Auckland house buyers should have plenty of choice this summer so sellers will need to be realistic on price

Auckland house buyers should have plenty of choice this summer so sellers will need to be realistic on price

Barfoot & Thompson had a moderately optimistic start to the spring selling season, with sales volumes running ahead of September last year and prices holding relatively steady.

The real estate agency sold 722 homes in September, down 73 from 795 in August, but up 64, or 10%, from the 658 sales it achieved in September last year.

However the market still remains relatively subdued compared to the boom years of 2015 and 2016 when well over a thousand properties were sold in September.

The average September selling price was $929,757, almost unchanged from $928,266 in August and $928,213 in September last year.

The median selling price was $835,000 in September, also little changed from $840,000 in August, but down $25,000, or 3%, from $860,000 in September last year.

Essentially Barfoot & Thompson's prices have remained within a fairly narrow range for the last two years, suggesting prices in the city have flat lined.

Rush of listings

There was a healthy rush of 1709 new listings in September, well up on the 1331 received in August and the 1414 received in September last year.

It was the highest number of new listing in the month of September since 2015.

That pushed the total number of homes the agency had for sale on its books to 4515, the highest level for the month of September since 2011.

Overall, Barfoot's latest figures point to an improving market with higher levels of activity as we head towards summer, but the increased stock levels will giver buyers plenty of choice and keep a lid on prices even though interest rates are falling.

Vendors will still need to be realistic with their pricing.

Barfoot & Thompson managing director Peter Thompson said more than 30% of the properties the agency sold in September achieved prices of more than $1 million, while just 9% of sales were for less than $500,000.

Barfoot Auckland

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Median has dropped $25000 YOY from $860k to $835K and dropped $5k from last month.

The average prices for the following areas have dropped YOY

Central Akld down $14k to $648K
Central suburbs down $73k to $1.071M
Eastern suburbs down $4K to $1.271M
North Shore down $186K to $981K
Rodney down $12K to $980K

Full report
https://www.barfoot.co.nz/market-reports/2018/september/residential-sale...

More negative news for spruikers.... sorry about that

thanks for the link.

Just did a couple of spot checks on the more active sales categories.
3 bedrooms on the north shore. down $50k (5%) since last year.
3 bedrooms in south auckland up marginally +$6k. (0.1%)

TTP, BLSH, readers will be starting to notice that you conveniently leave out the eroding effect inflation is having on house prices yet you're quick to mention it on articles reporting on term deposits. Why is that? Perhaps some simple analytics are in order?

Adjusted for inflation, house prices are actually falling. Its a recipe for disillusionment if one follows your advice to buy now.

Hi Retired-Poppy,

I can’t believe!!

Yet again, you forget to factor in YIELD (return on investment)!!

For a vast number of house owners, (net) yield far outweighs today’s (low) inflation rate. Either they live in the house (and, thus, avoid paying rent) or earn rent from having tenants.

Retired-Poppy - your one-sided commentary is grossly misleading & deceptive.

TTP

TTP, if inflation is low (which it is) why repeat ad nauseum your sympathy for the disciplined saver then? Repeated assertions that term deposits are being eroded by inflation just makes you read like a jealous idiot.

Clearly, you've failed to factor in interest, rates, insurance, increased maintenance costs in your argument. There's many articles published that disclose the financial advantages of renting over being an owner. Heres one published right here on interest.co.nz; https://www.interest.co.nz/property/rent-or-buy

Quote,"Conclusion - On a national basis it is clearly less expensive to stay renting than to buy. The recent leveling off housing prices, even small falls in same markets, don’t really change the situation. But buying in anticipation of capital gains may not be wise any more. Housing may be returning to its primary purpose of ‘shelter’ rather than as an ‘investment’. And that may effect its positioning in retirement savings plan"

Whether renting is the practical option is another story.

TTP, again you're reminding readers of how misslead you've become. David Chaston has a better idea than you.

No - you are wrong again.

I clearly referred to NET yield above.

Plenty of house owners right across the country are getting very good returns after all expenses - and tax.

In fact, yield is one of the key attractions of house ownership.....

It’s not only about capital growth - despite this having been strong for the past half-century (and longer).

TTP

You won't be getting good net yields on Auckland houses at current prices

A very good point TTP.

TTP does have a point. Also, people are looking at yield as a percentage of the value of the house, it's true if you've paid for the property outright. But if an investor has bought a house for $500k @ 60% LVR, a net yield of 2% based on house value is $10,000 per year. A net yield on investment would be based on the $200k deposit which is $10,000 per year = 5%.

Plus, any capital gains (if they can bank them) are also a return on the investment (deposit) rather than the house price. If the house gains $100,000 and they sell then they've seen a 50% increase on their investment.

Yes, good points also.

Medians
September 2016 - $850k
September 2017 - $860k
September 2018 - $835k
(August 2018 - $840k)

It's the first time since 2010 that the B&T September median was lower than August.

Add a mammoth number of listings to the market, and remove 30% of central Auckland buyers (foreign buyer ban)....and summer is looking pretty interesting. If the market gets through unscathed I reckon a property miracle will have occurred. Never say never :)

So about a 3% decline. What was inflation over that period? Could be closer to 4%.

Has the housing hysteria come to a halt? Here's hoping there's a controllable decline.

Kind of a shame for me - have family planning to sell in the next few years.

Any breakdown of the types of properties sold ie, houses/apartments/sections etc.?

And a little look at the numbers shows a failure rate of 33% of all listings.

Barfoot & Thompson Figures.
March 1689 new listings, 1064 sales
April 1358 new listings, 731 sales
May 1455 new listings, 1027 sales
June 1210 new listings, 903 sales
July 1057 new listings, 830 sales
August 1331 new listings, 795 sales.
September 1709 listings, 722 sales

So 9809 New Listings since March 1st and Sales of 6072
Total stock at end of Feb = 4648 Total Stock at end of September = 4515.

So stock that's been available since March 1st = 9809 + 133 (difference between total stock at end of Feb to today) = 9942 Total Listings

6702 Sales / 9942 Total available stock = 67.4% sales ratio. Or 1/3 of the market is failing to sell and being withdrawn from sale. That's an expensive marketing adventure for all the failures!

That's really interesting, thanks for posting.

I had always wondered about the survivorship bias inherent in sales price figures.

Would be interesting to see what that comparable 12-month "sales ratio" has been over time.... in theory, the inverse ("fail ratio"), would be a good lead indicator.

cmat

I've compared Instruction to sales ratio for the last few Septembers below. The conversion rate to sale has fallen off a cliff!

Yeah I noticed that, thanks.

I think this type of time series analysis is more useful - 12 month avg rather than a single month snapsnot each year.
Obviously, given days to sell, listings and sales within a month do not have consistent basis.
The 12 month time series would eliminate the noise of that lag.

It's clearly illustrated here - this analysis indicates that the "fail rate" is ~33%, but below the implied fail rate for Sept 18 is 58% (if you believe a snapshot)
I think the former (33%) is perhaps a more accurate way to look at it.

Might be something for me to do in my spare time ;)

Those expecting sizeable price changes in house prices will go on being disappointed.

TTP

Could I borrow your crystal ball TTP? Want to check the share market in the next few years

I don’t have a crystal ball.

If you want one, go buy own.

TTP

I notice frustration creeping in..

TTP's memory has faded a bit I think.

He's conveniently forgotten, like most new Zealanders, that National house prices fell 38% between 1975 and 1980.... It was a sticky time for many, as in they were stuck with the debt and couldn't move!

Wait, you can actually sell people crystal balls!?

I'm in the wrong business!

....ball is cracked. He/she dropped it ages ago.

Too late

Central suburbs average down $73k to $1.071M yoy
North Shore average down $186K to $981K yoy

And some September to September Comparisons from B & F for those that like more data.

Monthly Sales to instruction rate
Sept 2018 - Listings 1709 Sales 722 (with the benefit of a deadline to assist sales) 42%
Sept 2017 - Listings 1414 Sales 658 (with an election to slow activity) 46%
Sept 2016 - Listings 1536 Sales 1051 68%
Sept 2015 - Listings 1940 Sales 1358 70%
Sept 2014 No listing data Sales 959

Can't say that the market looks particularly healthy when you study the metrics and see how they've changed over the last 4 years......No Sign of a Spring bounce in those sales numbers. Spring panic perhaps?

Actually when I am done with TTPs crystal ball I might borrow yours. Going to make myself a very wealthy man!

Unless they say different things of course :O

Hi Saving4.... I very much hope you do..

Data is data and looking beyond the manipulated offerings of the vested interests, is usally the way to find the truth.. You won't see this information in the MSM though and watch the spin that accompanies the news later...

Let me give you some guidelines, an Instruction to Sales ratio at 60% equals a balanced market. Above that and it is a sellers market, below that and it is a Buyers market. We're heading south rapidly so this will get ugly at 42%. Anyone can do this themselves for whatever market they want to look at in more detail, all listings get posted ( all you have to do is count them each month) and all sales get recorded, albeit there is often a lag before most of us can get the data..

Add to that, that a 1/3 of all B & F Listings are not selling this year and therefore being withdrawn and it paints a true picture of the market. Feel free to share the reality with whoever you like.... No crystal ball gazing here, just critical assessment of the data...

Hi Saving4.... I very much hope you do..

Well that's very nice of you! And they say you bring doom and gloom.

My outlook is now 'cautiously bearish'. This market was always suspect, but lowering immigration and a year of stagnant prices in Auckland has sealed the deal for me.

You don't really need a crystal ball to gaze! Just look at the trend setters; Sydney and Melbourne. Both have been the magnet for buyers from the Far East - Auckland was just an off shoot.
https://www.corelogic.com.au/research/monthly-indices

lots and lots of hot air - how about this question

Hands up all those home owners who bought their house and are really unhappy about their choice and wish they had stayed renters all their life ..............

DOOM DOOM DOOM - but if you own your home - does not matter if you bought last week - last year or ten years ago you know it was a great decision!

Hi kpnuts,

You make a worthy point.......

Indeed, there are many contributors here who resent having not bought a house.

What they have in common is membership of the Sore Losers’ Society [SLS].

TTP

You often tell us how you havnt purchased a house but would like to.

Does that just make you a Loser?

Sorry, thegic, but I have never disclosed any information here with regard to my asset holdings (or liabilities).

TTP

Posted by TTP Mon, 24/07/2017 - 22:39 "Personally, I'd love to see house prices plummet. It would give me the chance to buy my much yearned for villa in Ponsonby. Raise LVR's to 95% by all means - and take away all the tax concessions for landlords. Bring it on!! (-:

Well done RP!

I guess that answers the question!

Not at all. TTP just said he'd love to buy a villa on Ponsonby. It does not mean he doesn't own a house elsewhere as you suggest

Hi Retired Poppy and thegic,

You are wrong - yet again.

There is a major difference between assets that one holds - and assets that one ASPIRES to hold.

I similarly aspire to own a house in Queenstown - but that’s very different from me actually owning one there.

But yes, great from my personal perspective if house prices fall in all my favoured locations - to the point where I can purchase.

TTP

If you're going to lie, you need to make it more difficult to be proven unsubstantiated -

"by tothepoint | Fri, 08/09/2017 - 15:15
up2
Hi vman,

I'd like to buy a house - not sell! (Ponsonby is great but I can't afford it - so I'm now looking in Palmerston North.)

A capital gains tax will act as a disincentive to sell houses. So the supply of listings will drop away. And house prices will rise!

Is that what we want to happen?????? Most of us here - and certainly me - want to get a house at a price we can afford. But it's damned difficult - and Labour in its stupidity will make it even more difficult."

Hi Solidname,

That particular comment says nothing about what house(s) I might (or might not) already own. Anybody can own a house(s) and aspire to buy more, even though they might be short of finance.

Nobody here knows anything about my asset portfolio - or any liabilities that I might have. (I have never disclosed any such material here, because it's a private matter.)

Suggest you take a course in "reading for meaning".

TTP

Solidname, TTP's yet to learn the valuable lesson that only the truth is easier to remember! He/she often forgets what is posted, is well practised in backpedaling and is embarrassed here often.

Hi Retired-Poppy,

Sounds like your describing yourself - the person who "forgets" to factor yield into property investment assessments......

and who is well-known for failing to learn from his (numerous) botch-ups.

TTP

Well TTP in that comment of yours your twice referred to "a house" rather than "another"

"I'd like to buy a house - not sell! (Ponsonby is great but I can't afford it - so I'm now looking in Palmerston North.)"

"Most of us here - and certainly me - want to get a house at a price we can afford. But it's damned difficult"

Given how you are so particular about your articulation, the overwhelming probability is that you don't own a house!

That being said you are either full of the proverbial or one of those that have missed out, which you refer to as sore losers, as you don't seem to be too sore about it all, by your own definition that would just make you a loser, right?

Have been a home ownerin early 2000s, and no, it wasn't a great decision at that time, wish I had stayed renting at the time. And right now not seeing over whelming reasons to buy until the market has corrected somewhat.

If you ever feel like giving yourself a kick in the guts, figuratively speaking, go have a look at what that property you sold is worth now.

Edit: You’ve previously said you’re considering purchasing a kiwibuild - are you going to try the “second chancers” route given that you’re not technically a first home buyer?

Considering only financial considerations (and ignoring non financial considerations), it really depends on comparing the value of the proceeds that he received on his property and the rate of return that was earned on that amount to determine if he is in a better financial position.

For example, the median house price in Auckland in 31 Dec 2000 was approx $241,000. The median house price is now $830,000. That house value has grown 7.5% p.a over 17 years.

If we assume that he had an LVR of 80% in 2000, that would mean his loan would be $192,800, and his equity in 2000 would have been $48,200. Assuming an interest only loan for simplicity sake, in 2018, his equity would be $637,200 ($830,000 house price less mortgage of $192,800) . His equity value would have grown at 16.4% per annum.

So
1) if he had no leverage on the house, his equity grew at 7.5% per annum
2) if he had an 80% LVR, his equity grew at 16.4% per annum

Now what could he have invested in? We don't know but he could be a savvy investor and earned high returns on the sales proceeds that he received in 31 Dec 2000. For example, he could have invested in:
1) the shares of Apple at the end of 2000. Returns in NZ$ terms have been 31.7% per annum for 17 years (excluding dividends).
2) the shares of Amazon.com at the end of 2000. Returns in NZ$ terms have been 32.4% per annum for 17 years.

So imagine yourself on 31 Dec 2000, with the full benefit of hindsight, would you have invested in an investment with a 17 year return of

1) 7.5% per annum
2) 16.5% per annum
3) 31.7% per annum
4) 32.4% per annum

The same decision making process should be made today for those with purely financial considerations. If you keep your property, what are your future expected returns? What are the future expected returns in other assets? Then you should risk adjust them and invest in that asset which has the highest risk adjusted return.

Postscript: On an unleveraged basis, the house value of NZ$241,000 in 2000 would now be valued at NZ$830,000. If the house was sold and net proceeds of NZ$233,770 (NZ$241,000 less 3% commissions) was invested into Apple or Amazon on 31 December 2000, that NZ$233,770 would now be worth NZ$25,140,143 and NZ$27,571,308 respectively. Then he could have sold NZ$830,000 worth of shares to purchase a property at today's prices and still have over NZ$24,000,000 remaining.

Bingo, financially it was a bad move, but quality of life is more important. If I had stayed in that house in those circumstances I probably would have ended up an alcoholic or worse. It was better for everybody involved to sell up and live a better life.

No, I didn't invest the profits from that place "wisely", I traveled and chased skirt, and I really don't regret it at all.

He who dies with the most toys.. is still dead.

Cheers, an interesting assessment. My only critique of course is that it probably isn’t quite fair to assume he’d invest his capital in Apple, Amazon or BitCoin (or any other investment that in hindsight has delivered astronomical returns). If we are going to compare the house option with shares, we should probably assume in the order of 7% return. Let’s say 10% to be generous. On that basis, the house wins by a long shot.

Can use this to calculate rent vs mortgage etc. https://www.lyfords.co.nz/Financial+Calculators/Rent+or+Own+Calculator.html

And this for compounding returns if investing the $48,200 in shares https://www.moneyhub.co.nz/compound-interest-calculator.html

Don’t worry though, property prices are about to collapse to 2000 levels, so pragmatist will be getting a second chance soon.

I know people who are still traumatised from buying in the UK before the crash in the late 80s/early 90s. Negative equity was very common and many were put off property altogether. Of course if you ask now at the end of a long bull run, you won't find many complaining, same as if you ask anyone under 30 what they think of investing in the stock market.

The 'FOES' (FEAR OF EVERYTHING SMART) are now resorting to a show of hands to determine good idea or bad idea.

I often hear the adage 'that house prices double, but house prices double'..... It's peddled out by everyone who got suckered into buying with big leverage having attending a seminar. But how long is a piece of string?

If you bought a property in England in 1904, Do you know you would have waited until 1954 for the price of that house to double. Yep it took 50 years.... A purchaser of a property in Japan in 1989 only got back to their purchase price in 2015. 26 years and a long way from doubling. Ireland's 2006 purchaser, still no where near seeing their money back. Newcastle in 2005, nope still 10-15% down after 13 years of paying the mortgage interest and for many no chance of moving because on a 30 year term you only pay back 20% of the captial over 10 years.

WHY DOES NO ONE EVER MENTION THE 38% FALL IN HOUSE PRICES IN NEW ZEALAND BETWEEN 1975 AND 1980? If you bought in 73 or 74 and needed to move again in the following years you got hammered!

New Zealand is diffrunt?

Just trying to educate the Young and the FOES..... (Fear of Everything Smart)

And all these stats are before an inflation adjustment (not so relevant in the case of Japan though).

You didn't get hammered mate in 1974 because thats when we came to New Zealand and bought a house. The house in question was on the North Shore and if I recall is cost something like $19,000. My parents were paying double digit interest and had a second mortgage but it was paid off in only a few years. I remember it well because I didn't get much in the way of Christmas presents during that time but a few years later it was new bicycles for everyone.

Carlos67

Housing market crashes and availability of data was a lot harder to access in 1975. Plus back then the housing market was generally for homes rather than the gambling den it has become since. My guess is that you were blissfully unaware of the reality, whilst getting on with your daily life.

Today, every day, property dominates the New Zealand press. Why? Because we have created the biggest bubble in the country's history and there are a lot who could get severely burnt in a sharp downturn.

https://www.google.co.nz/search?q=house+price+chart+new+zealand+from+197...

Hi Nic Johnson-Poppy,

You write, "WHY DOES NO ONE EVER MENTION THE 38% FALL IN HOUSE PRICES IN NEW ZEALAND BETWEEN 1975 AND 1980?"

The reason why nobody mentions that is simply because it's rubbish. I assume you dreamt up that statistic - because there's no reputable database that contains such information (unless it's a misprint).

Do you seriously believe that if the statistic was true, it wouldn't have been shouted about here before?

That era was the first part of the Muldoon/National Government - when house price inflation was rampant. Even Muldoon's wage/price freeze in the early 1980's did nothing to contain house price inflation.

My neighbour bought an average house on an average section in a large provincial town in late-1973 for $15,000 and did nothing to (accept live in it) for five years. It sold near the end of 1980 for $33,000. The $18,000 increase ran well in excess of the CPI. Note that experiences of that type were common in the late 1970's.

Finally, anyone who bought a house in 1973 and still owns it will know that it has multiplied in nominal value by a factor of around 30-40. Thus, a house in a larger centre that was purchased for $20,000 in 1973 is likely to be worth about $700,000 in 2018.

TTP

TTP, your answer is uneducated at its best. Please read the following; https://www.greaterauckland.org.nz/2016/07/11/remember-the-last-time-hou...

"From 1974 to 1980, house prices fell by around 40% in real terms. By the end of the decade houses were no more valuable than they had been at the start"

All thanks to falling migration and an oil shock and the then National Government played a key part.

TTP, once again you've embarrassed yourself. Que the backpedaling......

Hi Retired Poppy,

You're tiresome - and, of course, wrong again.

As we can all see (above), Nic Johnson-Poppy made no mention of REAL prices. So his statement misleads. What's new?

In any case, in reality plenty of people did make real profits in that era.

Note also, that the real estate / property statistics of that era were hardly considered credible. So much so, in fact, that people avoid using them. (These days, of course, the REINZ statistics are arguably some of the best available.)

TTP

Ha-ha-ha:) TTP, caught out again. Remember, when armed with a little knowledge you too can stand tall against fact based counter arguments presented by motivated commentators :) No more spoon feeding you - OK.

TTP

Why don't you read the post that I wrote, look at the graph that I attached to it and spare me having to repeat myself.

I put the information on a plate for you and it still goes right over your head.. Are you the leader of the 'FOES'

Nic

Yep basically mine almost went up three times the price it was in 2005. Anyone who purchased as little as 2 years ago unquestionably made the right decision. Your wasting your time trying to convince some people on here however. I would suggest you psychologically follow your parents. Mine always bought the house and it was the right decision. If your parents rent then your probably renting.Had I not bought back in 2005 I would be kicking myself up the backside.

Will be interesting to check the sales volume in November to March compare to last year.

Wait and Watch.

Volumes have been dropping for the past 3 years and will continue to do so given the thrill of cheap money is waning and demand for high prices houses of baby boomers in expensive suburbs drops off the face of a cliff as the young family generations who need those houses cannot afford them!! Oh and overseas buyers have already well & truly left the market...the B&T auction room was proof of that this week as at least 5 properties in previously favoured suburbs went without any bids.....

Note that this does not necessarily mean a drop in price indicators though (as most of the arguments in this forum seem to be about) as the consumer generally sets a budget based on today's circumstances (interest rates, debt levels etc) and keep to it hence not impacting the blunt median and average indicators. They will tend to upgrade their suburb or house if they can rather than drop their budget substantively.

What will impact sales prices is an increase in interest rates, tightening of credit, reduction in perception of job security, cost of living inflation etc...anything that limits the ability of the consumer to pay their mortgage or afford their house... hence why watching the bond rates out of the USA are almost important than onshore NZ property sales volumes arguably.

Property prices are crashing. ..

NO! It's the DGM that's crashing.....

They're all joining the SLS [Sore Losers' Society].

TTP

Common ttp, wise old men like you should know how to admit defeat ...

From that article: "analysts say that downward pressure on home prices occurs when the sales to listings ratio dips below the 12% mark for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months".

Auckland with around 1800 sales a month and 12000 listings on trademe is sitting at about 15% for trademe and 14% for real estate co nz (12800 listings).

Does anyone recall that an election took place last year....on Saturday September 23 2017....would it be reasonable to suggest that comparing the September sales may be questionable.

Hi Cowpat

Already done, above, with comparisons to 2014-2016 together with sales to new listings ratio.

Voting takes 5-10 minutes. Few people watch news. Doubt that affected sales significantly.

Agents will commonly tell you that sales fall off around an election - reason being is that the average punter from a psychological perspective does not like to make big purchases where there is a perception of uncertainty (valid or not). We were advised not to sell our house in this period due to this and delayed 6 months post election to let the dust settle.

One thing is for sure that for next few year housing market is dead.

May or may not fall (All indication are that should fall but by how much is to be seen), but one thing is defenite that not going up for next few year.

This is begening of the end of current speculative boom.

Out of Australia - why do real estate agents suggest a vendor sell their property via auction even though the market is a buyers market?

Vendor paid advertising (VPA) can constitute 50-70% of an agents income.

https://youtu.be/R7tGkqTIqj0?t=15m50s

Does anyone know if the same economic incentives operating in NZ with real estate agents?

@Nic Johnson | Wed, 03/10/2018 - 10:52: I thought it is FONGO for the current housing market (Fear Of Not Getting Out)