The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘REINZ Monthly data’ Category

4

NZ Property price recovery – are we there yet?

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

iStock_000011075814SmallerThe 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.

REINZ Stratified house price vs median price 2005 to 2009

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

Stratified house price - November 2009

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

Stratified house price - Auckland November 2009

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

Stratified house price - Wellington November 2009

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

Stratified house price - Christchurch November 2009

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

Stratified house price - other north island NZ November 2009

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

Stratified house price - other south island NZ November 2009

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!

2

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!

10

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

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

istock_000005865076xsmallThe 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:

  1. Supply of property coming onto the market – quantity of new listing indicating confidence in the market to support sales by vendors
  2. Demand for property – an indicator of the level of interest and confidence in buying property
  3. 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
  4. Sales price – the trends and absolute price level
  5. The asking price of new listings coming onto the market
  6. Sales performance – the ratio of sales to listings, in the US this is around 40% with up to 90% for mortgagee sales
  7. Sales volumes – the monthly tracking volumes
  8. Contract ratio – this is sales matched to total inventory
  9. 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
  10. 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.

Page 3 of 3123