Slower property sales not affecting all sectors equally

The property sales stats released this week by REINZ showed a total of 6,356 sales for February 2008, representing 3,000 less homes sold in the month as compared to February last year. The figures for the rolling 12 month total show a 17% decline from a high of 104,675 in the 12 months to Feb 07 to just 86,720 for the latest 12 months.

However as ever behind the numbers lurk very interesting trends. The key one that caught my eye was the segmentation of sales by price band. The fact is the top end of the market is not suffering as acutely as the sub $400,000 sector. This was interestingly intimated in a Herald on Sunday article today which focused on some high end developments which show continuing demand.

The sales stats by price has only been reported by REINZ since mid 2005 and shows the price bands of (i) less than $400k (ii) $400k to $600k (iii) $600k to $1m (iv) $1m+.

The fact is that whilst there has been a 17% decline in overall sales across the country comparing a rolling 12 month period, the high end sector has continued to enjoy growth. Each sector tells an interesting story.

$1million dollar plus properties: Over the past 12 months this sector has seen a 10% growth with 2,725 properties sold. Whilst representing just 3.1% of all properties this sector has grown from less than 2% in 2005. Over the course of the the past 12 months an average of 227 properties over $1m have been sold each month in NZ .

$600,00 to $1million properties: Over the past 12 months this sector has seen the fastest growth at 11% with 9,735 properties sold. This sector of the market represented 8% of sales a year ago and today represents 11% of sales.

$400,000 to $600,000 properties: These properties are above the current median price of $337,500, however their sales represent nearly a quarter of all properties sold in NZ in the past 12 months, and have shown a volume fall in sales of 5%, less than that of the total market.

Property below $400,000: This sector is the largest in the market, in the past 12 months 53,357 properties of this value were sold – a significant fall of 25% in sales volume compared to 12 months earlier. It can clearly been seen that this sector representing slightly less than 2/3rds of the market is were the real weakness is.

The data provided in the REINZ stats does not go as far as to identify median prices per price band (maybe this could be of value to industry observers). However one means of looking for a surrogate for such information is to look at average sale price vs. median price. Clearly the median price currently at $337,500 is showing early signs of falling this year, however the average price of all property sold in NZ as reported by REINZ is actually holding reasonably well, with a figure of $415,744 for the month of February. The graph below shows the tracking of median vs average for a 3 month moving average for the past 2 years. The upper blue line is average sale price, whilst the lower red line shows median prices.

It would be safe to say that the gap is not closing, adding weight to the view that the weakness in the NZ property market is primarily at the bottom end.