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!
Alistair this is a great blog and of extreme value to the industry. In Hamilton the market while having improved from 2008 is still very much hard work! Is there any way to work out the table for Hamilton City?
I just hope your information gets picked up and puts to bed the theory that the housing market is booming once again and therefore the Reserve Bank need to turn up the thumb screws to shut it down.
The only issue I do have with it is the timing being near the middle of each month and the advantage taken of that fact by Quotable Value (QV) who go to the media each month about the 8th or 9th with data a month old and stealing the media headlines as if they are the authority on such market information.
Hi Alister,
How about making some predictions of what? and where? and when? is going to boom,and why?
example big projects,jobs, population booms in certain areas.
Why the provincial areas are lagging behind the cities regardless of there affordability.
When will southland pick up,
Maybe an article on the “so called ” resource boom, oil lignite,coal seam gas ,silicon, on southland ,as southland seems to have hit rock bottom.
What about a graph on land prices without houses
After all isnt that what appreciates
look forward
merry christmas
Cam price
Cam
That is quite a Christmas wish-list!
The fact is there are many who try and have tried to make predictions on many subjects, property included and in the main they tend to be wrong. I have tried this myself and have come up wrong over the years. It is for this reason that I judge the best we can do is share information – such as these charts to then let people make their own judgments based on many variable. You correctly state that broad economic factors effect the performance of property markets and these need to be taken into consideration in any forecast.
As an example of why I am less motivated to make forecasts, have a read of a book that I am just reading “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb – it is incredibly insightful in debunking some of the theories of forecasting.
As to a chart on section prices – that I can do and have been meaning to do for quite a while. Should have that one done soon.