The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘Buying / Selling a home’ Category

2

Mortgagee sales still show the drawn out effects of “The Great Recession”

Posted on: July 5th, 2010 | Filed in Buying / Selling a home, Featured

iStock_000007731653XSmallRecent statistics would certainly point the way to an improving ecomomy with the March quarter recording a 0.6% growth following a 0.9% growth, however the sober reality as Bernard Hickey describes it, is, in his judgment a Clayton’s Recovery – the recovery you’re having when you are not having a economic recovery. The reality is that for people caught with a large debt burden then this “recovery” is not feeling too good and the latest data for mortgagee sales certainly supports this view.

Over the first 4 months of 2010 a total of 765 properties have been sold as mortgagee sales – where the owner has defaulted on the terms of the lending agreement and the lender as the mortgagor has sort to recover as much as the debt as possible through a mortgagee sale. This total of 765 compares to 726 for the same period in 2009 and 246 in the first 4 months of 2008 before the Great Recession began.

Whilst the scale of mortgagee sales show little signs of abating the rate of growth seen over the past few years appears to be slowing and the outlook should be brighter in the medium term. A key indicator of the future scale of mortgagee sales is the inventory of mortgagee properties featured on Realestate.co.nz. The chart below tracks the weekly total from 2007 to the present day. Currently there are 279 mortgagee properties comprising homes, units, apartments and townhouses as well as lifestyle properties.

Realestate.co.nz mortgagee listings 2007 to 2010

The chart certainly highlights that the peak of the market for new listings of mortgagee properties was back in 2008 & 2009, the calmer days of 2007 are still a long way off.

Another key indicator of the mortgagee market is the degree of searching on the web for mortgagee properties as an indicator of demand from investors or general buyers looking to capitalise on stress in the market to negotiate for a property. The website of Realestate.co.nz tracks all keywords used on the site – some 500+ every week with over 8,000 weekly specific keyword searches. Amongst the most actively searched over the past couple of years have been the phrases around mortgagee property – mortgagee sale, mortgagee auction, mortgagee. The chart below tracks these weekly searches and matches the volume to the weekly inventory of mortgagee property on the market.

Realestate.co.nz mortgagee searches and listings

2

Winter property market opens up opportunities

Posted on: June 20th, 2010 | Filed in Buying / Selling a home, Featured, REINZ Monthly data

House in winter croppedWith Queen’s birthday now well behind us, we characteristically hunker down to see ourselves through the longest stretch of working weeks now until the Labour weekend – still some 18 weeks away!

This stretch through the dark winter months may be punctuated by overseas warmth, but it is worth remembering that whilst people may not be strolling along the beach they are actually still buying property.

As cited earlier this year in the post “Is summer really the best time to sell a property” there is good reason to try and sell your home through the winter months, as it is not as dead a time as most people think. The simple fact is that the property market does take a slight breather through the June to August period, by no means does it disappear. The chart below very clearly shows the proportion of a total year’s sales by month (red line) matched to the proportion of total year’s new listings by month (blue line).

Seaonality of sales and listings in NZ

Both listings and sales do dip during the winter, however the dip in new listings is actually more significant than the dip in sales. Such a gap between the two lines does highlight an opportunity as it provides the ability to make your property stand out against the market, when during the winter there are less new listings coming onto the market.

Now clearly the property market is relatively quiet at the moment as the latest data from the Real Estate Institute showed in releasing its May sales data last week. The total for the month of May at 5,206 was up just one single house sale on the April total, but down over 1,000 on May last year. The seasonally adjusted figures showed a 5% decline between April and May. However the fact is that in May there were still 168 houses sold every day. Over the months of June and July and into August these sales will continue, which will mean that between now and Labour weekend we could see a further 22,000 properties sold. The question is – will yours be one of them?

NZ Property sales 2005 - 2010 REINZ Realestate.co.nz

0

Seasonally adjusted property sales

Posted on: June 5th, 2010 | Filed in Buying / Selling a home, Market News

The release this week of the May NZ Property report provided us here at Realestate.co.nz with the opportunity to update one of the key measures of the report – the level of inventory of unsold properties on the market. We have chosen to switch to quoting seasonally adjusted, rather than raw data. This was prompted by review meetings with economists, whose recommendations, I certainly take on board.

However I was approached a couple of times this week to be questioned why we had taken this route when seasonally adjusted data can be seen as “smoothed” or at worst “manipulated”. The view put forward, was that it was best to state the facts and let people make their own assessment. My answer to the question was in some ways supporting and in someways opposing. The NZ Property Report does publish actual data of new listings coming onto the market in the past month as well as actual asking price. The decision to make the inventory stats seasonally adjusted is that it is a calculation, based on actual inventory and actual sales. The issue is that there is a timing factor in the sales data, whereby the two sets of data are out of alignment.This has the potential to distort the inventory statistics.

Reflecting after these questionings I was drawn to want to share some insight behind the differences between actual and seasonally adjusted data. So I have taken the opportunity with the latest Barfoot & Thompson data for May to cast some light on the subject in order to assist greater understanding.

The report from Barfoot & Thompson highlighted the “rise in sale volumes to 792 in May, up on April’s 671 deals but still well behind the year’s peak in March of 927 deals”. These are the actual sales levels, by comparison the seasonally adjusted data shows that May sales were 745, up on April which was 723 and also up on March at 712, in fact the first 5 months of 2010 has seen a steady albeit very slow rise month on month of sales (seasonally adjusted) for Barfoot and Thompson as the largest real estate company in the Auckland region. The chart below shows this particularly well. The critical fact is that by seasonally adjusting the data allows for a true like-for-like comparison between one month and the next.

Barfoot & Thompson seasonally adjusted sales 2010 Realestate.co.nz

The calculation of seasonal adjusted sales in this case is made using Barfoot & Thompson own data for the past decade. The inescapable fact is that the property market does move in seasonal cycles through the year, added to the ever present reality that there are different number of days per month which will naturally effect sales numbers.

What is interesting is to look at the seasonal factor for the Barfoot & Thompson data represented in the chart below. Clearly March is traditionally the biggest sales month with nearly 11% of all annual sales whilst December languishes with just 6.5% of sales – in theory an average month would be 8.3%.

Barfoot & Thompson seasonal sales 2000 to 2009 Realestate.co.nz

Looking at these statistics reinforces the assertion put forward in a prior Unconditional post that Summer may not be the best time to sell a property; because as you see the level of winter activity is pretty consistent, the 5 months through June to October represent a a steady 8.3% average – equal to one twelfth of the annual total.

0

Extensive property reports on Zoodle further empowers buyers

Posted on: May 26th, 2010 | Filed in Buying / Selling a home, Featured

Property expert evaluation fixed v2Undertaking a detailed analysis for a property you might be interested in buying  just got a whole lot easier thanks to Zoodle. New reports have been made available on Zoodle which allow more extensive review and investigation of individual properties that may be on your wish list.

We have been listening to feedback and appreciate that for active property investors and researchers, keen to capture key raw data on a number of select properties, the current portfolio of detailed individual property reports may not match their exact needs. What people told us was they wanted to go shopping for a key data on a number of properties – kind of like bite sized morsels rather than a full meal, so we have established a much more comprehensive menu of reports

So in addition to the comprehensive property reports (sample report here) and valuations that have previously been available on Zoodle, you are now able to shop for specific records and details for individual properties. These records comprise the following:

(Note: These reports may not be available for all properties – however you will be able to see before making a purchase decision which are available for which properties.)

Certificate of Title

New Certificate of Title for a NZ property on ZoodleThis report details the legal owner of the property and shows everything registered against the property title. The Certificate of Title details whether there are any Mortgages, Leases, Easements, land usage restrictions, or other interests registered against the property title. It will also tell you whether the land is freehold or leasehold. The Certificate of Title comes complete with a diagram, it will include a separate page with a simple diagram of the deposited plan of the property, normally showing the property’s area and dimensions. This report costs $11.25 (inc GST) – you can download a sample report

Rating Valuation

This simple but important single piece of data is available for the majority of properties containing the rating valuation, the land value as well as the value of any improvements. Just $2.95 per property – view a sample report

Previous sale price

This report provides the previous sale records for the property. It contains date of sale, gross sale price, net sale price and details of any chattels; in addition it details the rating valuation at the time of sale including the land value. Just $3.00 per property – view a sample report

Local sales

This report provides a summary list of up to 10 sales within 1 km of the property in the past 12 months. For each property the records include the street address, the rating valuation, the date of sale, the gross and net sale price. This report is $14.95 – view a sample report

Zoodle provides a rich resource covering all New Zealand residential property with free reports to download and be distributed by email. In addition there is comprehensive details on local communities, with vital statistics on the local property market as well as census data to enable informed decision making on property investing right across the country.

21

Is Auckland unaffordable for first time buyers?

Posted on: May 17th, 2010 | Filed in Buying / Selling a home, Website searching

The excellent Personal Finance section of the Weekend Herald hosted by Mary Holm featured a letter this week from a 25 year living in Auckland earning $62,000 a year and asking the question – how could he and his wife possibly afford to buy in Auckland where as he states in the letter the average house price is around $500,000. He states that his weekly net income is $806 after tax, student loan and kiwi saver. He judged that something was out of skew and that possibly house prices might have to go through a correction.

This letter naturally got me thinking. Firstly if this question was universal to all 25 year olds or to all first time buyers then the market would very quickly come to a grinding halt and have to re-adjust prices for without first time buyers the market would have no fuel at the bottom end to stoke the engine.

Secondly there always seems to be an assumption or over simplification that if the median price is $470,000 (the actual Auckland figure for all sales in April from REINZ) then somehow this is the cost of houses in Auckland – it is only the mathematical median price. Of the 1,768 houses sold in Auckland in April 884 were sold at a price above $470,000 and 884 were sold at a price below $470,000.

In the spirit of helpful assistance I though I would assist this 25 year old find a suitable property they could afford on their single income (they are thinking of starting a family soon so rightly want to budget for one income).

Here then are some options.

How about the central city suburbs – Grey Lynn is a nice area. This 3 bedroom house is on at $399,000. According to the Westpac mortgage calculator on the site this with a 5% deposit of $79,800 would cost $424.91 a week based in the current interest rates for a 30 year mortgage.

Maybe the central city does not suit so how about the North Shore. This 2 bedroom apartment in Albany is only $246,000 – with a $49,200 deposit this would cost $261.97 a week based on a 30 year mortgage at the current mortgage rate of 5.65%

How about out west Auckland – here is a modern townhouse, 2 bedrooms at $259,000 in Glen Eden. With that 20% deposit of $51,800 this property would have weekly repayments of $275.82 on a 30 year mortgage.

1

Property sales in April show little signs of movement

Posted on: May 14th, 2010 | Filed in Buying / Selling a home, Featured, REINZ Monthly data

REINZ monthly sales data Realestate.co.nzA total of 5,207 properties were sold during April. This represented a fall of 954 compared to last month, and a fall of 1,003 compared to April last year.

April is traditionally a quieter month for sales. April generally accounts for 8.3% of annual sales as compared to March which is closer to 10% (9.8%). Taking a seasonal adjusted position, the sales in April were almost unchanged as compared to March. The chart below tracks this seasonal adjusted monthly sales over the past 5 years. This chart better shows the trends in the market.

Seaonally adjusted sales tracked from 2005 to April 2010 REINZ data Realestate.co.nz

The 5 year period of the chart from January 2005 to the current month certainly highlights the key distinct stages of rises and falls of the market in terms of volume sales. The latest trending period which began around the spring of last year has been typified by falling sales volumes. Back in September last year monthly seasonally adjusted sales were 6,601. In April the seasonally adjusted level has fallen to 5,204 per month.

Another view of the April sales figures is detailed in the two charts below. The first shows actual sales for the month of April covering the last 11 years. The second takes a recent 3 month period (Feb / Mar / April) and examines the actual sales for this same period over the past 11 years.

NZ April sales 2000 to 2011 REINZ Realestate.co.nz

NZ Property sales 3 month total to April 2010 vs prior years REINZ Realestate.co.nzTurning to the results of property prices for sales in April. The median price of all sales in April was $356,000, down from $360,500 in March but up from $340,000 in April last year.

The Stratified Price Index which provides a more robust measure of true price movements which has been developed by the Real Estate Institute in collaboration with the Reserve Bank showed a more subdued picture of property prices. The chart below shows the April stratified price of $366,925. This is down slightly from March at $368,225.

NZ Stratified property price April 2010 REINZ Realestate.co.nz

The chart shows that now 29 months after the peak of house prices in November 2007  the market price of NZ homes is still hovering below that peak level. It has yet to break through to reflect a true price increase in actual dollar terms. The current stratified price is 3.7% below that peak which in November 2007 was $380,900.

2

Auckland property prices – not quite the increase portrayed in the media

Posted on: April 19th, 2010 | Filed in Buying / Selling a home, Featured, Media commmentary, REINZ Monthly data

Auckland Property prices in March 2010 Realestate.co.nz

There was a sense of deja vu about the article in the NZ Herald over the weekend.

“Booming Auckland house sales jump $709 each day”

Are we back in the boom years of 2002 or 2007 when headlines of “Homeowners riding a $500-a-day rocket” or “Auckland homes rise $540 a day” were published?

Whilst the specific statistics quoted in the article were accurate (median price increase), I would judge that the inference that property is appreciating by $709 per day is not valid.

The headline used as its source the REINZ monthly median price data for the Auckland region which showed that between February and March the median price had risen by $22,000 from the February figure of $453,500 to the March figure of $475,500.

These median figures are accurate. Taking the total data set of 2,187 properties sold in March 2010 – the midpoint of that range ranked by price will be a single house sold for $475,500. Equally taking the total data set of 1,578 properties sold in February 2010 – the midpoint of that range ranked by price will be a single house sold for $453,500. However it is not accurate to state that by inference that all properties in Auckland have risen in the month, nor that in fact property prices on average have risen by $709 each day.

The issue with these statistics is that median price is a volatile measure and is susceptible to changes in the composition of property being sold. If there are more properties being sold at the higher price end of the market, then median prices will be reported as higher. That is likely to be the case at this time. The chart below sourced from the regional property sales by price band provided as a subscription service from REINZ – Residential Housing Facts displays the make up of all sales in each of the two months set out by price range along the horizontal axis. The red line represents the percentage of sales in February by price range, with March in blue.

REINZ Auckland price range analysis Feb March 2010

The very clear picture shown by the chart is that for property sales below the median in March represented less than for February, whilst sales above the median in March represented more of the sales. This supports the view that the composition of sales changed significantly and therefore impacted the median price.

Let’s look for a moment at the broader picture for the whole of NZ. For the whole of NZ the composition of sales by price segment is very telling. In the month of March total sales increased by 22% from the February figure of 5,029 to 6,161. In the lower price segment of properties sold at prices below $400,000 sales volumes increased by just 17%; properties sold at prices between $400k and $600k, sales increased by 25% – slightly ahead of the total. However for properties sold at prices between $600k and $1m sales increased 38% and the sales of properties over $1m increased by 55%. This clearly shows a skew towards higher priced properties selling in March.

The Real Estate Institute (REINZ) does produces a more accurate measure of property prices published in its monthly report. In collaboration with the Reserve Bank REINZ publishes the monthly Stratified House price index specifically to minimise the impact that changes in the composition of sales has on price.

The Stratified price of Auckland property sold in March was $479,438 – this was down very slightly on the February figure of $479,975. The chart below tracks the stratified sales price in Auckland over the past 5 years.

Auckland stratified house price March 2010 Realestate.co.nz

As the chart shows the fact is that property prices are not booming. Auckland property prices peaked in July 2007 at $510,197, it then fell to a low point some 16 months later of $435,700, a total fall of just under 15%; subsequently prices have crept back up towards the peak but currently are still some 6% below that peak.

The chart of stratified prices for the whole of NZ as detailed below equally show that despite the peak of property prices being reached some 28 months ago, nationally prices as measured by the stratified price are still some 3.3% below that peak.

New Zealand stratified house price March 2010 - Realestate.co.nz

5

Open homes – Realtors in the US go on the offensive to showcase property

Posted on: April 11th, 2010 | Filed in Buying / Selling a home, International

Nationwide_OPen_HouseThis weekend around the 50 states of the US houses will be decked out with blue bunting and balloons. It is not a new public holiday -rather it is a concerted initiative by the National Association of Realtors to try and kick off the spring season of property buying with a bang!

The US property market has been in the doldrums for over 3 years as it has suffered the largest fall in prices since the Great Depression. The Case Shiller Index of home prices (the most respected source of property prices measured across 20 major cities) is still 30% down on the peak of the market back in May 2006. During this time the number of properties being sold has slumped with a consequential loss of confidence in real estate and a sobering rise in foreclosures (mortgagee sales). Estimates vary but a common held view is that up to 40% of all mortgage holders are technically under water – their property is worth less than the value of their homes.

The chart below tracks the Case Shiller index showing year on year growth or decline. Whilst the current year on year is effectively zero, the key fact is that for 3 years the index has been constant year on year decline.

Case Shiller Home Price Index January 2010

With this as a backdrop the US government recognised, that just as in most western countries where residential property is a key asset for most households and consumer confidence is tied to perceptions of wealth something needed to be done to stimulate the property market. The US government solution was to allocate some of the massive US$787 billion fiscal stimulus package to create a US$8,000 tax credit for first time home buyers and up to US$6,500 for move-up buyers. The original deadline for this initiative was scheduled to expire on the 30th Nov last year but was extended to the 30th April 2010.

So this initiative this weekend for local real estate companies to implement a carnival-like experience across the country is timed to try and peak interest and purchase decision before this stimulus incentive runs out at the end of the month (with no likelihood of another extension).

The question as to the value of this exercise could be hotly debated – can a concerted effort on this scale by an organisation as powerful as the National Association of Realtors (NAR) and the associated local branches through local offices and agents drive demand? What is not to be ignored is the might of the NAR, it is the largest trade organisation in the US, with over 1.2 million members. It’s influence was strong enough to achieve the extension of this home buyer tax credit, so it’s marketing muscle has the ability to affect consumer activity and stimulate interest in property buying.

It would be an interesting question to know here in NZ if such an initiative (a massive open home weekend event – not a first time home buyer tax credit) could be coordinated and implemented and if it would have a bearing on the property market?

4

Could this be the start of a resurgent property market?

Posted on: April 7th, 2010 | Filed in Buying / Selling a home, Featured

March 2010 property sales from Barfoot & ThompsonBarfoot & Thompson, the leading real estate company in Auckland and Northland released their sales figures today for March. A total of 927 properties were sold in the month of March. This figure is encouraging and raises hope for the property market across the country as Barfoot & Thompson release their sales figures well ahead of the Real Estate Institute data which is due on the 16th April.

The figure of 927 for March compares with a more subdued figure of 626 in February, but is in line with March 2009 when 924 properties were sold. That month of March 2009 was the turning point in the market then with an increase in sales which ran for 7 months until the Spring of last year.

The chart below presents the monthly sales figures on a seasonally adjusted basis – this better demonstrates true growth stripping out the seasonal factor of the market. The month of March is the biggest selling month of the year accounting historically for 9.8% of all annual sales.

Barfoot & Thompson seasonally adjusted sales March 2010

The sales for March at a seasonally adjusted level of 789 is very strong – 34% up on the February seasonally adjusted figure of just 588.

In terms of average sale price, the March figure of $545,156 was up over $20,000 on the February figure and $53,000 on March last year. The chart below tracks the monthly average sale price over the past 4 years highlighting the more than 10% year-on-year increase.

Barfoot & Thompson average sales price to March 2010

Given this month’s increase in sales activity and given the scale of the business of Barfoot & Thompson (based on the past 12 months Barfoot & Thompson represent 13.7% of national sales) it is possible to make an educated extrapolation of the total sales for March.

Using seasonally adjusted monthly sales for February and March 2010 and applying the percentage month-on-month increase seen by Barfoot & Thompson of 34%; this would extrapolate to a March total sales for the whole of NZ of around 7,000. This level of sales would start to bring the market back towards a more normal market for property.

One caveat to this extrapolation is the likelihood that within the performance of the Barfoot & Thompson sales figures is potentially a higher level of activity in metropolitan regions of the country as expressed in the March NZ Property Report. We shall have to wait for the final sales numbers from REINZ in two weeks time.

9

What is normal in the housing market?

Posted on: April 5th, 2010 | Filed in Buying / Selling a home, REINZ Monthly data

iStock_000001558465SmallBernard Hickey wrote an interesting piece in the NZ Herald entitled “Abnormal the new norm“.

In it, he describes what he sees as a new normal in the property market borne of more stringent controls on banks by the Reserve Bank policy requiring more stable and longer-term sources of funding, with less reliance on “cheap hot money from overseas”.  A consequence of this he believes will be a continued shift from fixed rate mortgages to variable rate mortgages. Currently 30% of mortgages are on variable rates – a trebling over the past 3 years. This shift will likely see a closer alignment of base rates to mortgage costs and therefore the impact on the property market.

Whilst I agree with the principle of what Bernard states in his piece, that we are unlikely to see what many had considered to be normal level of market activity in terms of price increases and strong sales as was witnessed over the period of 2005 to 2008; the important question is though, what is going to be this new true normal in the property market.

To assess this requires a view of the historical perspective on the NZ property market. Fortunately the data of the market is comprehensive going back to 1992 through data published by the Real Estate Institute. The data covers both sales volumes and median price. Whilst historical data of sales can provide insight to the future, when it comes to pricing as we have seen in the past 18 months – historical pricing trends are no forecaster of future trends, and it is a brave person to state whether property prices are going to rise or fall.

Looking for trends in historical sales data, the chart below tracks the historical property sales in NZ since 1992 measured as a percentage of all residential property in the market at the time. The key here is that in 1992 when the data began there were 1.18 million residential properties and annual sales at that time were 63,270. Over the course of the past 18 years the number of residential properties has grown to 1.55 million – an extra 370,000 properties.

NZ property market percentage of all homes sold each month realestate.co.nz

However as the chart shows the percentage of all properties sold each month has varied greatly – peaking at over 0.75% in 2004 before falling to the recent lows of the past 2 years, well below long term average of 0.52% and barely half the level of 2004.

The key consideration here is what is likely to be the new norm for the property market. Bearing in mind the comments of Bernard Hickey the period of the mid 2000’s should be seen as abnormal. Interestingly though is the fact is that in the period of 2005 to 2008 the average sales as a percentage of all properties was 0.495% – below long term averages. In fact if you might consider the 1990’s fairly normal – during that period the average monthly sales represented 0.52% of all properties.

Based on these statistics it might be safe to call a normal market around 0.5% of all properties selling in a month. That ratio based on the current number of residential properties at 1.55 million would mean an average monthly sale of 7,727.

The last time the monthly sales of residential property in NZ exceeded this level of 7,727 was November 2007 – 27 months ago. The most recent 12 months of sales total just 69,390 properties an average of 0.37% of all properties per month.

The fact is that based on the current state of the property market sales would need to rise by 34% to just reach what we might call normal. To help provide some guide to recent sales levels as to how close to the new “normal” this market is the table below can be thought of as a ready reckoner. If 2010 was a new normal year (ie 0.5% sales per month) then these are the monthly sales we should be expecting to see.

NZ property market - a new normal, how sales should look

Clearly this year,  just two months in, is showing we are no where near a normal sales level – in fact with only 8,695 sales in the first two months this market is 43% behind the mark. The latest sales for March will be published on the 16th April and it will be interesting to see how they look as compared to a normal market.

Page 7 of 18« First...56789...Last »