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Property sales for February show a continued subdued market

Posted on: March 12th, 2010 | Filed in REINZ Monthly data

The sales figures released by the Real Estate Institute for Feb 2010 of 5,029 properties sold in the month will come as some surprise to property market watchers.

This figure was the lowest February sales reported since data began in 1992. It represents a 3.8% decline in sales as compared to February last year, which itself was down 18% on the 2008 figure. The figures for the month of February alone tracked over the past decade are shown below. They clearly highlight the decline that has been seen in this key month over this time and the fact that the market remains subdued.

February is traditionally one of the stronger months for sales – on average 8.9% of all annual sales occur in February. February is also the 3rd most active month for sales, after March and November.

Extrapolating this month’s sales figure into a full year would show 56,689 sales. To put this in context the lowest 12 month sales seen over the past 18 years was the period leading up to February 2009 when a total of 53,540 sales were recorded. The biggest 12 month period by contrast was the period ending April 2004 when 121,777 properties were sold.

Taking the seasonally adjusted sales figures over the past 5 years the chart below provides a sense of clarity as to what the state of the current property market.

The key question will be the impact of this slow rate of sales on the inventory of unsold houses. The NZ Property Report for February showed a level of 48 weeks of inventory based on the January sales figures and the addition to the market of over 15,000 new listings in February. It will be very interesting to see the March report which will be published on this site on the 1st April.

Taking the property pulse of the market – February 2010

Posted on: February 18th, 2010 | Filed in Featured, Market News, REINZ Monthly data

Today was the start of a new regular slot on TV3 Business Breakfast for providing a mid month view of the property market. For those readers who were not up at 6.40am you can view the segment here on the TV3 website.

The key data presented in the report covers the latest Real Estate Institute sales figures for January as well as latest data on website listings.

Sales

The sales in January were very low. Just 3,666 properties were sold in the month. These sales were lower than many had anticipated, especially when compared to a year ago – a time you have to remember when the storm clouds of the recession were depressing all forms of consumer activity and confidence – in that month a year ago 3,706 properties were sold. So this placed January 2010 as the lowest month going back as far as 1992.

The chart below tracks the past 5 years and uses seasonally adjusted monthly sales data. The key periods of the past 5 years are highlighted to track the key events – STRONG MARKET 2005 – mid 2007, MARKET FALL mid 2007 – early 2008, FLAT MARKET in 2008, RESURGENCE AND FALL in 2009.

On a seasonally adjusted basis the January 2010 sales volumes were not quite the lowest month, but they came pretty close.

Sales Price

The Stratified median sales price for January as reported by the Real Estate Institute in association with the Reserve Bank showed a further fall to a level of $360,687. Down from $366,500 in December which itself was a fall from November. The stratified median price as shown in the chart below is still some 5.3% below the market peak last seen in November 2007. The resurgence of houses prices seen through 2009 when the price came within 2% of the peak has certainly lost steam – certainly low sales volumes has the ability to apply a downward pressure on prices.

Listings

The most recent NZ Property Report for January highlighted the rise in the inventory of unsold houses from 34 weeks in December to 40 weeks in January. With this latest set of data reporting a further slowing of sales volumes added top which is a strong flow of new listings; that level of unsold inventory will likely rise again significantly for the February report – I suspect we will see a level around 48 weeks.

Taking the latest pulse of the market looking at the flow of new listings coming onto the market – the fact is that February is going to be the month which a lot of people have been expecting for a while – 18 days into this short month we have already seen over 9,500 new properties hit the market. To put this in context last February saw 12,164 new listings – we are seeing a daily rate of close to 700 and with 7 more business days we could see over 14,500 for the month.

The NZ Property Report for February will be published on Monday the 1st March on this site and will provide a national as well as regional view of the property market as seen from the perspective of new listings, asking price expectation and inventory of unsold houses.

Latest property data shows weakness in sales numbers

Posted on: January 19th, 2010 | Filed in Buying / Selling a home, Other interesting reads:, REINZ Monthly data

The statistics released by the Real Estate Institute (REINZ) yesterday focused on the record median price – $360,000 – stating in the article:

“Real Estate Institute of New Zealand President Peter McDonald says it’s an appreciating market fuelled by a shortage of properties for sale but is looking optimistic for 2010″.

The other half of the story relates to property sales number which were 4,957 in the month – these sales figures are the 3rd lowest in the last ten years for December which is naturally a quiet selling month. The best December ever was back in 2003 when 8,669 properties were sold.

The more concerning fact behind the numbers is that through the last 6 months; year on year comparative monthly sales have been steadily building on the very low sales base of 2008. Through the period from April to November the volumes compared to 2008 was averaging increases of 40%. In September sales were up 44%. However the December sales at 4,957 was only up 15%.

What is more concerning is that a year ago we were experiencing the low point of sales volumes as a result of the global economic recession and the slow down of the NZ property market. This was acute in the 3 month period of November, December and January last year. So in theory we should have seen a sales volume in December more of the order of 5,500 rather than 4,957.

The reasoning behind this view is seasonality. December is on average 7.3% of all annual sales just as November is a bigger month representing 9.1% of annual sales on average. Taking the last 6 months of seasonally adjusted sales prior to the December figures the calculations were all pointing to a total annual sales for the whole of 2009 of 75,000.

The input of the December stats resulted in the total for calendar year 2009 of just 69,629 just 24% up on the all time low of 2008 of 56,128.

To provide a view and perspective of the current sales volumes the graph below tracks the seasonally adjusted 12 month moving average sales volumes over the past 5 years. The key periods of the market have been highlighted to bring clarity to the market movements.

The strong sales period – through 2005 and 2006 with sales in excess of 100,000 per 12 month moving average
The downturn which started midway through 2007, bottoming out in March 2008
The flat period through most of 2008 averaging just 55,000 per 12 month moving average
The Spurt of activity in the first half of 2009 before what has been another leveling off leaving sales at this 70,000 12 month moving average level, before the recent fall off over the past quarter relative to seasonal averages.

Just for clarification this chart is developed by weighting each months actual sales to the seasonal average representation, with the average based on the period 1992 to 2009. So for example taking December 2009 with 4,957 sales – December on average represents 7.3% of all sales of a year therefore in theory this sales volume for December would extrapolate to a 12 month equivalent sales volume of 68,084 sales

NZ Property price recovery – are we there yet?

Posted on: December 15th, 2009 | Filed in Buying / Selling a home, Featured, REINZ Monthly data

iStock_000011075814Smaller The reports of recent weeks and months would have us believing that the property crash of 2008/9 was well behind us and prices are now powering up to new highs.

Some of the data would support this – however as is well documented, you can always find data to support any argument. When it comes to house prices there is too much at stake to allow headlines to drive such important decision making activity as house buying.

In NZ as has been discussed and presented on this blog in the past there are a number of house price statistics which derive their data from a variety of sources – some more timely than others and some more robust than others. What there is a need for is a trusted and definitive measure of house price – in the USA the Standard & Poor’s Case Shiller House Price Index is the trusted gold standard.

The NZ equivalent is the Stratified House Price Index. This index was established in August utilising the data from the Real Estate Institute’s members (licensed real estate agents) of unconditional property sales. This raw data is then computed using the stratified model built by the Reserve Bank of NZ. The abstract of the methodology is summarised below:

Widely used measures of growth in mean or median housing prices will reflect changes in the composition of dwellings sold as well as changes in demand and supply conditions. Using a suburb-level dataset from the Real Estate Institute of New Zealand we use stratification techniques to adjust for compositional change and derive a timely and robust measure of housing prices for New Zealand. Results suggest this stratified measure produces estimates of housing price inflation that accord closely with the accurate but less timely figures obtained from the QV Quarterly House Price Index.

Simply put the use of medians and averages for house prices are always influenced by sales volume and sales composition (more or less high price / low price properties). The chart below provides a visual representation of the stratified median house price by month since Jan 2000 as compared to the straight median price for the same month. Both calculations are derived from identical data in each month.

The divergence of the two lines from 2002, which showed the greatest gap in 2007 is likely to be the result of the composition of property sales over the period. The Stratified mean reflecting a higher price as a function of the compositional change in the NZ housing stock over the period – more higher priced properties.

Current data

The latest reported statistics of Stratified median price for November from the Real Estate Institute is broken down by key cities. The data is presented in the following charts which portray the detail of the past 5 years and highlight the market peak of prices and the market decline together with recent resurgence – they individually and collectively seek to answer the question: “are we there yet in property price recovery?”

National house price

The current price of $369,825 shows a recovery from the low point of January this year when the price had fallen to $337,400. That initial fall of 11.4% from the market peak of November 2007 when the market reached $380,900. The current price is still 2.9% below the peak of the market – No, we have as yet not recovered!

Auckland house price

The current price of $487,650 shows a recovery from the low point of exactly 12 months ago when the price had fallen to $337,400. That initial fall of 14.6% from the market peak of July 2007 when the market reached $510,197. The current price is still 4.4% below the peak of the market – No, we have as yet not recovered!

Wellington house price

The current price of $414,140 shows a recovery from the low point of September last year when the price had fallen to $372,075. That initial fall of 12.2% from the market peak of September 2007 when the market reached $423,955. The current price is actually just below the peak of 2 years ago, however the figure for October ($424,615) set a new peak – Yes, we have recovered!

Christchurch house price

The current price of $345,925 shows a recovery from the low point of January this year when the price had fallen to $309,400. That initial fall of 14.6% from the market peak of October 2007 when the market reached $362,475. The current price is still 4.6% below the peak of the market – No, we have as yet not recovered!

Other North Island house price

The current price of $300,675 shows a recovery from the low point of January this year when the price had fallen to $283,600. That initial fall of 12.0% from the market peak of November 2007 when the market reached $322,305. The current price is still 6.7% below the peak of the market – No, we have as yet not recovered!

Other South Island house price

The current price of $276,100 shows a recovery from the low point of January this year when the price had fallen to $254,010. That initial fall of 13.1% from the market peak of February 2008 when the market reached $292,425. The current price is still 5.6% below the peak of the market – No, we have as yet not recovered!

Auckland property – facts on the state of the market

Posted on: December 4th, 2009 | Filed in Buying / Selling a home, Media commmentary, Other interesting reads:, REINZ Monthly data

istock_000006996157xsmall Recent 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.

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:

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.

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.

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!

New stratified house price index – another step to richer property information

Posted on: August 8th, 2009 | Filed in REINZ Monthly data

The announcement today of the establishment of a Stratified House Price Index to be published by the Real Estate Institute in association with the Reserve Bank recognises the ever growing interest and importance of timely and accurate information on the property market.

The new index which will be presented monthly will take the existing monthly sales data of volumes and price and establish a tracking index which will more accurately present house price movements removing through using sample sets within suburbs the impact of changes in the mix of properties sold. This new index will continue to be the most timely set of data as it will use the sales data from the preceding month as represented by the reported sales by all licensed real estate agents.

This move reflects strongly the message I have been observing at the conference I am attending in the US this week. A key trend I have observed here through the sessions is the recognition by all in the US real estate market to the criticality of timely and accurate property information – not just price, but also all the key drivers of the property market.

One specific session identified 10 key drivers that when accurately reported and analysed could provide a very clear picture of the property market overall:

Supply of property coming onto the market – quantity of new listing indicating confidence in the market to support sales by vendors
Demand for property – an indicator of the level of interest and confidence in buying property
Motivation of buyers and sellers – in the case of sellers, whether there is distress sales or mortgagee sales; in the case of buyers more around return on investment and interest rate costs of financing
Sales price – the trends and absolute price level
The asking price of new listings coming onto the market
Sales performance – the ratio of sales to listings, in the US this is around 40% with up to 90% for mortgagee sales
Sales volumes – the monthly tracking volumes
Contract ratio – this is sales matched to total inventory
Pending sales – this is more of a US ratio as sales process has pending homes sales which a proportion of which do not complete – close to conditional sales tracking in NZ
Inventory of property on the market

In listening to this presentation and reviewing these 10 key drivers I was struck by the fact that in NZ if you were to go back just 1 year ago the only hard data from this list of 10 that was readily available was Sales Price and Sales Volumes.

Whilst we do not now have hard data on all 10 of them; as a function of the power of the data from this website as reported through the NZ Property Report and other statistics such as mortgagee listings we have added a further six key drivers on top of the original two.

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