Comparing auction selling prices to rating valuations suggests prices are relatively steady

Barfoot & Thompson's latest auction results suggest an ongoing increase in auction activity while prices hold steady.

The agency, which is the largest in Auckland, marketed 200 residential properties for sale by auction last week and achieved sales on a third of them.

Of the 59 properties where interest.co.nz was able to match a property's selling price with its rating valuation (RV), 27 sold for more than their RV, 30 sold for less than their RV and two sold for the same as their RV.

Of the major auctions where at least 10 properties were offered, the highest sales rate was at the Shortland Street auction on October 11, where most of the properties offered were from a mix of west Auckland and central fringe suburbs such as Henderson, Onehunga, Glen Eden, Greenlane, Hillsborough, and Mt Wellington. The sales rate was 54%.

The lowest sales rate at the major auctions was the North Shore auction at 25%.

Barfoot's on site auctions continue to perform well with a sales rate of 44% last week, and it was 31% at the big Manukau auction.

The prices and rating valuations of most of the properties that sold are available on our Residential Auction Results page.

Barfoot & Thompson Residential Auction Results 8-14 October 2018
Date Venue Sold Not Sold Total  % Sold
8-14 October On site 8 10 18 44%
9 October Manukau 13 29 42 31%
9 October  B&T, Shortland St, CBD 8 10 18 44%
10 October B&T mortgagee/High Court 0 2 2 0
10 October B&T, Shortland St, CBD 11 27 38 29%
10 October Pukekohe 2 2 4 50%
11 October North Shore 11 33 44 25%
11 October Kerikeri 1 2 3 33%
11 October B&T Shortland St, CBD 7 6 13 54%
12 October B&T Shortland St, CBD 7 11 18 39%
Total All venues 68 132 200 34%

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?

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58 Comments

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Wow, middle of spring and sales rate refusing to budge.
1 week to go and the probability of anything improving only diminishes

Not that surprising, buyers not willing to pay top price and sellers not willing to discount, hence low volumes but steady prices.

Not sure about the current number of active buyers in the market, so there could be fewer active buyers in the market at current vendor price expectation levels. Could be fewer buyers at current vendor price expectation levels due to:

1) foreign buyers ban
2) recent property price changes, may have influenced sentiment about property, future property price expectations and buyer confidence to buy. Definitely no FOMO buying now, so potential buyers may be willing to take a wait and see approach.
3) property renovators / traders making low ball below market value bids, or no bids at all if they are uncertain about their future sale price or future market liquidity conditions at the time to sell their renovated property.

Also are active buyers unwilling to pay top price or are active buyers unable to finance current vendor price expectation levels? Big difference.

If buyers are unable to pay top price due to inability to finance a high purchase price due to credit criteria tightening, then under these tightened credit conditions, there is little likelihood of further upside to prices unless there is a change in current credit conditions and lending criteria (especially on debt servicing metrics).

Under these conditions, if sellers are desperate, time constrained, or financially stressed then it is possible that they will discount - there could be a race for liquidity as more properties are listed for sale and fewer active buyers in the market. Causes of possible increased financial stress for owners:
1) owners who have financed their purchase on interest only and their loan payments become P&I (especially owners who are already cashflow negative on interest only debt payments). Any owner of a large portfolio which is currently cashflow negative in Auckland will have this magnified.
2) those in the residential leasing business who need to spend amounts to upgrade homes for insulation, etc. I heard of a property investor who had 14 properties to potentially upgrade and he was going to sell them - not sure if he had didn't have the funds for the capital expenditure or was unwilling to make the capital expenditure. If he doesn't have the funds for capital expenditure, then he becomes a potential seller with a time constraint.

Loving the 100 word limit

I know, there's a few contributors who like to pad their posts out as some big hypothesis as a way of looking smart. Come on guys, give us the Reader's Digest version please.

Please feel free to ignore and scroll past the long posts.

For interested readers, the posts are meant to be clear, informative and complete, rather than incomplete and unclear.

NZ Dan
No chance I’ll mistake your comments
Learn to scan read
It was once part of NZ education way back

I can scan read. All I saw was half a dozen hypotheticals and an anecdote written in as many words as the site would let him use, all of which most us commentators are pretty au fait with. Was just a waffle piece.

NZDan

You are obviously more informed, more experienced and have a much deeper understanding about the property market than many other readers here. Readers on here have diverse backgrounds, experiences and insights – a few like you are well experienced, whilst others are at the opposite end of the spectrum and are novices and newbies. The community welcomes you sharing your constructive insights to add to the discussion.

Should you find particular posts unuseful, and uninformative for your needs, please feel free to ignore and scroll past the posts.

Reminder of commenting policy above:
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?

Remember we welcome robust, respectful and insightful debate.

You're more than welcome to ignore and scroll on by my comments as you so freely suggest I do.

I was making an observation on how some people decide to write whole novels for just a few points. Just cut to the chase. Should call you "Adjective Man" for your first paragraph.

People wonder why there's now a 100 word filter on this website....

Yvil, snide insinuations do you no favours. CN and NJ's comments often offer a great deal more analysis than yours. Keep the comments coming guys!

Guess 100 word limit is based on limited reading speed of so many
Very sad
CN can actually write so either learn to scan read or move on to shorter posts

Yvil, you have always craved for INSIGHTFUL comments, so CN is delivering to the max..

Good on you CN

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Yep FOMO is a thing of the past (for now at least)

Plenty to choose from

AKLD Inventory on trade me now 12377
AKLD Inventory on realestate.co.nz 13280

FYI,

AKLD inventory on trademe.co.nz - 10,147 (properties for sale with dwellings) - so over 2,000 listings are for bare land or sections only

https://www.trademe.co.nz/Browse/CategoryAttributeSearchResults.aspx?sea...

another one to monitor in terms of in property market conditions in Auckland. This is probably a lagging indicator rather than an early indicator. If the numbers have increased significantly, the economy is most likely to be already in a slowdown. Typically rises with unemployment rates ...

https://www.trademe.co.nz/browse/categoryattributesearchresults.aspx?134...

Wow, high court has really lost its selling abilities. Banks are struggling to mark to market.

Westpac and ANZ both had their pants pulled down yesterday.

Westpac shares falling 1.83% and ANZ 1.85%. Both are now sitting at 52 week lows. The market can make a mockery when the Emperor is wearing no clothes.... or have lent too much into a bubble. Can't even get the mortgage price back by the looks of it!

Reserves not met, same as any other auction.

yep, in other words banks not setting reserves to realistic levels for the current market.

Banks have obligations to protect the interests of the mortgagor when setting a reserve price and must satisfy several requirements (e.g. obtain a valuation). This is monitored by the High Court. They cannot simply set reserve at $1 or even the amount of the mortgage debt (although I am sure they would like to) and go for it.

yes, but they also have to sell the property to recover the outstanding money. It does nobody any favours to go to mortgagee auction and not sell, assuming its been fairly promoted and advertised.

Depends on the facts of the case, if it goes to another auction and receives a bid twice as much as the highest bid in the earlier abandoned auction it was obviously favorable to wait.

Banks are usually indifferent to the delay as they can recoup the costs of the delay from the eventual sale. However, if a bank ignores the registered valuers reserve price based on a forced sale and sells below that value they open themselves up to claims by the mortgagor.

In the event of shortfall dont they have security to seize, or perhaps their lending (hit my bonus) practice been so poor that in reality there is nothing and winding the specudebtors up will simply start the great unwinding. Would struggle to believe that the banks paperwork does not hook borrowers equity/family home/trust shelter somehow. They must surely be protecting their own nest or are the banks going to get into renting out their new debt loaded assets...?

Assuming the mortgagor has other assets recourse may be had against them and bankruptcy/liquidation may ultimately occur. However, the first course of action is for the mortgagee to sell the property. To do this they will need to ensure they do not sell below a valuation by a registered valuer of a forced sale reserve price. If the property does not sell then a new valuation at a lower reserve is likely to be sought.

My point is that the most likely reason for he failure to sell is not because the bank has lent $1m on a property that only got to $500k at mortgagee auction and decided to pass the property in in the vain hope it will double in value by the next auction in 2 month's time or the bank will now enter the renting business (the narrative doom and gloom merchants love to peddle). In reality the bank would take the $500k, cut its loses and move on to either recover from the mortgagor's other assets/income or write off the debt .

The most likely reason the house didn't sell is that the reserve price recommended by the registered valuer (note: this is a price based on a forced sale in the current market) was not met. The Bank will not sell below this price as it opens them up to claims from the mortgagor. For example:

Bank owed $300k, valuer values house at market for $500k but given forced sale min $400k. Goes to auction and highest bid is $350k, banks say sweet i'll take the $350k, get all my money back and pay the vendor $50k surplus. Vendor runs to banking ombudsman/Court screaming fire sale and demands another $50k from bank which they will get.

Or:

Bank owed $300k, valuer values house at market for $500k but given forced sale min $400k. Goes to auction and highest bid is $250k, banks say sweet i'll take the $250k, and chase mortgagor for remaining $50k. Vendor runs to banking ombudsman/Court screaming fire sale and bank has to write off $50k debt it is still owed and write out a cheque for $100k to mortgagor.

Where reserve is not met the bank will ask the valuer whether there is a need revise the min price down. What they won't do is say "fuck it, $1 reserve who's in" or choose to start up a property management business.

In a mortgagee sale, potential buyers are unable to inspect the property physically. They can only see what they buy from the curb. They buy as is, and not necessarily free of occupants.

When the owner takes possession, the owner may have to remove the occupants. Subsequent to the sale date, the occupants may have removed items / chattels which impair the condition of the property - e.g remove stove, fixtures, copper pipes, hot water cylinder, broken windows, graffiti, carpet damage, holes in walls, remove heaters and heat pumps, etc

As a result, to mitigate the risks of the unknown for the buyer, mortgagee sales are sold below the market value of a comparable property in the area.

Agreed, but a valuation (let's call it a "forced mortgage sale valuation") which takes into account these factors can still be provided. I made it clear in my previous posts that reserve is not at at a market valuation. My examples make that doubly clear. I presume you are making a general observation rather than strawmanning me.

Yes, general observation and clarification for those who may not know and have your level of understanding.

My objective is to make only positive contributions to improve the discussion and help other readers understand.

Out of interest, how often do the owners not cooperate to let potential buyers inspect? Surely it is better for all to get the highest price possible at the auction, so its in the owners interest to let people inspect and get the best price.

Obviously there will be a few illogical people that try to fight and hinder, and tenanted properties.

https://www.youtube.com/watch?v=TxIjlo1ZPcQ

Song for the Auckland housing market. One week to exchange contracts with Mr and Mrs 'Johnny Foreigner'

https://www.youtube.com/watch?v=uf4YyXVoWeA

And song about how Mrs Chan pumped and dumped the Auckland housing market. You see 'she had diamonds on the soles of her shoes'

Increase in Auction Activity....

Definetely everyone is trying to sell before the foreign ban is in place as no one has the correct data (Thanks to National Government) so not sure though have a feeling that foreign buyers were very active in Auckland (May be other places, also) and if that perception is correct than.......

Begining of the End ...........Give 3 to 5 years atleast for the market to pick up, again so FHB wait and watch.

The Property investor Centre in New Zealand call time on the Boom and finally recognise that the market is falling.

https://www.propertyinvestorcentre.co.nz/the-boom-is-over/

(Thanks CN for finding this little gem)

Could we dial back on copy and paste of the same post please. Doesn't add anything to the conversation.

It was actually for BLSH's and TTP's benefit, purely because I don't think they tend not to read the 90 seconds at 9.00am.

You seem prickly at present Pragmatist?

I always have a low tolerance for bullshit :)

Did you manager to get your head around how David's numbers had been miscalculating the true withdrawal rate last week?

No, I really don't care tbh, sales prices and sales volume are somewhat interesting, the rest is fluff. But its amusing watching your little crusades.

Are you in property Pragmatist? I ask because you talk of a short commute but burning through gas each week?

No, i'm not in the RE trade in any manner. I just have a social life outside of harassing people on the internet, so I go places and do stuff.

Was it not you who started the harassing on this thread? Shall we call this a day, I'm too old to go rutting horns with young bucks, besides the sun is shining and the golf course beckons.

Harassing? I asked you to stop copy'n'pasting the same thing repeatedly, which is something you seem to have started doing a bit recently. That's not harassment.

its a matter of scrolling past to the next comment.. there are many that may not have seen it at the other thread.. not everyone scrolls thru each comment on every post on interest.co, not saying that you do...

Worth reposting on other articles. Readers may have missed comment on another article. If you've seen it, ignore & keep scrolling.

Clearance rates are about the same, and prices are holding plus or minus to CV. Sooooo not much change to the last six months other than more listing/auctions. Being spring, and with the FBB pending, that should be more or less expected...?

Have to say Im interested to see what impact the FBB has in the next 6-12 months as a lot has been written on this in the last couple of years. It will either be a non event, or, a Sydney/Vancouver moment. If it does lead to a big drop National will be very exposed on their support of Chinese cash. Today's press does show shows they continue to be very fond of it.

TM Today in Auckland region, 207 Urgent, 272 Must Sell, 914 Quick Sale, 85 Overseas Owner. Time will tell.

CEC Australia. More concerns being aired about the risks of a bail in of their banks/our banks.

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

Again how do we change that here!
We need to put pressure on parliament here too

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Adjusted for inflation, Auckland (median) house prices are actually declining. Since April 2016 and when adjusted for inflation, some median reductions are now entering double digit territory; https://www.stuff.co.nz/business/106902193/heres-where-house-prices-are-...

I prefer to use the inflation component because for many years spruikers often remind us of how capital gains exceeded the rate of inflation. Now they are underperforming it.

Even before the commencment of the FBB, properties in 50 parts of Auckland are now worth less than their respective CV's here; https://www.stuff.co.nz/business/107694820/auckland-christchurch-propert...

Don't get caught up in the cycle of self serving REA hype. With each passing day, the prospect of massive financial carnage is building on a global scale. Now's good for holding on tight.

Core Logic updated their estimate of my home value yesterday. Up to 99.1% of CV from 98.7%. When is it supposed to be tanking?

Your property is special, it might cross that magical 100% shortly..

Homes.co.nz has my property at 118% of 2017 CV, or 124% of my purchase price this time last year.

Does this make me a savvy investor?

Absolute genius mate, you'll have that private jet by 2020. :)

In case you were wondering about sales occurring after an Auction here is an update on Sales following the Barfoot and Thompson Auction at 10am Wednesday 26 September 2018. This includes properties in the suburbs close to the city centre such as Remuera, St Heliers, Glendowie, Panmure, Stonefields.

21 Properties went to Auction that day. 9 Sold, 5 were later listed with a price and 7 were re-listed via negotiation.

3 weeks later a further 3 have sold giving a total of 12 properties for that auction, 6 are now listed as priced and 3 are by negotiation.

so not a lot of post auction sales activity.

Thanks, thats really interesting.

VeryInteresting

Thank you, very interesting.

The next question offering some possible property market insight is - for properties passed in at auction what was the subsequent price compared to the final bid at auction before the property was passed in.

What was the percentage price difference in each case? A discount to the final bid at auction might suggest that the vendor is more willing to move on price and meet the bidder's offer (especially as the Auckland property market is a buyers market). This could indicate the sentiment and confidence of vendors in reaching their initial price expectation, or if vendors have lowered their price expectations.

Specifically:
1) for those properties passed in at auction and subsequently sold 3 weeks later - how did the final sale price compare with the final bid at auction before it was passed in?
2) for those properties passed in at auction, and subsequently listed with a vendor price indication - how does that price indication compare with the final bid at auction before it was passed in?
3) for those properties now listed for sale by negotiation, you can do price range searches on trademe.co.nz to see where the lower price point is on the listing (real estate agents put this into the system and it may be hidden from public view). Then compare with the final bid at auction before it was passed in.