The figures for December are in and it is important to strip away emotion and look at the facts when it comes to housing statistics especially as the media continues its insatiable desire to create alarmist headlines:
Cheaper houses may be on the way as market tanks
Property prices slowing
House sales, prices fall in December
The fact is that sales have slowed – the Real Estate Institute (REINZ) report a total of 92,101 properties sold in 2007. This compares with 102,042 in 2006 – that’s a 10% decline. In the month of December sales slowed to just 5,597 – the lowest single month since September 2001. It is clear then that property is not being bought as fast as it has been in the past few years.
The key question then is how long does it take to sell a property? For December a reported 36 days – the average for the whole year was 32, the average for 2006 was 34! – so does that mean properties are selling about as fast as normal and there are just less properties being offered for sale?
The slightly misleading figure is this “median number of days to sell a property” – it is not an indication of how long on average it should take to sell a property, it just the median number of days to sell those properties that sold. A truer representation of the pace of sale of the market can be seen from statistics on the website. Currently there are 92,067 listings on the site of which 55,331 are residential properties for sale. Now 12 months ago when the market was considerably more active and monthly sales were averaging around 8,500 per month the number of listings of residential property on the site was over 52,000. So it is very clear that property is backing up and inventories are rising. The big question then is, is this leading to falling prices and are bargain hunters out on mass?
The median selling price for December was $345,000 this was down 2% compared to November. A trend or a one-off? Looking back over the 2007 year shows some interesting volatility of prices. Prices were down 0.4% in Oct as compared to Sep, July prices were down 0.7% as compared to June and that month was down 0.7% compared to May. It is important to remember that median prices are always more volatile when sales quantities fall. So it is not clear if we are seeing a true trend or a seasonal adjustment. Either way you look at it the fact is that 12 months ago the median selling price was $327,000; in December it was $345,000 a 5.5% increase in a year.
The last point on pricing, and a very important one not highlighted in the REINZ press release – the total value of all property sales reported in 2007 was $37.8 billion. That represents the highest year ever on record, 1.1% higher than 2006. That total value was made on a much quieter sales volume as cited earlier of 92,067 – so that means that the average selling price of all properties sold in 2007 was $411,196 – representing a 12% increase in the average price. Now normally median prices are quoted in monthly stats, but taking a year of data the average provides some relevant information and clearly 12% increase is significant.
So that all provides some different perspective on the market statistics – as to what it means for the coming year, I would be interested in your views.
Either way you look at it the fact is that 12 months ago the median selling price was $327,000; in December it was $345,000 a 5.5% increase in a year.
Yes but a lot of people have mortgages of $300,000 so at 10% rates that is 30,000 in interest alone each year
So in simplified terms if you have a large mortgage you are LOSING money at the moment.
Grant,
Thanks for taking the time to comment.
My response would be that it would be the case if the house you owned was a locked-up unusable capital asset. The fact is that the majority of NZ’ers are primary home owners who have the benefit of a roof over their head whilst they are paying the interest component of their loan.
I think we all would like to see some easing in rates – especially as global rates are declining and the only reason ours are so high is the issue of our tie to Australia whose economy is booming off the back of global commodity boom which rather like our reserve bank governor’s tactic they are trying to smother with interest hikes.
All these reported housing statistics omit one critical point. There is not one housing market in NZ – there are many. Unlike the UK, NZ housing statistics do not include the TYPE of properties being sold. The 1.1% increase in the total value of all properties sold in 2007 may be due, for example, to an increase in the total value of $1m+ properties sold, which would thereby artificially inflate the ‘average’ sale price. It is important to compare apples with apples, and not lemons!
That is the problem with statistics, many variables will impact the data as well as the way that the data is interpreted. The key thing is though the larger the data set and the longer the time period the more these factors are diminished.
The data quoted covered the whole of 2007 – some 92,000 transactions. Now certainly within that sales stats there are a proportion of $5m+ homes and $10m+ homes as well as $70,000 properties, physically most were there in 2006 and 2005 (not all being bought and sold).
I guess there will never be a perfect sets of statistics – until you get down to 1 house. Certainly smaller towns, suburbs and street level data provide far more indication of key trends, but this data is often very small in number and equally influenced by extremes!
I take you point though.
Alistair
There is no question that putting a sale together with all the doom and gloom in the media is more of a challenge than it was this time last year, however plenty of sales are still happening. Thought it would be interesting to look at NZ results the last time the NZ market went through a bad patch. Median days to sell in Feb 1998, 1999, 2000, were 49, 53, 63 days. Volume of sales in those years in February were 5,432, 6,992, 6,363 and median price hardly moved $162,000, $170,000, $171,000 and still only $173,000 in Feb 2001. Sentiment through 1998 to 2001 was very much like it is now but a good volume of sales happened even though prices were going nowhere. So these figures will be a great benchmark when it comes to analysing Feb 2008 results. Watch this space!
On page 5 and 6 of Tony Alexander’s latest Economic Report he outlines several Fundamental Reasons that support the view that we are not going to see any major price correction this time around. Read the report at http://www.bnz.co.nz/binaries/w210208.pdf