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NZ Property Report – December 2009

Posted on: January 1st, 2010 | Filed in Featured, NZ Property Report, Other interesting reads:

blue pen and small houseDecember is traditionally a quieter month for new listings coming onto the market with a noticeable decline in activity after the middle of the month as property searching takes a back seat to Christmas focus. This behaviour markedly changes in the first week of January when searching starts again in earnest with the busiest time of year for online property search.

NZ Property Report - 1st Jan 2010 Realestate.co.nz cover imageThe calendar year 2009 saw the property market close with a continued subdued sentiment. The level of new listings for the year was down 17% on 2008 and 24% down on the 2007 year. This considerably lower number of listings has been matched by a slower year for sales. The level of property sales through the year remained subdued with the 12 month moving average to November being just under 69,000,whilst up on the year prior figure of 57,000; the long term average 12 months sales would be closer to 98,000.

The level of inventory fell in December to 34.3 weeks. The fall however is unlikely to reflect a tightening in the market at this stage as a possible indicator of an emerging sellers market, rather this statistic is more a reflection of the lower seasonal listings coming onto the market matched to the strong sales months preceding Christmas.

The key movement in what was a steady month for new listings was the easing of asking price expectation. The price fell back from what had been a noticeable spike 3 months ago when the asking price jumped by just over $20,000 in a month back in September leading into the Spring selling period.

Asking Price

NZ Property Report Dec 09 Asking price - Realestate.co.nzThe vendor’s expectation of asking price for properties coming onto the market in December fell by 1.7% from November to $412,319.

This price represented a 1.7% fall in asking price when compared to the moving average of the past 3 months (Sep/Oct/ Nov).

The asking price of new listings in November last year was $401,631 representing a 2.7% year on year increase.

New Listings

NZ Property Report Dec 09 New listings - Realestate.co.nzThe number of new listings coming onto the market fell in December to 10,349, from the November total of 13,857.

The total of 2009 saw 135,416 new listings come onto the market. The calendar year 2008 saw 163,488, with 2007 with 177,529 clearly showing the quieter state of the property market.

Inventory

NZ Property Report Dec 20009 Inventory - Realestate.co.nzThe overall level of available inventory as measured by equivalent weeks of sales slipped slightly in December from 36.0 in November to 34.3.

This fall is a common seasonal factor as December sees fewer new listings, whilst sales continue strongly for the first half of the month. A similar fall in inventory levels has been seen in each of the last 2 years of records.

Regional Summary – Asking price expectation

NZ Property Report December 2009 Regional map of asking price of property listings - Realestate.co.nzWhilst the national asking price expectation of vendors eased in December the total number of regions showing a fall represented only 7 of the 19 regions. The major influence of the 3 main centers however affected the overall picture with both Wellington and Canterbury down 2.6% and 2.5% respectively as compared to the recent 3 month average.

The Auckland market showed an easing of 1% down to $530,923 – this is still 3% below the peak of the property market in asking price terms back in October 2007 when the asking price was $547,163.

In provincial areas asking prices showed some significant increases with 6 regions having asking price increases over 5% as compared to 3 month averages with both the West Coast and Central North Island recording double digit increases.

Regional Summary – New listings

NZ Property Report Dec 2009 Regional summary of new listings - Realestate.co.nzNew listings were down in December as a function of seasonal factors. There were only 2 regions reporting listings lower than a year ago however. This overwhelming trend to year on year growth in listings across the country has more to do with the state of the market a year ago when the full economic impact was being felt in the property market with the fear of falling prices were negatively effecting buyer sentiment.

The majority of the increases in new listings are being seen outside of the main centers with Wellington and Canterbury showing very modest increases in listings and Auckland showing just 6% increase with 2,730 new listings.

Regional Summary – Inventory

NZ Property Report Dec 2009 Regional map of inventory levels - Realestate.co.nzGiven the seasonal trend to reduced inventory across the country in December the overall market appears fairly balanced with 7 regions tipping towards a buyer’s market and 7 tipping towards a seller’s market.

The main 3 metropolitan areas continue to point to a stronger position for sellers with Auckland at 26 weeks inventory as compared to a 12 month avg. of 35m, Wellington at 16 vs. 12 month avg. of 21 and Canterbury at 26 vs. 12 month avg. of 31. Other notable areas shifting to a more sellers market is the Coromandel and area that has over the past year been a classic buyer’s market with inventory peaking at 284 weeks now down to a level of 146 well below long term average.

On the buyer’s market side Marlbourgh region has been seen steady increasing inventory levels now at 69 weeks compared to 12 month avg. of 52 weeks, similarly the Central North Island including Taupo sitting at 88 weeks up from 59 weeks 3 months ago.

Lifestyle Property

NZ Property Report Dec 2009 Lifestyle property - new listings - Realestate.co.nzLifestyle listings in December were relatively strong based on seasonal expectation. A total of 995 new listings came onto the market with an asking price expectation of $614,951. The volume of listings was up 19% on December last year and the asking price was up1.9% on the recent 3 month average.

There were significant increases in new listings added in the Central North Island, Bay of Plenty, Northland, Wellington region; as well as Central Otago Lakes and Marlborough. Set against this were significantly lower new listings in Manawatu / Wanganui and Taranaki regions.

Apartments

NZ Property Report Dec 2009 New apartment listings - Realestate.co.nz

The apartment market slowed in December with just 480 new listings coming onto the market representing a year on year growth of 7%, however a 25% fall from November. In the calendar year 2009 6,416 new apartment listings came onto the market as compared to 6,916 in 2008 and a staggering 8,470 in 2007 indicating that the apartment market remains subdued.

The asking price expectation for the new listings in December was $379,567 – this represents a 2% decline as compared to the 3 month average.

The full report can be downloaded here (1.2MB pdf document). Additionally the raw data is accessible here as an Excel spreadsheet enabling anyone to analyse the raw data and establish any trends or observations. Usage rights are governed by attribution to the source of the data being Realestate.co.nz. The next NZ Property Report for January 2010 will be published on this website on Monday 1st February at 10am.

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Mortgagee properties – more than just statistics

Posted on: December 14th, 2009 | Filed in Other interesting reads:, Website searching

nz-herald-mortgageeThe detailed article in the Herald on Sunday by Andrea Milner did what all good reporting should do – provide the human touch. That in many ways differentiates the blogger from the journalist.

Whilst I have at my finger tips the data that provides insights and trends to provide models of where real estate markets are headed (or to to be more accurate – where they have come from!), a good journalist has the expertise and experience to bond together the facts with the emotion to provide a compelling sense of empathetic attachment.

That is where the traditional world of journalists and the new world of social media can coalesce and mutually benefit irrespective of the medium (print or online).

Anyway back to mortgagee statistics. The situation as the article represents is that the scale of searching for the keyword of mortgagee has tailed off during the year as the chart below represents. The red line tracks the number of searches on the word mortgagee each week since early 2008 (tracked on the left hand axis). The blue area represents the weekly level of listings on the site of mortgagee properties (tracked on the right hand axis).

The extreme peaks of searching which at one point totaled 3,500 per week; amounting to close to a third of all keyword searches has now receded to a level of around 1 search in every 14 is for mortgagee properties.

Mortgagee properties - inventory of properties and searching for properties on realestate.co.nz

As for inventory of mortgagee properties. The level has remained fairly stable through this year with some recent fall as we head towards Christmas. The reality is that mortgage repossessions are still occurring – in fact almost as many are being listed as are being sold which is good for the market, as a healthy turnover indicates a steady sales market for property overall. The likelihood is that through 2010 these numbers will begin to fall; however the fact is that mortgagee properties are typically an indicator that lags the more positive trends of economic performance and consumer confidence.

It is worth just confirming that as mortgagee properties are not a defined category of listing submitted to realestate.co.nz the means that the only way in which people find such listings is by typing in the keyword or keywords into the search box.

The data of listings using this term is collated using the same method with the filter undertaken manually to remove any listings that have used the word mortgagee to deliberately capture interest for properties that are not being sold on behalf of the mortgagor. Examples being headlines such as “As cheap as a mortgagee property”.

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Auckland property – facts on the state of the market

istock_000006996157xsmallRecent data published in the media seems to be pointing to a impending bubble in the Auckland market – described in the NZ Herald as “a bubble that will burst and cause a painful property recession”.

I confess that our own NZ Property report for November contained a component of this speculation stating as it did that

The price rise in Auckland (asking price expectation) of 4.1% (Nov ’09 vs. 3 month average) is a direct result of the tightness of the market with inventory levels remaining tight as the flow of new listings seems to be being met by a steady demand

As ever any analysis of a market in order to be able to establish trends requires access to the most comprehensive data. It is appropriate to gather this data and undertake some detailed analysis.

The chosen data I have analysed for the Auckland region is the REINZ sales figures and the new REINZ / Reserve Bank Stratified House price index. Both of these sets of data are geographically defined as being the compete Auckland Region comprising the current 7 local authorities. The sales data is sourced from all of the licensed real estate offices selling properties which are in this region.

To this data I have analysed the realestate.co.nz data of property listings which uses the same geographical boundaries as the REINZ data and is compiled from the listings of licensed real estate offices for properties listed in the region. The website is the most comprehensive source of property listings of real estate agents with over 94% of all offices loading listings to the website.

As a point of note the NZ Herald article made its assertion based on data from Barfoot & Thompson sales data as representative of the Auckland market. There is potentially some error in this assumption as B&T operate extensively in Auckland as well as Northland and down through the middle of the North Island – of the current 7,568 listings on their website 17% (1,322) are for properties outside of the Auckland region.

Taking sales data first. The fact is that sales in Auckland are back from the extreme lows of 2008. At that time average monthly sales were around 1,406, the most recent 6 months in Auckland have seen an average of 2,059 up 46%; however the average through 2007 (albeit clearly recognised as a heady peak of the market) was 2,537.

The chart below details sales over the last 3 years with the respective months of Aug / Sep / Oct / highlighted in red. The key thing to note is how the sales level appears to be relatively stable over the period since March 2009 at a consistent level similar to 2008 albeit 50% higher.

Auckland property sales 2007 to 2009 REINZ Realestate.co.nz

Turning to pricing which is naturally the key concern to most people as most people only want to buy or sell one house.

The Real Estate Institute have with the assistance of the Reserve Bank produced a very credible Stratified House Price Index which stands up to the extreme scrutiny of economists and academics as it is not impacted by the externalities that affect average or median price as a function of the performance of house sales within differing price bands.

The data for this House Price Index goes back to 1992 and the Auckland data is presented in the chart below:

Auckland Property Price - Stratified House Price Index REINZ Realestate.co.nz

The striking rise through the last decade is most evident from the graph as is the fall from the peak and the subsequent resurgence. However what is also very clear from the graph is the fact that using this credible house price index the market price in Auckland has not as yet returned to the peak level seen in July 2007 – the current price index is still 5.8% below the peak.

In terms of actual stratified median price from the same data the current (Oct 09) price in Auckland is $480,510 and the peak in July 2007 was $510,197. This does contradict the article which stated that Auckland prices had “recovered all the losses experienced over the past two years“.

It is useful to match side by side the sales across the Auckland region with the sale price as the chart below does. There is a recognised fact, in that prices tend to follow sales volume trends and the rise and subsequent decline in volumes and price through 2007 and into 2008 would attest to that, as would the volume rise and price rise in early 2009. The key issue now though is the trend of price rises extending whilst sales volumes have moderated – this could foretell a softening of prices in the coming months.

Auckland property sales and price Realestate.co.nz

As a further support to the view that the Auckland market is stabilising and not about to create an inflated bubble is the additional data set of listings. The chart below tracks the number of new listings added in the market in the Auckland region matched to sales. What is interesting is how conspicuous is the rising level of new listings which is leaving a fair gap from the monthly sales – this would indicate that the market has a growing stock of houses for keen buyers.

A growing inventory of new listings takes pressure off prices and buyers feel less pressured to have to “grab a property” in the fear of missing out which was the symptom so conspicuously seen back in the peak of the bubble through 2006 & 2007.

Auckland property market new listings and sales 2009

Overall I believe that in analysing this comprehensive and robust set of data there is more than enough evidence to take the view that the Auckland market is fairly well balanced and therefore unlikely to suffer a “painful property recession” – however forecasting the property market is never an exact science and only time will tell, after all this data is all historical – telling us what happened, nothing for certain ever tells us what will happen!

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Will the new law change the way homes are sold?

Posted on: November 29th, 2009 | Filed in Buying / Selling a home, Media commmentary, Other interesting reads:

istock_000004343314xsmallAn article in the Herald on Sunday makes the assertion that the changes to the Real Estate Agents Act 2008 will change the way properties are sold.

I would hold that the new law will not change the way that homes are sold.

The article states that :

A property lawyer is tipping more sellers could opt to sell privately to get around new rules making real estate agents disclose defects in the home to potential buyers.

What I interpret this statement as saying is “if you (the seller) want to hide known defect in your home, then don’t use an agent and sell privately so you don’t have to disclose defects”. I find this surprising coming from a lawyer, after all, the seller always bears a responsibility to provide factual information regarding a property when questioned. More importantly any half-smart buyer contemplating parting with over $350,000 for a median priced property is surely going to get expert reports on the condition of the property.

To think that in some way private sales of houses would be judged by the buyer to be a less risky purchase or to think they can approach it in a more relaxed manner is staggering.

The new Act certainly places a greater responsibility on the agent. This is good. The principle of the Act is to bring greater transparency and greater safeguards for buyer and sellers. The real estate industry has embraced the new Act and sees these added responsibilities as further evidence of the professional service they wish to provide buyers and sellers.

To provide some clarity to this issue the Act details the professional standards of conduct expected and required of agents in section 6 of the Code of Professional Conduct and Client Care.

6. Standards of professional conduct

6.1 An agent must comply with the fiduciary obligations to his or her client arising as an agent.

6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute.

6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client.

6.5 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely, on the basis of the licensee’s knowledge and experience of the real estate market, that land may be subject to hidden or underlying defects, the licensee must either-

(a) obtain confirmation from the client that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses

6.6 A licensee must not continue to act for a client who directs that information of the type referred to in rule 6.5 be withheld.

It is important to recognise that these are rules and whilst they need to be read in conjunction with the Act the fact is that such rules are never cut and dry as to the exact manner of their application. The article in the paper states that

“for example, an agent should be able to tell of a house is at risk of being a leaking building based on when it was built or what it is made of.”

If this was to be taken literally it would mean that every agent would tell every buyer that every home built over the past 25 years using a timber frame with a cladding system which is not adequately ventilated is potentially a leaky building! The fact is the only way to identify a leaky home is to undertake a professional survey by a professional company who, using testing equipment can establish the likelihood that the property has become effected by internal frame damage. This is exactly what a building report undertaken by the buyer should tell the buyer. There is no way a real estate agent can provide this service. They are not qualified on such matters nor put themselves out in the market to be surveyors and building inspectors.

Having said that the new responsibilities placed upon the real estate profession are there to safeguard the interests of the buyer and the seller, and this is where this issue becomes really interesting.

In the vast majority of cases involving a property transaction a property buyer is at the same time a seller and visa versa. So to think that sellers are not going to want as much professional disclosure as buyers is illogical. This is why the code of professional conduct and care speaks to the agent providing that to both sides. How the view that private sellers will somehow be happy with that when they are also buyers is hard to believe.

Overriding this issue in the context of private sales is the fact that the consideration in choosing to sell privately or through an agent is in the main not purely around the amount of disclosure or even the fee. The fact is negotiating a property purchase is a complex and time consuming activity which surprises the many people who think they can sell privately, and who then end up employing an agent. That is why still with all the greater access to open marketing on the web the number of private sales continues to be around 10% – very similar to most other countries internationally – selling a property is far more than just advertising, and equally should not be shrouded in attempts to deceive or hide key facts.

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Is the housing market killing our economy?

Posted on: October 8th, 2009 | Filed in Media commmentary, Money Matters, Other interesting reads:

listener-magazine-coverThere seems to be a regular flow these days of articles that firstly prophesy the re-emergence of a property price bubble and secondly seek to berate the general population for “allowing” property to be leading us out of a recession instead of exports.

The latest media to ask this question is the Listener, which this week leads with a cover story “ How to stop the rising house market kill our economy

Dealing to the first of these issues, it is worth as ever looking at the facts.

The current price indicators of the market (REINZ and QV) are both showing a year on year recovery as detailed on the chart below. The REINZ median price showed in August a 5% appreciation, the first for over a year – the REINZ statistics tends to be more of a lead indicator as the data is more timely reflecting as it does the price of sales in the prior month.

NZ Property price - annual variance Qv & REINZ data

Not only are prices of houses only just beginning to show a year on year rise, they are still languishing below the peak of the market which regardless of which data set you choose to use is now close to 2 years ago.

Added to this the most recent sales data from Barfoot & Thompson showed that prices had actually softened again in September – down 3% from August; with their figures showing the current price some 8% below the peak of the market.

So I would have to say there is as yet now evidence of significant rise in prices – more a sense that prices have at this time ceased falling.

As to this notion that somehow we as income earning NZ’ers are in someways being frivolous and irresponsible in “allowing” what is seen as our “love of property” to damage our economy. Well even the Listener article if you read it through, tends to place more weight (based on the contributors) on our commodity based agricultural biased economy being the influencer of our currency turbulence rather than anything to do with house price inflation driven by easy money.

I cannot imagine that there would be anyone who would not want to see our exporters of premium high quality products and services succeed on a world stage and earn valuable productivity efficient earnings to raise our standard of living as the article cites. But to somehow expect all of us to somehow cease our inherent desire to find a home that suits our needs and in so doing spend what we think is a market price is ridiculous. After all there is nobody out there forcing anyone to buy any property and therefore market prices are a function of a willing buyer and a willing seller agreeing on a price.

As to the issue of investment property soaking up valuable credit that could go towards investing in productive capacity – that is an undeniable fact, that money would be better for the economy if it was able to flow to seed investment that can be productively used, but again we live in an open economy – part of a global economy with largely free trade in currency and goods. Like it or not, money will flow to where it can safely earn a rate of return that satisfies those that lend. In the case of banks as in the case of Japanese housewives their investment risk profile seems to suit mortgages rather than business loans.

As the article further highlights the single lever of the Reserve Bank being interest rates, which they use to manage the inflationary effects of potentially damaging house price inflation has a consequential impact on investment attraction in our volatile tiny currency. This seem then to be arguing as some emerging voices are highlighting the set of tools available to the Reserve Bank needs to be widened.

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International house price movements over the past 2 years

Posted on: October 5th, 2009 | Filed in International, Other interesting reads:

The Economist has just published an excellent graphing tool to aggregate the house price index of the leading property markets for which data is available.

The Economist - House Price Index Q1 2007 to Q1 2009Covering 20 countries the chart allows for the comparative plotting of countries and their bubbles and busts especially over the past 2 years.

Examining the data highlights some facts. For whilst the global property market has arrested over the past 2 years as the global recession took hold, there were those markets that faired better than the worst performers.

In fact 7 of the 20 countries measured, have ended the past 2 years with price indices higher – 4 of them over 5% higher and in the case of Hong Kong over 15% higher. These 7 countries shown in the chart to the right were Hong Kong, China, Switzerland, Australia, South Africa, Italy and Sweden which appears to have made a last minute rally to return to positive growth.

The Economist - house price index falls Q1 2007 to Q1 2009 - The majority of the 20 countries though saw falls in house price index. Naturally as would be expected the USA shows the greatest decline hitting an index of 70 (30% down at the end of 2008) and showing some early Q1 recovery in 2008. Most of the other markets show between 5% and 15% decline.

The NZ data in the report and charts is surfaced from QV and shows a 9% decline at Q1 2009, although the latest QV data for August 2009 shows a 2.8% decline.

The Economist also highlighted in it’s article some markets where the graph would have almost been inadequate to reflect the scale of price fall – Latvia suffered a fall of 60% fall and United Arab Emirates a nearly 40% decline in house price index.

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Where is the NZ Property Market heading in 2010?

Posted on: September 21st, 2009 | Filed in Buying / Selling a home, Other interesting reads:

I was invited to participate in the American Chamber of Commerce presentation event on “How to ensure business success in 2010” today with co-presenters Shamubeel Eaqub from the NZIER, Lindy Shuttleworth from M&C Saatchi Retail and Grant Osborne from First Rate.

The title for the session on property was “Where is the NZ property market heading; commercial and residential – lessons from lead indicators”. The presentation slide show is viewable below:

The key pointers from the presentation would be best be summarised as follows:

Historically the key indicators as to the property market lag market activity anywhere up to 4 months after decision making has occured – the web now provides far more equivalent “real time” information – supply and demand data is within 30 days

  1. Property prices as measured by median price have seen recent rebounds – currently 5% up on a year ago (August)
  2. Based on inflation adjusted prices the current median price represents at worst a 7% decline from mid 2007 prices
  3. Sales volumes are returning, however they still represent historical lows especially when assessed against the total number of dwellings
  4. Current sales volumes would have to increase by a further 50% to return to the long term (20 yr) average of sales based on the % of all dwellings being sold per year (6.2%)
  5. The supply side of the market is beginning to respond to the increased market activity – early indication for September show a significant rise from August (in line with seasonal pick up)
  6. Inventory levels still weak in major metropolitan areas – nationally 33 weeks of inventory
  7. Property searching at all time high – the demand indicator of property website traffic is recording unseasonal highs as buyers actively analyse the market
  8. New property listings show as yet no inflated expectations of price increases

Taking all of these indicators into account and then add some more macro economic indicators and trends and you have some idea of the future of the property market.

A very key issue of the shortage of new properties being built; added to which is the constraints on building contractors as tighter regulations pervades the industry. A further issue is another potential exodus of builders to Australia as that country begins to address an equally large housing shortage. All of these factors point to property prices edging upwards over the next year or two – not a bubble, but enough demand exceeding supply to drive up prices as the economy gets into gear.

I am indebted to Tony Alexander for his insight this week into the very real impact of new build market and the potential trade shortage.

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