The activity in the NZ property market is largely the Auckland factor

by Alistair Helm in


Transient

I guess in someway we all intuitively knew it. We knew that the sense of another property market bubble was merely the frothy demand in the biggest city in the country.

Well now we have the data to back it up – to give us the picture that supports the assertion that the general picture of the property market outside of Auckland is a lot less frothy than we find in the metropolis of Auckland.

Let’s look at the facts. Auckland is home to 1.38 million people, that’s just over 31% of the population. It has around 480,000 dwellings which represent around 29% of all the dwellings in the country.

Now compare that to the fact that for 18 months Auckland property sales has represented more than 35% of the national sales and each month for the past 18 months, Auckland sales have represented more and more of the national sales right up until last month when on a rolling 12 month basis it hit 37% of all sales.

This chart below showcases this trend

The red line which represents the 12 month moving average share, has been growing steadily since the low point in mid 2008 when it was down at just 30%. At that time the representation of Auckland of the total national volume sales reflecting a truer representation of the city’s share of the national total of people and houses.

Looked at on the basis of comparative sales volumes on a rolling 12 month basis shows in the chart below how Auckland property sales actually fell at a faster rate through the collapse of the property market from 2007 through to 2009, however since the start of the recovery in mid 2010 in Auckland (and 6 months later in the rest of the country), Auckland sales have outpaced the rest of the country.

For clarity the chart above shows from the red line (read off the right hand axis) property sales in Auckland; whilst the grey line (read off the left hand axis) shows the total for the rest of NZ in total excluding Auckland.

What is very interesting is that if you look closely at the most recent data points of the past 2 months the total property sales for the rest of the country excluding Auckland is beginning to fall off.

This trend of a plateauing level of sales outside of Auckland is more conspicuously highlighted in this final chart which, tracks the rate of growth (or decline) for property sales in Auckland and the rest of the country over the past 5 years. That rate of growth year-on-year for the rest of the country is heading down indicating the plateauing of sales for regions outside of the powerhouse of Auckland that is driving the overall market.