh

...popcorn ready lol!

As I’ve said before, if you want to get anywhere you’d be better focusing on property than popcorn.

TTP

A couple of quotes from Shiller's book "Irrational Exuberance"

1) generally when home prices are going up, the percentage who think real estate is the best investment also goes up. When home prices are going down, the percentage who think real estate is the best investment goes down too. This is feedback.

Shiller, Robert J.. Irrational Exuberance: Revised and Expanded Third Edition (p. 73). Princeton University Press. Kindle Edition.

2) Stories abounded in the U.S. during the bubble years 2000– 2006 of aggressive, even desperate, bidding on homes, of homes selling the first day on the market for well above the asking price, of people buying homes in a rush to beat the market— homes that they had sometimes hardly even had a chance to look at. People were afraid that the price of housing would soon rise beyond their means and that they might never be able to afford a house, and so they rushed to bid on homes.

Shiller, Robert J.. Irrational Exuberance: Revised and Expanded Third Edition (p. 25). Princeton University Press. Kindle Edition.

Similar to the property auction bidding frenzy in 2015/2016 in Auckland??.

3) According to Eichholtz’s data, Herengracht home prices doubled between 1628– 29 and 1632– 33, just before the peak of the tulip mania, and home prices fell almost back to their 1628– 29 level before tulips peaked in 1637. The market for these homes was certainly volatile. But when this index is corrected for inflation over this whole period, we see that there was not much overall home price increase. From 1628 to 1973 the Herengracht annual real price increase was only 0.2%. Real home prices did roughly double, but took nearly 350 years to do so.

Shiller, Robert J.. Irrational Exuberance: Revised and Expanded Third Edition (p. 29). Princeton University Press. Kindle Edition.

So a 345 year timeframe of real estate prices in the Netherlands, has led to a 0.2% p.a real return.

In NZ, since 2000 4Q - annual CPI has been 2.1% per annum. Compared to 6.5% p.a nominal price increase in average house price in Auckland - that is a 4.4% p.a real return for over 17 years ... can this continue?

What always blows me away is the inflation adjusted charts for US homes that he did - and the way that their bubble stood out. David Chaston and the team attempted to do something similar for NZ prices last year, which didn't quite show the same significant (strange?). I sent the data to Shiller and he said we needed to add some additional refinement to the data to get an improved outcome (things like floor areas of homes being built etc).

Of course it can continue. If we work on Auckland having an average house price of $950,000 and the average salary is $75,000, then after 25 years of 4.4% p.a. house price inflation and wages going up at CPI of 2.1% p.a. then the average house price should be $2.7 million and the average salary $123,000. Price to income multiple of 21.

Just for S&Gs, I plugged your $2.7m median house, with 20% deposit over 30 years @4.3% into a mortgage calculator.. $2465/week payment, and assuming the effective tax rate on a median income stays around 24%, thats only taking up 69% of the buying couples combined after tax income!

No problem!!

Can you please show your working on that.
edit - thanks, on the 2.7 million yes.

@ NZDan
Well that implies a number of things:
House growth will slow
Number of occupants per dwelling will rise
Home ownership will fall
Interest rates will fall

1) Yep, slow, stall, retreat, slide downhill, plummet. I knew that list would come in handy, thanks R-P!

2) nope, already overcrowded houses everywhere, and there is no reason for houses to get much smaller in terms of living space, we aren't singapore or HK on a tiny island with huge populations. smaller sections and more apartments & multilevel housing blocks, but no jamming 9 people into a three bedroom home.

3) nope, not unless the kiwi mindset changes. Non-home owners are voters too.

4)from record low levels they will fall further? When will the banks start paying us to borrow money?

2) Rising occupants per dwelling is actually code for increasing proportion of renters.
3) Im afraid home ownership has been falling for decades sir, it is a function of declining interest rates and over the long term will likely continue. This is a crucial statistic to understand.
4) Hilariously some banks in Europe where too embarrassed/lacked systems to pay home borrows and so just canceled all the fees instead. We had a joke going around that if you didnt earn enough to pass servicing at a bank just borrow more to increase your income.

Very much agree.

heh, wander on over to hotcopper, there seem to be plenty of battles about which way the prices are going to go next and why.. TA vs FA, vs bot trading and instos selling out on inside knowledge etc.

True, hotcopper is a bit of a weird melting pot. I spent a bit of time over there when ATM was first kicking into gear. I feel like the ratio of rampers posting over there is a bit too high for comfort.

I won't argue with that assessment. Its entertaining, a bit like this place.

Are you a 'milker' too mfd

Bought in back when it was 60c, it got very exciting after a dull year or so. If I ever want to feel regret I look at my cancelled trade when I almost doubled down at 40c or so.

I hear ya,got in early at 10c...got more at $1ish,got spooked at $1.15,so offloaded a bunch...if only I had put more in instead of the 'low' gains from my central AKL property....
Still can't complain...all us 'milkers' have got way bigger smiles than a landlord with 5 renters,2 in Clendon,3 in Ranui lol..

No popcorn but this blog does provide a laugh alright
Agreed the negativity is no better than the spruiking
The market is indeed trending down but that doesn’t mean it will keep on that path
I personally would love a property in kiwiland & a lot of other places
NZ remains a beautiful aspirational haven for many who know it
You’re all very lucky

Exactly and that's where we have been discovered by wealthy and middle income Chinese who will keep migrating to NZ. Only need a very small percentage of a billion to trickle in and compete for houses. Remember they come in as residents through business investment category so no restriction on buying.

Maybe our ancestors had it right with the poll tax.

Would you revert to the equivalent voter eligibility of the time as well i.e. Male, over 21 and property owners?

I wonder with the Royal commission into the big banks in Australia will have any impact on funding? I might be harder to get mortgage if it is so.

Perhaps one of the QSt forex types can illuminate on the Aussie banks & reckless abandon
At least they can rely on nice fat profits from their NZ subs to bolster their bottom lines albeit after their excursions into alternative investment vehicles

Nice headline from the herald for a change -
"Auckland average house sale price drops $30k in a month: Barfoot"

but then the comedy starts -
"........ saying it believes Auckland's housing market may well have bottomed out.
Peter Thompson, Barfoot managing director, said that prices and sales showed that the market may be ready to emerge from its hibernation and there were modest indications that confidence was returning"

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=120...

Well Again, "While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome," Barfoot & Thompson Managing Director Peter Thompson said.

So DGM are having a day of mourning on this bad and sad news

Reminder! ...the July Auckland bottom still stands

Auckland Average Prices
July 17 = $908319
April 18 = $930223

Auckland Median Prices:
July 17 = $810000
April 18 = $830000

You are most welcome ... :)

What is the seasonally adjusted comparison?

I don't think real buyers and sellers give a rat's for seasonally adjustments.
their saving or deposits won't be seasonally adjusted nor do wages and income.

do you stop buying tomatoes and lettuce in winter because its seasonal price looks too high?

Who cares what your dollar buying power is today compared to last year when you are buying a house "Today".

It is exactly like the Inflation adjusted stuff, make you feel poor but changes nothing of today's reality .. it is what it is ! now one can buy with Yesterday's Dollar value.

Seasonally adjusted numbers are amusement material for economists and statistic reports - a feel good - stuff !

Actually, I do stop buying fresh tomatoes in winter. Why would you? They're best and cheapest in summer and autumn. Winter is time for root veggies, leeks and kale, squash etc. I find it strange that other people don't change their eating habits to fit the seasons, you save a bunch of money and eat better quality food.

Disappointingly, I will be in Europe when your moment of truth comes around with the July data. I still suspect we'll see some lower prices yet.

Coming from the future (apples to apples comparison)

Auckland Average Prices
July 17 = $908319
July 18 = $873223

Auckland Median Prices:
July 17 = $810000
July 18 = $790000

Well Again, "While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome," Barfoot & Thompson Managing Director Peter Thompson said.

Note that this is the viewpoint of someone who wants to encourage more property transactions in an environment of a decline in transaction volumes. You encourage more property transactions by calming the fears of potential buyers and persuading them to buy ...

Maybe ... but that would be believed if it only came out from just a RE agency drumming for own business.

The proof is in the pudding ( the Price) ... forget sales volumes, sales numbers, time on market and all philosophical assumptions -- look at the result , the final conclusion, look at the Price

So far ... QVs has adopted 2017 market prices, REINZ numbers show a slight to modest rise, Corelogic showing market valuations, sales values making medians and Averages are holding well, economists and banks are predicting the same, no one is confirming a downwards trend.

So, surely they can't be colluding with each other, are they?

Hi Eco Bird,

You post some useful (yet unsurprising) facts - but the DGM will be out for revenge. As you note, they are in a very agitated state right now, after taking a series of body blows in the recent past......

Tread carefully and watch your back.

TTP

...and be careful of the King of all DGM's: Retired-Puppy LOL!!

Honestly, why are so many on Interest.co. So,preoccupied with what the Auckland property market prices are doing.
Reality is that yes it is expensive if you are not already a property,owner and I do have sympathy for the first home buyers coming thru.
If you are in your 30s and haven’t purchased a home then I wonder why you haven’t?
Yes there will be plenty of people who sell once the ringfencing comes in as they won’t be bothered propping up renters living costs to the detriment of their own living.
What you will see is existing investors picking up the slack and rents will without doubt go up!
I personally wouldn’t be buying in Auckland due to the low rental returns but many will.
The consequences of the COL will have huge detrimental consequences for the renters and the only o es that can’t seem to see this is The COL!

I think people are focused on Auckland because that’s the highest market by far for volume and especially value. Nothing else comes close. Big falls in Christchurch or Dunedin or Tauranga or whatever would not be material to financial stability. It’s not a judgement on what places are nice places to live. There’s are plenty of places in NZ that beat Auckland as places to live, IMHO.

Bang on Bobster,

1) Auckland houses are a large proportion of the collateral value underpinning a large amount of mortgages in the banking system in NZ.
2) Mortgages are a large percentage of the assets and capital of the NZ banks / authorised depository institutions.

Should the house price fall be large, then there are likely to be concerns about the financial stability of the banking system in NZ, and the adequacy of bank capitalisation of the banks to absorb loan losses. If the bank has insufficient capital / liquidity then the open bank resolution could come into play.

If you have deposits in a bank in NZ, then through the open bank resolution, you could take a haircut on your deposit and inadvertently become a shareholder in your bank ...

Truth is no one has any idea what will happen - people are just HOPING prices go up / down depending on their predilection

Not really, once you backed it up with fundamental analysis (news, government laws, etc) You will have a better picture whats going to happen in the future. I'm not saying it's 100% accurate, but I guess it is better than nothing.

That's a matter of opinion - "fundamental analysis" may just be an illusion of knowledge - don't forget that a year to two back how many people were confident the Chinese would re-enter the market. A great number of things are not measurable in real time if at all such as "market sentiment" - and how quickly that can turn on a dime. All I'm saying is read the business news but treat it with some suspicion, formulate your own plan - if the numbers stack up go for it. But don't' be surprised if some thing happens that you don't expect.

Where is tothepoint????
He/she is surprisingly quiet about a property report. Is he/she in shock and/or mourning over these figures?

shssh, don't speak his name, we're enjoying the peace and quiet.

70 more houses sold and a $13,000 average selling price increase from April 2017.

The sky is falling! The sky is falling!

"Nosedive" is the word.

"Prices also eased slightly, with the median dropping from $860,000 in March to $830,000 in April, which was also below the April 2017 median of $850,000 and significantly below the record high of $900,000 set in March last year"

OK, so median prices in Auckland have dropped from record high of $900,000 in March 2017, to $830,000 in April 2018. That is a 7.8% drop from the peak in an economic environment where there are record low interest rates, unemployment levels at 4.4% and an economy that is growing at 2.9% p.a, (and obviously no where near a recession).

Recall that property prices on average in Auckland fell 8-10% from their peak during the recession and GFC. We have already reached that price drop level already in a very much different and much stronger economic conditions than the GFC. If the NZ economy goes into a recession due to some external global factor, which is the likely direction and magnitude of property price changes in Auckland?

Combine that scenario with the following facts
1) household debt levels in NZ are currently at record levels (relative to GDP).
2) Auckland house prices are at near record house price to income levels.

That's not fundamental analysis CN - you need to use 'demographics' to determine which way house prices are going. Because we have record immigration stats set against limited supply, house prices are only going in one direction...(sideways....hey....what the hell?) This is of course sarcasm...

Here are a couple of my favourite examples of fundamental analysis using demographics ...

1) https://www.irishtimes.com/life-and-style/homes-and-property/prices-up-1...
2) https://www.independent.ie/business/irish/there-is-no-property-bubble-to...

There are 2 levels of fundamental analysis. Most people use level 1, but it is level 2 that really matters ...

Heh, that second one would pass as one of EcoBirds diatribes with a few minutes in Word using search and replace to localise the content.

Once again ‘Retired-Poppy’ is claiming that the New Zealand property market is a bubble ready to burst - and once again 'Retired-Poppy' is wrong.

It's in good company. Davy Stockbrokers seems to have published reports suggesting that New Zealand property prices must be due for a fall once a year for the past decade. One once a year for the past decade New Zealand's largest stockbroking firm as been wrong.

Not only is New Zealand property bubble not about to burst, but there are very good reasons to believe that it doesn't exist. Yes, of course New Zealand property prices are rising faster than anybody predicted, but we are only looking at a bubble if that rise is not justified by the fundamentals.
In simple terms a bubble happens when people are buying on the wrongful assumption that prices will continue to increase.

There are very good reasons to believe that New Zealand house prices will continue to increase for some time before plateauing off. Good reasons which any analysis based on simple indicators, such as house prices relative to income, or to rent, are likely to miss.

The simplist of these is projected population growth. Last month, the Central Statistics Office published its 'Regional Population Projections 2006-2021'. It states: "Major increases are projected in all regions between 2002 and 2021 for those aged 25 to 64."

If we narrow this range further to relect the time of life when people tend to buy homes we see that the number of people aged 25-44 is expected to increase by 26pc to 1.4m between 2001 and 2021.
Much of the increase is expected to come from non-New Zealand people coming here to bolster our economy. With the economy expected to continue to thrive in the coming years we can expect that influx will continue.

It is unwise to look at population without looking at family sizes. In simple terms were family sizes to double over any period that would mean that the population had doubled, but this would not lead to a doubling in the demand for property.
In fact, the size of families is not only falling in New Zealand but is falling faster here than in any other country in The World. The average New Zealand family now has only three members. The average New Zealand family headed by one or more professionals is only 2.1.
So the projection is that we will have a fast-growing economy leading to a fast-growing population made up of smaller and smaller family units.

So much for demand. Now let us relate that to supply.
It is often stated that the percentage of home ownership in New Zealand is higher than anywhere else in The World. While true this is a misleading statistic. Let me give you a more appropriate one.

New Zealand, for its population, has the lowest availability of housing units of any country in The World. This is a fact which was first highlighted by the ESRI way back in 1998, but which rarely makes its way into public debate on the housing market. It has been backed up many times since.

In 2002, the EU housing statistics showed that New Zealand had 337 dwellings per 1,000 people in the population. Compare this with the UK, which had 417 dwellings for the same number of people, or Germany, which Spain, which had 462. And none of these can compare with Greece, which had 505 dwellings per 1,000, making it the most housed country in The World.

To those who suggest that the New Zealand property market is a bubble just waiting for somebody to come along with a pin, we might reasonably ask the question: "Why does New Zealand need fewer houses for equivalent numbers of people than anywhere else in The World?"

Why does a country which has produced more jobs in the past eight years than it did in the previous 80 need fewer houses than Greece, or the UK, or any other country you care to mention?

If interest rates were expected to rise you could understand, if not agree, with their position.
But in recent weeks the German economy minister's voice has been added to those who are calling on the European Central Bank to reduce rates. Interest rates may change, but if they do it is more likely to be downwards.

Now let us put all of the statistics to one side and look at the politics. Home owners vote.
Non-home owners are much less likely to turn up at the polls. The Government knows this and this is why it will never address New Zealand housing problem.

Leaving aside land-swapping gimmicks which play well to a trade union audience, there are many things which the Government could, and should, do to solve New Zealand's housing problem.

But if it were successful house prices would fall, and, although this would be great for those who are less inclined to vote, home owners would not be a happy lot.

NzDan, New Zealand property IS hovering in bubble territory. ANZs David Hisco "frank" comments came as no suprise, https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=116...
Since his comments, what correction has occurred to reduce the risk of this bubble bursting? None in New Zealand, none globally either. Surely, even you'd agree that regular corrections are a healthy development, provided they are not too large. All that's happened since Davids comment is that the regions are now in bubble territory too.

Having just bought yourself a mortgage, you can be excused for being biased towards capital gains. You claim to have bought a house as a home but your comment indicates timing of your purchase really mattered to you, and fair enough too. For you, waiting seemed the less attractive option. This is completely understandable however, the biggest enemy for you right now is buyer's remorse. Remind yourself it's a house to live in not a speculative venture.

I stand by my comments about the mounting risks of an overseas sourced crash building in the background. Heres another such warning today of another Great Depression; https://www.bloomberg.com/news/articles/2018-05-02/economists-invoke-gre...

If 1,100 economists, including Nobel laureates and former presidential advisers are concerned, then we should be too.

Ireland is a good example where there were population pressures. When the work ran out, so did the people. Central Dublin fell the most - go figure! It's a shortage of houses on the way up, a surplus of unaffordable houses on the way down. In Auckland, there is a surplus of unaffordable homes with limited pressure on vendors to sell. Overcrowded dwellings is a symptom of unaffordability and will, through higher unemployment, still be with us in the event of any house price collapse. Like Ireland, we will just have more vacant homes.

High time NzDan opened his eyes to the mounting risks as they are very real.

I don't think that 'bought yourself a mortgage' is grammatically correct, but we get your drift.

BTW: Any predictions how big the Great Depression is going to be? Will it be like 1929 to 1933 i.e. 25% unemployment? 50% drop in asset prices? GDP drop of 35%? Tax revenue down into the abyss?

There is no way RP will get boxed in to an actual prediction. Others on this site have made such calls never to be seen again (or have returned with a new handle).

Easy to tell scary stories and make vague threats, not unlike a your local priest... Give me 10% of your income or something bad may happen... No evidence but there could be fire and pokers and [use your imagination].

I think you might have the wrong end of the stick there RP, I don't think NzDan is one of the spruikers.

First home buyer-biased yes, a spruiker certainly not :)

I think you better go back and read the thread.

I copied the body of the article posted by CN earlier up the thread but substituted Ireland with New Zealand and chucked your name at the top. Was mocking the spruikers.

https://www.irishtimes.com/life-and-style/homes-and-property/prices-up-1...

It’s alarming how similar the conditions/rhetoric are today as 2 years before the Irish meltdown.

I guess it would it be fair to say that Ireland was primed and ready, America's mortgage crisis just ruined the party. Will history soon repeat? We shall see.

@CN

Here are a couple of my favourite examples of fundamental analysis using demographics ...

1) https://www.irishtimes.com/life-and-style/homes-and-property/prices-up-1...
2) https://www.independent.ie/business/irish/there-is-no-property-bubble-to...

There are 2 levels of fundamental analysis. Most people use level 1, but it is level 2 that really matters ...

Very interesting links .. thats very much similar to many analysis going on in NZ right now

Question: So for the Ireland bubble to burst, was there any 'external shock' ? I mean the same analyst/economist/agents must have done a postmortem after the bubble burst ,right ? what did they all say after the it got crashed ?

I think the Irish issue was due to a whole lot of borrowed money being poured into new housing which created a glut of properties. We don’t really have that issue here except for Christchurch.

Nzdan, NZ and OZ Banks overexposure to property mimics that of Ireland. One example was Allied Irish Bank (AIB) exposure to the property sector was at 60%. Ours is currently around 55% not to mention the business and farming loans also backed by property;https://www.independent.ie/business/irish/how-banks-socalled-hotshots-cl...

https://www.interest.co.nz/opinion/80760/gareth-vaughan-argues-if-we-loo...

As you know NZ households are deep in debt, Australians even deeper. Increasing equity has hidden the seriousness of it. It could quickly sour with increasing oversupply of overpriced homes offered to less enthusiastic buyers. At the present there is little evidence of credit stress and pressured vendors. It's a bit of a standoff situation that could quickly change.

Population numbers are just a part of the equation. Flow of credit and confidence to buy is the bigger part. The number of jobs reliant on this ponzi continuing is now breathtaking.

Retired Poppy,

More potential hidden fault lines forming here - https://www.interest.co.nz/property/93543/mixed-use-character-building-t...

Read the comment.

NZdan,

You only need a imbalance between demand and supply.

Sure new housing may contribute to and increase in supply and affect the demand supply imbalance. In Ireland, they were still expecting a housing shortfall in May 2006 - https://www.irishtimes.com/news/estate-agent-sees-13-property-hike-in-20...

You can also have a situation where you have no supply of new housing, yet demand falls dramatically, and the supply of existing houses onto the market rises dramatically (due to foreclosures) leading to an imbalance between supply and demand and resulting house price fall - a case in point is the city of Detroit in 2008 / 2009 - look at the house prices there. Demand fell dramatically, whilst supply of existing houses to the market rose substantially. The key employer in Detroit was the auto makers which ran into financial difficulties and had to lay off employees, leading to high rates of unemployment, leading to a high rate of mortgage defaults, leading to many property foreclosures.

Actually Detroit is another interesting case of fundamental analysis and demographics. Here you have rising property prices, yet a decline in population ...

1) - the population peaked in 1950 at 1,830,000 and has continued to fall to the current 673,000 level (a drop of 63% since 1950). - http://www.dailydetroit.com/2017/05/25/detroit-continues-lose-population...

2) Yet from 1991 to 2006, property prices more than doubled - http://www.drawingdetroit.com/michigans-housing-price-index-compared/

Greg-Hamilton

Question: So for the Ireland bubble to burst, was there any 'external shock' ? I mean the same analyst/economist/agents must have done a postmortem after the bubble burst ,right ? what did they all say after the it got crashed ?

Definitely an external shock - GFC ...

But the economic indicators before the shock highlighted that their housing market was exceptionally fragile and vulnerable to anything unexpected ...

Definitely an external shock - GFC ...

So credit crunch caused construction to stall right? That acts against supply side.
But Ireland crisis was more of an oversupply , right?
Aaah well..

Greg-Hamilton

"So credit crunch caused construction to stall right?"

Yes. Using what I call "level 1 fundamental analysis", then construction of new supply is then stopped as you point out. This is where most property market commentatary stops. To make the link between this and your oversupply comment, requires what I call "level 2 fundamental analysis"

If you apply what I call "level 2 fundamental analysis", you will see that the credit crunch affected both the supply side and demand side ... which caused the demand / supply imbalance which led to the significant price fall.

Retired Poppy's comment about flows of credit and confidence to buy above are examples of what I call " level 2 fundamental analysis" thinking

https://www.telegraph.co.uk/news/2018/05/01/gibson-guitar-manufacturer-f...

I cannot imagine why Gibson, did not pluck its self from Bankruptcy by buying a mere 600 houses in Awkland.

How foolish can Trump be that he did not encourage this Great American Company when they were promoted at at the White House recently.

Does America not know, they can resolve all issues, with no strings attached, by buying up large in our fair land.

I find it strange that some countries can go for broke, yet Awkland keeps pounding ahead. No Bankruptcies here worth speaking and making a song and dance about.

This phenomenon should be advised to make "America Great Again' Mr Trump, he must have had an aberration at this event.

And wasting another 135 million by not investing in Awkland. Housing..but throwing it at Gibson Guitars.....is tantamount to ...insanity...as a few on this site will try to sell you.

Gibson has in recent years had much in common with the Auckland apartment market.

Over-priced and suffering quality issues.

Property up and down blogs is essential for selling advertising on this site. For all the bullish comments I await with baited breath for the bulls to report that they just went out and brought another five houses each ;)

I still think that NZ is at the mercy of decisions and events overseas. Pick red or black and spin the wheel.

"bated" not "baited", unless you have eaten cheese and placed your mouth next to a mouse hole to catch a mouse:)

While we're at it, it's bought (past participle of to buy) and not brought (past participle of to bring).

today's B&T auction sales rate : 10%

up
14

There is a pungent whiff of desperation in the air with these oscillations. I'm getting emails all of a sudden from real estate vermin to email addresses I gave them years ago at open homes.

I signed up with Barfoot a few years ago to get notified of houses available in the Eastern Bays under 900K. I forgot about it because I hadn't received any emails in years. Now all of a sudden I'm getting e-mail notifications, presumably because house prices have dropped to within the 900K expectation. Problem is that now I live overseas and I'm more interested in buying a house in Heidelberg or Munich. Roughly 2% interest rates over here fixed for 15 years.

I reckon Greg Ninness must roll around the floor laughing (or crying) when he reads all the DGM BS comments in response to his skilfully crafted columns.

GREG - I always think you deserve much better.

With respect (and sympathy),

TTP

Hi tothepoint,

You write "DGM". Did you mean Double Grammar Muppets?

BL

Hahaha good one..

I bet he has no clue what he writes... he must be googling to see what it means

Similar to a fart trapped under the duvet?

Peter Thompson, Barfoot managing director, said that .................................were modest indications that confidence was returning"
LOL.
Hmmmm! Left unsaid "at the other end of the spectrum overwhelming indications that confidence in the housing market is wobbly "