The property market continues to show a continued tightness as highlighted in the April NZ Property Report with fewer new listings coming onto the market in the past month.
Just 9,993 listings were added to the website in the month of May down 5% as compared to April and down 29% as compared to May 2008. This steady decline of listings witnessed since February is resulting in inventory levels declining as the recent uplift in sales is significantly eating into available stock of properties on the market – a scenario echoed by most real estate agents around the country.
The resultant inventory of available listings when represented by the number of weeks of sales is currently sitting at 35 weeks (just over 8 months). This is down on both the March and April inventory levels of 52 and 42 respectively; and now represents a level below the average of the past two and half years at 38 weeks.
This new metric of inventory as expressed as the number of weeks of sales has been introduced to the report this month to bring perspective to the number of listings coming onto the market. Over the past two and half years the levels of inventory on the market has varied between lows of 20 weeks in the first half of 2007 right up to a peak in February of this year of 57 weeks. This latter figure very much influenced by the very low rate of property sales through the Nov / Dec / Jan period.
Asking Price
In terms of the asking price expectation of vendors of newly listed properties; the May truncated mean figure of $401,196 represents a fall of 1.2% from the April asking price expectation of $405,936.
Further it represents a fall of 1.7% as compared to an average of the prior 3 months (Jan/Feb/Mar).
The asking price in May 2008 was $414,539 which represents a 3.2% year-on-year fall in asking price.
New Listings
The trend highlighted in the prior month’s report of a significant fall in listings pointing to a turning point in the market continues to be the view of the market in May.
As compared to the April level of 10,453 new listings, May saw even less listings even allowing for the traditional winter slow down of new listings just 9,993 new listings were added in the month.
Comparing seasonal movements over the past 2 years – May as compared to April; this year represented a fall of 4.6%. The same period for 2008 showed a fall of 11%, and in 2007 a rise of 5%.
Inventory
This fall in new listings has led to the available stock of properties on the market falling to an inventory level of just 35 weeks, this compares to an April level of 42 weeks and a level of 45 weeks recorded in May 2008.
This level of 35 weeks compares to an average inventory over the past two and a half years of 38 weeks, during which time the level has moved within a range with a low of 20 weeks and a peak of 52 weeks.
Regional Summary – Asking price expectations
Measured against the prior 3 months average amongst the 19 regions across the country, 7 reported price declines with 7 reporting price increases – the balance of 5 regions showed little appreciable change.
The highest price growth was seen in the Wairarapa with a 10% increase to $286,898; this actually puts the region’s asking price back to December levels following low asking prices in recent months. Biggest fall in asking price was seen in the Coromandel with 7.4% decline, this region also saw a rise in new listings. Potentially more realistic pricing of new listings may be contributing to this fall as vendors try and compete with a large inventory of homes for sale.
Regional Summary – listings
Only 2 regions showed an increase in new listings as compared to 13 regions showing falls in listings of more than 20% as compared to May 2008.
Marlborough, Southland and Gisborne all have seen new listings for the month of May fall by around 50% as compared to a year ago.
In overall terms the comparison against the same month last year is beginning to show some slowing of the major variances seen in the April report primarily as the prior period begins to reflect the changed sentiment seen in 2008 when sales had consistently fallen for over 4 months and vendors began to show hesitancy in adding their property to an already overcrowded marketplace.
Regional Summary – inventory
The overall inventory has fallen for 3 straight months since the peak in February of this year with 57 weeks of inventory base on the rate of sale – a total of 62,522 property listings. In May the inventory of property listing totaled 56,114 which at the current rate of sale equates to just 35 weeks of inventory.
Across the country the inventory levels vary widely with the Coromandel region highest with the equivalent of 182 weeks (over 3 years of listings). Equally Northland, Central Otago Lakes and West Coast have over 100 weeks (2 years).
At the other extreme the areas with the lowest levels of inventory are Wellington with 16 weeks, Taranaki – 20 weeks, with Nelson and Otago with 23 weeks apiece.
Areas representing the tightest market in respect of current inventory as compared to long term averages would be Nelson, Wellington and Canterbury. Equally those areas with a proportionally high level of inventory would include Southland, West Coast, Gisborne and Northland.
Lifestyle
New listings for lifestyle properties totaled 914 in May as compared to 906 in April. As measured against May 2008 the level of listings is down 15%.
The asking price for lifestyle properties in May was $577,501 this represents a 0.8% fall as compared to April and a 4% fall as compared to the most recent 3 month average.
Apartments
Listings for apartments shows a 17% increase as compared to April with 473 new listings in May as compared to 405 in April. As measured against May last year shows a 25% fall. A total of 304 new listings of apartments in Auckland came onto the market in May representing a 22% increase as compared to April and a 16% fall as compared to May 2008.
The asking price for apartments in May was $396,363 representing a 6% rise from April. As compared to the prior 3 month average the May asking price shows a marginal increase of just 0.5%. The asking price for Auckland apartments in May was $352,620 this was a 12% increase as compared to April which itself was a surprisingly low asking price level. When compared to the most recent 3 month average May showed a 4.8% increase.
The full report can be downloaded here (1MB pdf document). The next NZ Property Report will be published on Wednesday 1st July at 10am.
What a great report – certainly puts the current state of the market in perspective.
In the area where I operate (Pt Chevalier, Westmere and Grey Lynn) available stock is at very low levels. In the case of Pt Chevalier as of today there are only 13 homes left for sale and given that the average number of sales per month over the last few years has been 15 we don’t even have one months stock left amongst all agencies.
Most of the homes marketed by our office so far in 2009 have sold fast, over 70% of them with multiple offers presented and as a result we have many cashed up buyers who have missed out and are seriously looking to buy.
In Pt Chevalier right now there are less homes on the market than at any point in the last 6 years yet we currently have 33% more buyers registered than we had in 2008 – 775 currently registered in our system.
On our website at http://www.sellrealty.co.nz we only have two homes left and they both received multiple offers and are now under contract.
Prices achieved had been down about 15% from the peak late last year but that has recently recovered to around 9% below peak so there has been a definite turnaround since February with most of our homes selling within $15,000 of asking price.
If we could get 20 new listings we could sell the whole lot within a month!
As ever Ross really appreciate your local perspective. As is always said real estate is a local business and as relevant national statistics are the true picture needs to be seen at a local level. Let’s hope you find some vendors keen to meet the demand in the market.
There always seems to be a perception that winter is not a good time to sell when in fact there are the same number of buyers and with less competition from other sellers you are actually likely to get a faster better result and that is especially so right now in 2009.
Winter will not stop our current pool of buyers making good offers and another reason they are keen to do it now rather than later is that interest rates are on the rise and they are worried they will go higher.
Here is my take on how this relates to those on the street looking to buy in this market. It certainly is getting busy on the open home circuit!
I also echo Ross’s sentiment for my area of focus in North Wellington. Fresh listings are very hard to come by, agents are again fighting over stock, and buyers are visiting in droves.
As an example, a 1940’s three bedroom house in Johnsonville listed last Wednesday (http://www.realestate.co.nz/1072093) has attracted dozens of visitors over the last week (including more than 20 people visiting the Sunday open home in the rain, hail and snow!) with the result that there are at least three offers waiting to be presented this time tomorrow with another couple contemplating entering the fray.
Why are the listings drying up?
Andrew I also find the circumstances rather unique, never seen anything like it in my 25 years in the business – this is my take on why listings have dried up:
a) A huge number of owner occupiers took advantage of refixing at rates around 5.9% for either 3 or 5 years fixed and decided to stay put when they otherwise might have sold and traded up. Even if they paid a break fee in the majority of cases they are better off especially if they broke late last year when the fees were lower, floated until February then fixed. I know of numerous people who did this.
These same people are unlikely to sell now as they will lose the advantage of the low rate ie today for a 3 year fixed rate you might pay 6.75% so although they may be able to transfer that rate to their next home it will not be possible if they sell and then can’t find an alternative home and have to go renting – this is a big worry for many.
b) Rental investors who were stretched and may or may not have had their rental homes on the market last year were also happy to refinance at lower rates and keep the properties. In many cases this has resulted in repayments 30% lower than they were paying and they may no longer be topping up the mortgage and are happy with their current situation.
c) Many people will be feeling that “we can ride this out” ie they may feel that we are half way through the slump phase and we can hold out for another three or four years for a recovery.
d) Others who are highly geared have mortgage repayment insurance and banks are offering mortgage holidays if you lose your job so people seem fairly relaxed. Many people believe that the worst is past us so no need to panic sell.
e) With the lower price bracket there is a perception that due to 20% bank deposit requirement that it is a waste of time putting your house on the market as the majority of your target buyers cannot get the money together so no point trying to sell. That is certainly a feeling you would get from all the media circus around this issue.
f) On the other hand there is a perception that the market is so terrible, I won’t get what I want, I would rather stay put etc, etc so those people may hit the market as they begin to notice that the supply/demand balance has moved back into the sellers favour.
g) I know for a fact that there are many potential sellers who have now decided that they will wait until Spring/Summer then sell their homes. (This could prove to be a mistake if the market is flooded with new listings and by then interest rates may have increased well above rates available today and maybe unemployment will increase)
h) There are also a group of owners who simply can’t sell as their house is worth less than the mortgage compounded by break fees if they do sell. If they can make their repayments they would rather ride it out and steer well clear of the bank.
i) Many people use their homes as security for their small business – banks have got a lot tougher so if you no longer have the security of the real estate for your business lending the bank may feel uncomfortable and want either all or a large portion of your business lending repaid.
j)There are those who had good equity in their family home who may have purchased 2, 3 or more “rental investments” 2 or 3 years ago 100% financed and these are now worth a lot less than they paid for them. If they sell them they would be left with a loan against their own family home which they never had 2 or 3 years ago and if their own home ends up with LVR of more than 80% borrowed the bank may demand a top up. All a bit scary!
So that leaves people who really want to buy having to compete with other purchasers for limited stock and wanting to do it while they can still get a pretty good interest rate. This demand has for the moment stabilised prices – or at least that’s they way it appears.
If you had a loan fixed at 9% a year ago of say $400,000 it was costing you $36,000 per year. if the term expired late last year and you floated until February then refixed at 6% your mortgage interest bill would be 24,000 or 33% less than it was so you either have more disposable income or you can pay an additional $1,000 per month principal off the loan.
Anyone else got any thoughts on this?
Read more here
http://www.unconditional.co.nz/ptchev/2009/05/19/pt-chevalier-very-serious-shortage-of-homes-for-sale/
and here
http://www.unconditional.co.nz/ptchev/2009/06/02/point-chevalier-real-estate-the-first-5-months-of-2009/
Ross
An excellent analysis – it is very interesting to hear that in your experience such scenarios have not been seen before. Really appreciate your hands-on experience and openness to share your insight.
Thanks Ross. As you rightly point out the supply side of the market seems to be made up of people that cant sell (points h and J) and people that wont sell (points b,c,d,f,g) due to the fact that they are not stressed enough or the price would be too low. It seems to me that current market activity is made up of people willing to buy and sell in the same market (point A types), investors capitalising on the stressed seller and the odd first home buyer who managed to save a deposit over the last number of years enjoying the improvement in affordability. As you have pointed out, this combination of activity has seemed to stabilised prices. Had the Reserve Bank not scuttled interest rates so aggressively when they did, i would imagine the situation would be far different with a flood of stressed sellers flooding the market.
Are there statistics on the breakdown of sales by invester / owner occupier / first home buyer to see where the current market demand is coming from?
Apparently i am living in a ‘recession free oasis’!
There is no way that we would have seen a “recovery” if mortgage interest rates had stayed above 8% so low rates have been a key factor in the resurgence. Can’t see it lasting if interest rates continue to climb.
Not aware of any databse that collates sales info by buyer type.
My view although based on a limited geographic area is that most of the activity is taking place with people who were already in the market now using this time to upgrade.
There was a surge of investor buyer activity when mortgage rates were under 6% and term investment rates under 4% but that appears to have died off.
There are also many first home buyers being assisted by parents into a first home and parents buying as investments and the kids live there.
Not everywhere has a shortage – for example in Levin Mason Parker states on his blogsite at http://www.unconditional.co.nz/noaddedfluff/ that there are 422 listings online. In Levin there were only 25 sales in April so that’s quite a different picture to the inner suburbs of Auckland where there is a serious shortage or Pt Chevalier where there is less than 6 weeks supply left for sale.
Real estate is local – what’s happening in a City will be quite different to a provincial town.
I think the real stress is not in the family home areas but the holiday home markets.
Sort of a veriation of (j).
Drove throught Taupo and Mangawhai over the long weekend and the streets are covered in for sale signs
Very interesting articles — so if you were a cash buyer would you put the money in the bank and wait until Spring? Thats what I’m doing..
Ross, would you ever auction a home in your local market due to the extreme demand and supply imbalances? Or can you achieve the best price by other means?