The latest data released last week by the Real Estate Institute for the month of July shows that the property market is reasonably active. That is the best description “active” rather any inference of a boom – Helen O’Sullivan the CEO rightly stated that “the current market should be seen as recovering rather than ‘booming’”.
The fact is that sales of properties across NZ in July were up 20% as compared to the same month last year with 5,907 unconditional sales booked in the month by licensed real estate agents. The first 7 months of 2012 has seen 42,464 sales as compared to 34,511 for the same 7 months of 2011, an increase of 23%. The chart below tracks the annual trend of sales growth or decline over the past 5 years. Having had 15 months of yer-on-year increases we are at that stage of seeing increases on increases on a year-on-year basis which really shows a strong trend.
The most important perspective to appreciate when examining the scale of property sales as a measure of the overall market is the historical backdrop. The chart below tracks the NZ property market from 1993 to date, measuring on the red line the 12 month moving total of property sales using the right hand axis. The blue line shows the total value of transacted sales tracked on a 12 month basis with the left hand axis scale.
The key take-away from this chart is just how low the property market fell between 2007 and 2009 – 105,00 down to 55,000. The current 12 month average is tracking at 69,000 with an expectation of 72,000 by the end of the year. This total now marginally surpasses the “dead-cat bounce” mini-peak of January 2010. In terms of the value of transactions this is now running at an annualised rate of $30.64 billion up 40% from the lowest point in February 2009 at $21.91 billion.
The other perspective on property sales is to reference sales to the existing stock of houses in NZ. The key factor here is just how slow new house builds have been over recent years, having said that the current estimated stock at 1.56 million is up 14% since 2000 the equivalent of an extra 189,000 homes. The chart below tracks the percentage of houses sales on an annualised basis against the stock of houses.
I think this chart more than any other ably demonstrates that the NZ Property market is in nothing like in a boom – the current rate of sale equates to 4.5% of all dwellings per year far below the long term average transaction level of 6%. The market is staging a recovery as the general population regain a sense of confidence in the general economy and are clearly being influenced with what are very attractive interest rates. However we would need to see another year of 20% growth on top of this year’s 20% growth before we would be anything like approaching the long term average level of sales.