Last week Barfoot & Thompson, Auckland’s leading largest real estate company published their monthly sales statistics. The headline from B&T was “Housing market resilient, sales jump in February” – interestingly from these monthly statistics the the media commentary varied between “Auckland housing market improves” (NZ Herald) to “No housing glut in Auckland – agent” (TVNZ). I thought that a deeper analysis and visual representation of the data for the important Auckland market would be of value.
The price of property is always of interest to buyers, sellers and property owners. Barfoot & Thompson figure for February showed an average price of $521,887 recording a 1.2% increase from January. The average sale price in February last year was $521,324 indicating that prices are in the main flat as judged by the sales made through the B&T offices. The chart below tracks the average selling price (3 month moving average) for Barfoot & Thompson sold properties over the past 4 years. The calendar years of 2007 / 2009 and 2011 are shown as red part of the line with 2008 and 2010 as blue part.
The chart ably shows the peak of the market through 2007 before the property market collapse. Two years later in 2009 it shows the return to the peak before seeing in 2010 a further fall in the sales price with some erratic movements.
The data from B&T can provide a good early insight into this key market, as their data is released earlier in the month than the REINZ sales data. At the same time the B&T data is based on the average sale price which is naturally influenced by the mix of high vs. low price properties. In recent years as volumes have fallen so the data of average price can be affected by the mix of properties sold. It is for this reason that I favour the REINZ based Stratified Price analysis carried out by the Reserve Bank. This analysis seeks to remove the influence of the mix properties sold in a month. The chart below shows this analysis of the stratified mean price for Auckland over the past 4 years.
The chart has been highlighted to show the peak of the market across the Auckland region in July 2007 at $510,197. Through 2008 the price of property sold dropped to a low of $435,700 before recovering in 2009. Since early 2010 the sale price has slipped to a current level of $464,425 still off 9% from the peak over 3 years ago.
The health of the market is often best represented by the number of transactions, as confidence in the market stimulates both buyers and sellers. The February sales by B&T totaled 619, up from the 563 in January and pretty close to the February 2010 total of 626. The chart below tracks the prior 3 years of sales by B&T.
From the chart it can be clearly seen that sales in February lifted from the lows of December and January. The key question will be whether the early indications of 2011 result in a lift for the remainder of the year as was seen in 2009.
The one factor in property sales which can distort the sales trend is the seasonality – the reality is that more properties are sold during the key summer months than the winter months, this can tend to distort the numbers per month. Removing this seasonality factor provides a clearer picture as to the underlying trend in the property market – a truer picture of the health of the market. The seasonally adjusted sales for the B&T sales of the past 3 years are shown in this chart below.
The chart better represents the trend of sales which is showing a steady monthly level for the past 12 months of around 600 per month. This compares with c. 500 per month in 2008 and 0ver 700 per month in 2009.
The number of properties on the market also provides a valuable assessment of the health of the property market. The monthly NZ Property Report tracks the inventory in relation to the rate of sale, thereby providing a perspective based on equivalent weeks of sale of existing inventory. The chart below shows real levels of inventory of property on the market over the past 3 years.
The chart speaks to the media story of there not being a glut of properties on the market – that would certainly be substantiated by the chart, however the market continues to hold a relatively high level of properties for sale, at this time there are 13,720 properties for sale in the Auckland region being marketed by licensed real estate agents.