The monthly sales figures and average price reported by Barfoot & Thompson within the first few days of the month have become a key lead indicator to the national figures released by REINZ around the middle of the month. The question is always how to interpret the data. As ever today’s figures present the same challenge.
Firstly the sales volume of 629 is a marked improvement over June at 556. July is normally always a slower month than June as we head into deep winter and July this year has been a depressing month, I think we would agree with bad news and bad weather – neither conducive to good property buying. So you could say things on the property front are actually looking brighter. One important point though that Peter Thompson made in his release was the that the figures did include the sale of 87 apartments – clearly a distressed sale to be so highlighted. If these are removed the “revised” figure of 542 looks about right on a season basis for July – not any more of a slow down than would have been expected.
As to pricing – the average price is reported as $497,479, this represents a 5.3% decline from June and 9% down on July 2007 – clearly this would signal that prices are falling.
But wait a minute what of these 87 apartments? – the implications is that they were sold as a distressed lot – the question is what impact this would have on average prices. Lets look at a couple of scenarios:
- If the apartments were say sold at $300,000 each then the average price for the month excluding these would have been $529,178, a slight increase on the June figure of $525,316.
- If the apartments were say sold at $150,000 each then the average price for the month excluding these would have been $553,255, a significant increase on the June figure of $525,316.
- But what if these apartments were say sold at a real distressed price of $99,000 each then the average price for the month excluding these would have been $561,441, a very significant increase on the June figure of $525,316.
The key thing here is how the impact of this situation can effect average pricing – equally this scale of bulk sale in a slow market would effect the median price.
The 2 charts below tracks the sales volume of Barfoot & Thompson over the past 2 years and details their average price, it also compared this to the average price reported by REINZ (the figures released by REINZ are median price, so this allows a more relevant like-for-like comparison). The first graph shows the actual reported statistics, the second graph shows the figures if these apartments were excluded (based on the second scenario of $150,000 each) how the picture would look.
I think you may find that the apartments were not a distressed lot but simply went unconditional in July Alistair. The sales will have occurred over a rather long period.
Tony
Thanks – useful insight, so this would seem to indicate that the underlying sales volumes for July are pretty much in line with seasonal trend, but prices without this level of apartments might be therefore closer to scenario 1 – ie. pretty flat avg price.
Alistair – perhaps an approach to Barfoots seeking clarification would be worthwhile. Would be interesting to know when the properties were originally marketed and what the average sale price per apartment was.
One thing I have always had an issue with is that the REINZ sales data for the City to Pt Chev area including Herne Bay, Ponsonby etc includes all the inner city apartments in that area – consequently the median price for City to Pt Chev is seriously distorted at around $350,000 when it would be closer to $650,000 if the apartments were excluded. I reckon they should have a separate inner city/apartments category in the statistics.
Ross,
I will investigate further.
In regard to having a richer set of data – trust me this is something we are working on with REINZ and through this site.
[...] The commentator at the real estate blog discusses how the apartment block influenced the median sales price. Possibly related posts: (automatically generated)Bernanke walking on eggshellsA Glut of [...]
Regarding prices falling, I understand a Meadowbank house that a colleague and I auctioned yesterday in Meadowbank was on TV3 Campbell Live last night. Apparently the commentary said that the house would have sold around $900,000 last year and couldn’t get $700,000 yesterday. Bidding stopped at $681,000 and current negotiations are into the $700,000s. Last year the owners paid $775,000 so I don’t know where they got $900,000 from. Don’t let the truth get in the way of sensationalism though eh! And by the way $775,000 minus 9% would be $705,250. This vendor will do better than the average punter when this deal is closed soon.
Could this item assist with future predictions?
With the lack of houses on the market and plenty of cash buyers waiting there will soon be a bidders war on whats left. This should drive the prices up quickly since there will be fewer sales but all with high sales prices? Especially when the elections are over and petrol prices steadying and mortgage rates dropping.
Steve,
I believe there is some reason for a degree of optimism (or at least a degree less pessimism as compared to 4 or 5 months ago) although I think the first signs we can expect to see will not be rising prices, I would suspect we are at least 18 months from seeing that. What we might see is a more active market in sales. There is still a very high level of inventory – well in excess of a year’s worth of sales at the current rate of sales. Mortgage rates are dropping, but this will merely remove financial stain, credit is still (and will remain) hard to get so the most likely buyers will be cashed up investors and individuals who will still be looking to buy below the market because they can.
The market is ready to bounce back! Its looking all good from here on in. Sales should increase and prices start to steady and some increase. Lets look forward to a positive property market!!!
I am so glad I found this “Blog”. It seems to me it is a back slapping, morale inducing, reality departure for the real estate institiute and it’s members. Keep up the good work, you obviously have a lot of time on your hands.
John,
I am interested by your comments – I sense a tone of sarcasm and skepticism. Firstly I think you should note that this comment by you has been approved rather than deleted – I believe that a broad mix of opinions is great.
Looking to your specific comments, I would like to point out as I have made great pains over many time – this blog is written by me in my role as CEO of the website realestate.co.nz. The website is not the Institute (REINZ) and acts as an independent commercial business.
I dedicate time to this blog (I can assure you I do not have time on my hands – ask my wife) because it is a very powerful marketing tool – it as the latest post attests is a powerful traffic builder and that is what is what websites are all about, secondly it is an open, transparent and highly effective tool for me to engage with my audience – consumers as buyers and sellers and my customers the real estate agents. To be better informed and aware of the market I believe makes this website more effective for all.
I am not above taking criticism and welcome feedback – your comments??
I think bob is right,
we are cashed up and looking to buy but everything we look at is going for well above qv’s and some for as much as when the market was at it’s so called high.
we’ve given up looking for that so called bargin and are now just hoping we can afford what we want.
Does the 2nd graph show that in 2 years AK average prices have increased from $490,000 to $550,000?
Simon
That is correct, but looking at the latest data for the month of November shows that the average has now fallen back below $500,000. The post titled Barfoot & Thompson sales continue to record a subdued property market provides the details in updated graphs