Clearly the headline makes the claim that the Auckland property market is “on the move” supported by the 46.2% growth in year on year sales as reported by Barfoot & Thompson yesterday for the month of March. At the level of 924 sales for the month this does represent a very strong level of activity in the market, but as the article goes on to detail with a balance of commentators these numbers are unlikely to be the start of a significant resurgence.
The figures from Barfoot & Thompson when seen in context in the 2 graphs below show a picture of a market finding some life – not as yet surging on the move. The 3 month moving average of sales volumes certainly show how consistently low activity has been in the market over the past 12 months with hardly any signs of seasonal fluctuations – let alone any signs of growth, set against this the March data has pulled the 3 months to March up considerably.
The pricing in the market though retains a downward track with a clear level being found at around the $500,000 whereas during 2007 the $550,000 level was proving to be the consistent level of price. The year-on-year slight pick up seen in February sales price has returned to a negative trend with a year-on-year fall of around 5%.
As the commentators rightly say the sales volumes are likely as a sign of latent suppressed activity on the part of the buyers and sellers being triggered by lower interest rates and the media not being so doom laden.
Another contributory observation I would make is the fact as highlighted in a blog post on Zoodle written in January titled “Property sales likely to pick up in 2009” . The total sales for residential property in 2008 at around 56,000 was at an all time low in both real and normal terms. The 2008 sales when viewed as a % of all dwellings represented just 3.7% whereas the average sales level as % of all dwellings over the past 20 years is 6.2%. This clearly showed that 2008 activity was frustrated by sellers and buyers who needed to move but were unable for a myriad of circumstances and what was needed was a catalyst which is what has fueled this recent activity – not the start of a new market resurgence. The fact is as we have seen in the first quarter of 2009 the level of sales volumes lifting off the bottom, and we are quite likely to see sales growth of potentially upwards of 20% this year as we might well head towards 70,000 sales across the country – that would still be well below the average sales % of all dwellings which currently equates to around 90,000 properties.
The fact is the that the uncertainties of employment, credit availability and economic wealth weigh heavy on the market and the consumer and in these circumstances the property market is more likley to be frequented by well informed, financially aware and stable buyers ready to meet what they judge is the market price.
“Well informed, financially aware and stable”–that quickly narrows down the field in NZ. You’d also think that criteria would knee-cap many first home buyers, a key driver of any buoyant property market. But the numbers don’t lie and the banks’ balance sheets won’t be looking so bad. So it’s all good… kind of.
A few negative comments were passed my way today during my open homes that the increase in activity was just ‘media hype’. I’d like to point out to anyone who follows that line of thinking that Barfoot & Thompson is very careful to only publish facts, not hype nor conjecture.
I realise some will interpret this as “talking up the book” however in the first three months of 2009 in my Pt Chevalier office we have sold just under $8,000,000 worth of homes – that’s one of our best first quarters ever.
We now have only a handful of homes left and need more urgently as we have plenty of motivated cash buyers ready to act. Many have missed out in multi offer situations on other properties.
The fact remains though that the median price in our area is down approximately $90,000 or around 13.4% from the peak – so long as owners recognise this and price homes realistically they will still have a good chance of selling.
Buyers have recognised that there are good opportunities out there and those that purchased in February and early March also managed to secure 3 or 5 year interest rates under 6%. Even at the latest BNZ 3 year rate of 6.75% affordability is significantly better than it was 18 months ago. Early in 2008 the interest rate for that term was around 2% higher.
Kiwis still love to own their own homes and I can’t see that changing no matter what the economic climate.
Ross, I can accept much of your take on things, even though PC is hardly a represenative sample of the Auckland market as a whole. I must say that your sign-off that somehow Kiwis are greater disposed to other “cultures” to owning houses whatever the circumstances is a complete cop-out. Furtermore, it could be easily argued that if it were true, then the potential for misery will be even greater in the future as buyers make decisions based on the heart over the head. Financials do matter whatever Joe Average thinks and that will be the key factor in the future.
We purchased two weeks ago, having been waiting for a feeling of stability. I guess others have played the same game. Of the 4 properties we were tracking , all sold the same week. We ended up spending over budget on a house that has yet to be completed !
Not our original Plan……….
K Draper,
Thanks for sharing your experience. To me it is very telling especially to those who believe that every property decision should alone be judged on cold hard facts.
The reality is that whilst I would be the first to say that a purchase should be evaluated around the financial decisions, the emotional and social considerations always will play a large part given the number of house purchases that are for the family.
From personal experience the buyers remorse association with the “did we pay too much” soon disappears when the lifestyle benefits of the new house start to accrue. Have fun in your new home.
The “emotional and social considerations”?? Alistair, you sound like a card-carrying member of the Labour Party. Unfortunately, living within one’s means takes priority over “lifestyle benefits” when you’re facing the worst economic recesssion since the Great Depression.