The Auckland Quarterly Property Review - Q1 2019

by Alistair Helm in


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The Auckland property market is exhibiting the classic symptoms of a market uncertain as to its future direction.

The latest 3 months to March, point to a flat market with no perceptible rise in sales activity, with prices edging down. However I believe there is cause to believe that signs of a recovery in the property market may be emerging. The lead-indicator of the clearance rate points to this possible improvement as this year progresses.

Examining the three key data points of sales volume, sales price and clearance rate in more detail should help to explain this summation.


VOLUME SALES

In the first 3 months of 2019 there were a total of just over 5,000 property sales across the Auckland region, this compares to just over 6,000 for the same period last year, as has been the story for the past 2 years as property sales have slowed. What is more significant is the fact that in relative terms the total sales in Auckland in the past year is actually half the actual sales volumes of the mid 90’s and the mid 2000’s. Let me repeat that statistic. Half the sales volumes. The ‘relative terms’ to which I refer is sales per head of population.

In 1996 the population in Auckland was just breaking through the the one million mark, by 2004 it was growing by over 2,000 a month as it reached 1,240,000. Today with that growth rate accelerating, the population of the country’s biggest city stands at 1,657,000.

Back in 1996, the annual sales of property stood at 31,927, this equated to 32 property sales per 1,000 population. By 2004 sales for the 12 months to March of that year was a staggering 40,170, equating to 32.2 property sales per 1,000 population. Now compare that with the latest 12 months to March of this year. With sales of just 24,301 it represents just 14.5 property sales per 1,000 population. Half the relative sales per head of population than those two other periods. This really puts todays Auckland property market into context compared to prior periods.

Screen Shot 2019-04-29 at 6.15.43 AM.png

In relative terms less transactions in Auckland today than at anytime since the darkest days of the GFC - the result of what?

Certainly market price is a key factor, back in 1996 median sales price was $230,000 and by in 2004 it was $320,000 whereas today it is $850,000. Certainly the appetite from investors has diminished from what would have been the hay-days of 1996 and 2004; and certainly access to funds from banks is far tighter today than in those prior periods, although perversely the interest rates on mortgages has never been lower.

There is simply no getting away from it, property sales in Auckland are not breaking any records any time soon. As the chart shows the variance in monthly sales vs prior year has been consistently negative since November 2015, with the brief exception of the early months of 2017 - all of those comparative gains are now being reversed.

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PRICING

As sales volumes remain flat, so do the sales price. The latest month of March saw a median sale price for Auckland of $850,000. This is $2,000 down on March last year and $30,000 down on March 2017, but is $15,000 up on March 3 years ago - property sales prices in Auckland are flat and losing value to what is benign inflation.

Screen Shot 2019-04-29 at 6.31.48 AM.png


CLEARANCE RATE

With neither sales volumes nor sale prices showing anything of positive outlook, it’s left to what I judge is a key lead-indicator of the market to point to the future, and the rest of 2019 and into next year. The clearance rate, that being the sales volumes as a percentage of new listings tracked on a 12 month moving basis which is now showing a consistent and healthy increase.

If the clearance rate is edging up then a greater percentage of properties brought onto the market are selling and as the historic chart below shows there is a correlation between clearance rate of sale price. A natural and predictable correlation. If properties are selling faster than the rate of new listings and inventory of new listings is declining, so it speaks to greater demand from buyers which in turn feeds into price inflation; although the lag can be many months.

Screen Shot 2019-05-05 at 1.17.31 PM.png

The clearance rate in Auckland in the past few months has edged towards 60% which is certainly a healthier rate than this time last year when the rate was bumping around the bottom of the cycle at 53%, certainly a long way from the frothy market levels of 2015 at over 75%, but much healthier than the GFC days of 2008 at just 33%.

As ever property cycles are notoriously hard to predict and are really best viewed through the rear view mirror. Later this year it will be clearer as to whether there has been a recovery beginning or simply another erratic bouncing around with no clear cyclical upturn on the horizon.


Quarterly Property Review for NZ outside of Auckland - Q1 2019

by Alistair Helm in


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Whilst Auckland continues to experience a flat property market, the rest of NZ keeps trucking on, although there are signs that the party may now be coming to a close. It’s been a very long party. As the rest of the country has tried to keep up with the Auckland market, the rest of New Zealand has managed to keep going long after Auckland ran out of energy and exited the party.

It’s quite staggering that the median price of properties sold outside of Auckland has been rising consistently for over 7 years straight, that’s 90 consecutive months of price increase. It was back in November 2011 that prices started to edge upward after the GFC and the likelihood that this run will head into its 9th straight year is high.


SALES VOLUME

The last 3 months has seen sales volumes across the country outside of Auckland fall by 6% as compared to the same time last year at just under 13,000 sales. On an annual moving total basis the picture as displayed in the chart below shows that sales volumes are coming off the boil at 54,539.

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Total sales for the month of March at 4,932 was down 11% as compared to March last year and this represents the 4th consecutive month with declining sales volumes compared to prior year. The chart below tracks the cycles of these sales volume movements over the past 20 years. The regularity of the pendulum-like rise and falls is certainly evident. The likely trend in the coming months is for sales volumes to continue to weaken.

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PRICING

The latest median price of property sales outside of Auckland continues to edge ever closer to the half a million dollar mark. Interestingly this half million dollar mark is fair more likely to be broken some time soon, and certainly well ahead of the much anticipated million dollar mark expected to be broken by Auckland two or three years ago but stubbornly failed up until now. In March the medan sale price for properties outside of Auckland was $491,000 up 7% as compared to the same month last year.

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As noted earlier this year-on-year rise follows a consistent increase unbroken over the past 92 months since way back in August 2011 when the median sale price for property outside of Auckland stood at $304,500. That unbroken run has seen median price rise 61%.

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CLEARANCE RATE

Just as the latest quarterly report for the Auckland market is showing some signs of recovery when examining the clearance rate, so it is with the rest of the country, except that the trend is the opposite.

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The first 3 months of 2019 has seen the clearance rate (the lead-indicator of sales to listings ratio) begin to fall, having peaked in November last year at 73%. As the correlation between clearance rate and median price movement is fairly close, it is likely that the future increases in median price for property sales outside of Auckland will continue to slow. However given the strength and consistency of the price increases over this extended period it is not likely that actual median prices will fall anytime soon based on historical trend analysis.


THE AUCKLAND QUARTERLY PROPERTY REVIEW - Q4 2018

by Alistair Helm in


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The Auckland market continues to mark time, showing little in the way of a clear direction. It is as if the market were an indecisive person caught at the fork in the road.

“Do I show signs of heightened activity and enjoy sales volume growth and price appreciation, or do I see retrenchment with lacklustre or declining sales and with it a weakening of sales prices?”

Neither future path is yet to be definitively taken. However analysing the core metrics of the market as I love to do, helps to identify the future direction of the market. These metrics are the sales volume trend, the median sales price trend and the clearance rate.


VOLUME SALES

The final quarter of 2018 saw one of the most erratic changes in sales volume for many years. As a total, sales for the months of October, November and December totalled 5,417 properties. This was a 3% rise as compared with the same quarter of last year and totally reflective of the normal market we have seen over the past year as the market has continued somewhat flat. However within that 3 month period the sales as compared to prior year were all over the place.

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October sales were up 19%, November up 12% and the December collapsed with a 21% fall. Yet in total for the quarter - a 3% rise. Why?

I believe what we witnessed was entirely the result of the deadline for the introduction of the changes to the law restricting overseas buyers which came into force on the 22nd October. The fact is any property purchase under contract (be it a conditional or unconditional contract) made legal before this deadline was except from the changes and I firmly believe what we witnessed was a surge in buying activity that brought forward property purchases to meet the deadline. These sales show up in both October and November due to the extent of conditional agreements going unconditional in November and recorded in that month’s stats, as well as unconditional sales in October.

This short term hiccup though does not materially impact the underlying trend in sales volumes as is seen in the moving annual chart below. Sales volumes for property sales across Auckland remain flat. The latest total for the calendar year 2018 was 21,850 down 35% from the most recent peak of the market back in October 2015.

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PRICING

Just as sales volumes have remained flat for close on 15 months, so the median sale price have continued to simply mark time. The median sale price for the final month of the year was $862,000. A year ago it was $860,000. Two years ago it was $855,000. You have to reach back into 2015 and early 2016 to witness the last time median sale prices in Auckland was seen rising significantly. Interestingly way back in August 2016 the median sale price was $854,000, that is 27 months ago, such has been the flattening of Auckland sale prices.

Auckland median sale price trend 2000 to 2018.png

When seen as year-on-year variance it becomes ever clearer as to the fact that Auckland median sales price has experienced an unprecedented period of stagnation. This though as many people will likely comment is not a bad thing. Stability of house sale prices drives over time greater confidence in the market. Initially from buyers who feel less panicked into the fear of ‘missing the market’ as it rises; and then subsequently from sellers who feel more confident as to what the market value of their property is and therefore more confident to move.

Auckland median sale price variance 200 to 2018.png

CLEARANCE RATE

The final of the 3 core metrics which I like to look to to get a rounded and truly objective view of the state of the market is the clearance rate. The measure of the transactional ‘health of the market’. It uses the comparison of sales to new listings ratio as a measure of overall activity in the market.

For the past 3 months, the final quarter of 2018 the clearance rate has bounced back. The last quarterly report for 2018 Q3 highlighted a noticeable and sudden weakening in the market. Halting a trend that looked to be showing all the characteristic signs of recovery. Well, the last 3 months of 2018 seem to have put that weakness out of its mind, and set the trend back on the predictable path which is towards a strengthening in the market.

Auckland property clearance rate 2008 to 2018.png

The current clearance rate is edging back towards 60% . Still a far cry from the 70+% levels seen back in around 2015 but as ever with property markets there is typically a cyclical movement. The current projection is surely heading towards an upward trend in the clearance rate which then tends to be the lead indicator that (as shown by the historical context in the chart above tracking the past 10 years) may well see a resulting inflationary impact on prices.


QUARTERLY PROPERTY REVIEW FOR NZ OUTSIDE OF AUCKLAND - Q4 2018

by Alistair Helm in


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Whilst the Auckland property market marks time in uncertainty as to next cyclical movement, the market outside of Auckland for the rest of NZ shrugs off this perspective and continues to show healthy development. Sales volumes are steady and slowing edging up, albeit from a decline through 2017. Median sales prices are strong and edging up at a rate ahead of core inflation, and the key clearance rate remains high - all indicative of an active property market.


SALES VOLUME

Overall sales of properties across NZ outside of Auckland remains flat. The latest 12 month total of 53,142 is almost in line with the annual total in August of 2017 some 16 months ago. In that time annual sales have hardly moved hovering around the 52,000 to 53,000 level. It is clear though from the chart below that whilst sales volumes have been flat they are at a historical level that is significantly higher than most of the past decade.

NZ property sales exc Auckland 2008 to 2018

PRICING

Unlike the situation in Auckland where sales prices have remained stagnant for well over 2 years, the median sales price for the rest of NZ outside of Auckland continues to rise. December median sale price of $480,000 represented the 89th consecutive month of price appreciation. It was way back in August 2011 that the median sale price for property sales outside of Auckland last saw a negative year-on-year movement, that is over 7 years ago.

Yr on Yr variance in median sale price for property sales in NZ outside of Auckland 2008 to 2018

Back in August 2011 the median sale price was $304,500 for all sales outside of Auckland. Over that 7 year period sale prices have risen 58%. However this increase is behind the increase seen in Auckland over the same 7 year period which is 88% rising from $458,000 to $862,000.

Median sale price for property outside of Auckland 2008 to 2018

CLEARANCE RATE

The activity levels in the property market in areas of NZ outside of Auckland remain strong. The clearance rate of sales to listings ratio remains above 70% which as shown in the chart is high and edging upward, at the same time the trend of median sale prices remains steady with a c.7% year on year increase. These collection of core metrics demonstrate that outside of Auckland (which is undoubtedly experiencing a stagnant market) the rest of NZ moves along at a healthy pace with no easing in demand as property sales remain active and price pressure remains.

Clearance rate analysis of property sales to listings for NZ exc Auckland 2008 to 2018



Quarterly Property Review for NZ outside of Auckland - Q3 2018

by Alistair Helm in


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The Auckland market is now firmly a buyers-market and the near term outlook is for a continued weakness well into 2019 based on the latest clearance rate and stagnant sales volume. However looking beyond the City of Sails reveals a property market for the rest of the country still experiencing healthy activity, with prices edging upwards, although that rate of increase is slowing.


SALES VOLUME

The latest 12 month total of property sales outside of Auckland up to and including September of this year was 52,998. This represents a small fall of less than 100 as compared to this time last year. The market volumes are certainly plateauing and have fallen by 15% from the peak of sales in August of 2016.


PRICING

The median price of property sales continue to edge upward with a 9% year-on-year increase in September taking the median to $466,730. Whilst the past year has seen strong year-on-year increases of between 6 and 8 percent, the actual median prices have been fairly flat indicating that the next 12 months will likely see percentage increases slip to virtually nothing.


CLEARANCE RATE

The latest analysis of the clearance rate (which tracks the moving annual total of property sales against the same time period of new listings indicating the core activity in the market) shows a slight weakness in the September data in many ways similar to the weakness witnessed in a more significant manner across the Auckland market. As highlighted in the analysis of the Auckland market the opposing forces of supply, finance and broader economic indicators are leading to a weaker market and maybe these self same factors are beginning to impact the market outside of the City of Sails. It is a fact that the rest of NZ tends to follow the Auckland market and this quarters analysis would seem to support this hypothesis based on sales volumes, median price and clearance rate. The next few months heading to the year-end will provide that evidence when we come to report on the Q4 update in January.








The Auckland Quarterly Property Review - Q3 2018

by Alistair Helm in


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The Auckland market is in the midst of one of its most interesting phases witnessed in the past couple of decades. Typically we see Auckland experience a see-saw market - alternating between a booming market or a retreating market.

For fully the past 11 months, the market, coming off a steady 2 year decline in sales has stubbornly, resolutely and somewhat belligerently refused to succumb to further decline; however and this is the unusual part, the market has not in anyway shown any signs of a resurgence, yet.


VOLUME SALES

Analysing sales volumes is critical in understanding the market and more importantly in identifying the future direction of the market. Simply put, rising sales tend to foretell a future rise in prices and equally the converse is true - this is somewhat simplistic but helpful as a rule of thumb.

So what to make of the market we have experienced since this time last year. A year ago the 12 month total of sales for Auckland stood at 22,781, it was the 23rd consecutive month in which sales volumes on a 12 month rolling basis had fallen. From a peak in October 2015 when the total was 34,060, volumes had fallen by 33%. However for the past 11 months sales volumes as seen on a 12 month rolling basis have not changed. Not changed; as in remained within a range of just less than 1,000. Here are the raw numbers and you can see how flat the sales have been.

October 2017: 22,278

November 2017: 21,788

December 2017: 21,608

January 2018: 21,614

February 2018: 21,619

March 2018: 21,350

April 2018: 21,435

May 2018: 21,554

June 2018: 21,561

July 2018: 21,661

August 2018: 21,645

September 2018: 21,615

This is an astonishing series of numbers - the mean variance from the median of 21,614 is just 34, representing 0.2%.

This unusual plateau in sales volumes is clearly seen in the chart below which shows the past 10 years, with the inset view of the full data since 1993. Simply put there has not been in the past 25 years a period when such a prolonged plateau has occurred.

Such an unusual trend calls for an explanation. Here are my thoughts around why, and also what may be the future trend.

The period from the peak in 2005 until November of last year was the classic end of ‘the Golden Summer’ - prices had reached a level that was becoming unsustainable and coupled with tighter lending restrictions, investors particularly, parred back activity in the market as yields became unsustainably low given the likelihood of low capital growth.

There can also be no ignoring the fact that the period of the past 11 months paralleled the duration of the new government, although I would judge this more correlation than causation. However the new government has placed housing atop the agenda, added to which the publicity of KiwiBuild has potentially enthused may first home buyers, but at the same time frustrated others as it clearly demonstrated just how long it takes to activate the supply side of the market.

Ignoring the political influence, the most likely explanation is that a plateau in sales volumes is the outcome of strongly opposing forces - cheaper finance, matched to limited supply of properties coming onto the market, added to which the tail end of strong price appreciation and a strong economy, all key factors continuing to drive demand. Facing off against this is tighter lending criteria in terms of LVR but also tighter debt servicing requirements from lenders, added to which have been growing fears of global economic uncertainty and that same consistent issue of limited supply of properties coming onto the market, in this instance working against the market.

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PRICING

So whilst sales volumes have plateaued, what has been the resultant movement in median price? It would come as no surprise to see that median prices have also plateaued. Proving the premise that rising volumes foretell rising prices as does the opposite. Equally a ‘standoff’ in sales trends to lead to a ‘standoff’ in price movement. Over 2 years ago Auckland median sales price topped $850,000 and since then prices have barely moved. For 6 of the past 9 months year-on-year variances have been down, albeit by no more than 2%.

The one variable that has not been analysed in the foregoing charts is new listings. Adding this into the mix provides what I consider the most robust lead indicator of the property market, that being clearance rate.


CLEARANCE RATE

In the last quarterly report published in August, with the data including July, I was confidently foretelling of a developing upswing in clearance rate and judging that the comments made at the time by the Reserve Bank Governor, that prices may be as likely to rise as to fall could be accurate on the upside. Well a further few months of data are now showing that prices may in fact be more likely to fall in Auckland as to rise. For the much heralded recovery in clearance rate has had a significant set back as shown in the chart below.

The fact of the market is that a stagnant level of sales is facing off against rising level of new listings which have lead to a drop off in the clearance rate which is significant and a setback to the heralded recovery. The rise in inventory is not to be unexpected at this time of year, however, remember this clearance rate is based on 12 months of moving total data of both new listings and sales and therefore excludes seasonal influence and more accurately therefore reflects true underlying market trends.

It therefore looks more likely that the Auckland property market is going to continue to face strong head winds in the coming months with a potential slide in prices as a buyers-market takes hold and sellers learn to adjust expectation in order to win that sale and in so doing allow themselves to become tough negotiators with their buyer-hat on.


Quarterly Property Review for NZ outside of Auckland - Q2 2018

by Alistair Helm in


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As I have commented recently, I've made a conscious decision to cease to produce data analysis on what is seen as the "NZ Property Market" - the fact is this aggregation is really no longer as relevant, given how distinct the property market is between Auckland the rest of the country. So this is the first of what will be a quarterly report for the aggregation of property data for areas outside of Auckland, complementing the separate report for the Auckland market.

The brief overview of the property market outside of Auckland based on data up to and including July, shows a relatively healthy market with good clearance rate, sales volumes fairly static at a strong level, with prices continuing to rise with mid single digit year-on-year growth.


Volume Sales

From a volume sales perspective - annualised volumes are steady at around 52,000, a level that has been consistent for around 9 months. The past 4 months has seen a very slight increase but not enough to yet call it a upturn. This level is down 16% from the last peak of sales which was close to 2 years ago, far less than the fall seen in the Auckland market which was 37% from peak.

NZ property sales excluding Auckland 10 yrs to Jul 2018

When seen as annual variances in monthly sales, the picture shows modest rises in sales comparing each month with the same month in prior year with barely a perceptible trend up or down.

Property sales for NZ exc Auckland 2000 to Jul 2018 variance yr on yr

Pricing

In terms of pricing the median sales price over the the past quarter has marked time at the $455,000 level. Back in March the median price peaked at $460,000 and subsequently it has bounced around that level but not as yet exceeded it. The chart below tracks the year-on-year variance of monthly median sale prices over the past two decades, showing as it does how consistent property price appreciation has been over this extended period.

NZ median sale price property excluding Auckland 2000 to Jul 2018

Clearance Rate

I am very keen on this relatively new metric of the clearance rate as a tracking tool for the trends in the market. It is measured as the rate of sales against the rate of new listings - think of it as the available stock in a warehouse - if your clearance rate is below 50% then you will suffer the pressure of overstock and will need to adjust prices down to clear inventory. The opposite with a clearance rate of over 50% indicates strong demand which can create price inflation.

As you will see from the chart below the clearance rate for NZ properties outside of Auckland is edging up, as it has been for most of this year so far. The point about clearance rate is that it is all about relative market activity so whilst sales are almost static this is matched to static new listings, within this market dynamic, the properties being listed are being sold at an ever increasing rate; and as the chart shows clearance rate tracks to a pretty close correlation to price inflation. It is also worth comparing the clearance rate outside of Auckland with that in Auckland. Auckland clearance rate is currently just 55% as compared to outside of Auckland at 68%.

Clearance rate of NZ property excluding Auckland tracked with median price movement 2008 to Jul 2018
 


I have added a modified version of the clearance chart below prompted by a comment from John - he was questioning the uneven scale range between price movement and clearance rate. I have used the 50% clearance rate as the midpoint and then adjusted the upper level to +25 percentage points as per the price movement and equally -15 percentage points to the lower level.

NZ_Property_Report_monthly_data.png

The Auckland Quarterly Property Review - Q2 2018

by Alistair Helm in


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A bit later than planned here is the quarterly report. I've included the latest July property data to produce this analysis of the Auckland property market. As I have commented recently I've made a conscious decision to cease to produce data analysis on what is seen as the "NZ Property Market". The fact is this aggregation for all NZ property data is no longer as relevant, given how distinct the property market is between Auckland the rest of the country. That is why I will produce a quarterly report on Auckland and another one on New Zealand outside of Auckland.

The picture of the Auckland property market now with the benefit of a further 4 months data since the last report is showing a market in the doldrums. A situation that is actually quite uncommon from a historical perspective as compared to the rollercoaster that typifies the Auckland market.


Volume Sales

From a volume sales perspective - annualised volumes have remained at the level of 21,500 for virtually all of the past 9 months with just the vaguest sense of an increase in the past 2 months. Remember this is annualised sales so there is no seasonal factor to explain any movement. This level of sales remains at levels reminiscent of the post GFC period of a decade ago, far from the peak activity of 3 years ago. The decline since that time is significant 37% less sales. 

REINZ_CORE_MONTHLY_DATA_xls__-__Compatibility_Mode.png

When seen as annual variances in monthly sales the same visualisation of the market in the doldrums is reinforced. The typical cycles of the Auckland property market usually see a seesaw rise and fall, whereas the recent period has the appearance of a market just marking time; deciding if the next move will be up or down, almost mirroring the recent proclamation of the Reserve Bank Governor.

Q_A__Will_house_prices_really_slump_.png
REINZ_CORE_MONTHLY_DATA_xls__-__Compatibility_Mode.png

Pricing

In terms of pricing the median sales price over the the past quarter has similarly marked time at the $850,000 level, although July saw this slip down to $835,000. It is now fully 18 months since the Auckland market topped out at $905,000 - subsequent months have seen prices bump around between a low of $820,000 and a high of $880,000. The chart below tracks the year-on-year variance of median sale prices over the past two decades.

Auckland median price movements 2000 to 2018

Clearance Rate

I am very keen on this relatively new metric of the clearance rate as a tracking tool for the trends in the market. It is measured as the rate of sales against the rate of new listings - think of it as the available stock in a warehouse - if your clearance rate is below 50% then you will suffer the pressure of overstock and will need to adjust prices down to clear inventory. The opposite with a clearance rate of over 50% indicates strong demand which can trigger price inflation.

As you will see from the chart below the clearance rate for Auckland is edging up, as it has been for most of this year so far. The point about clearance rate is that it is all about relative market activity so whilst sales are almost static this is matched to very low new listings, within this market behaviour the property being listed is being sold at an ever increasing rate and as the chart shows clearance rate tracks to a pretty close correlation to price inflation. 

NZ_Property_Report_monthly_data.png

So just maybe the Reserve Bank Governor was righter than he thought when he stated that there was as much chance that property prices would rise as they would fall!

 


The NZ quarterly property review - Q1 2018

by Alistair Helm in ,


Quarterly Review logo.png

The first quarter of 2018 is now behind us and with it the final month of the financial year. It is interesting as an aside that this last month of the financial year, through no direct result of any promotion or marketing by this industry towards the consumer, typically ends up being one of the biggest sales months of the year. Sure it's influenced by seasonal considerations but their is no denying the fact that incentives within the industry do bring more properties 'across the line' into March than would be the case without these incentives.

With that as a backdrop it is a good stage of the year to examine the state of the market from the available published data from both Realestate.co.nz and REINZ.

I always like to start any property market analysis with sales volumes as this for me is the most important driver. The Median Sales price whilst the headline of all property news articles is largely an outcome of the market, the result of the pressures of the market; but the number of transactions indicates the real health of the market.

Across the whole of the country, sales volumes have been weak now for what is close on 2 years. As the chart below shows, the market year-on-year variance dropped into negative territory nearly 2 years ago in July 2016. 

In the middle of last year after 12 months of declining sales we started to see the rate of decline ease off, and as we reached Christmas, year-on-year sales were pretty close to level with prior year. This was followed in January and February of this new year by very slight rises year-on-year, but then March seems to have hit us and we are back year-on-year to a 9% decline. This is why I made the comment earlier. I had expected that March would have been stronger than it was. For whilst comparing the same influence on the market last year, 9% decline after what has been very low sales volumes is surprising and has that feel of a 'late spring frost' arresting the early new spring growth.

Yet despite this 'snap of frost', it is my view that we are still likely to see sales volumes rising through 2018 to end well ahead of 2017. The most recent 12 month total sales volume to March was exactly 73,000 as reported by REINZ. This level of sales is almost identical to the low point of the last cycle in October 2014 before the upswing in sales that lasted for the next 18 month as sales rose to a 12 month moving total of 94,000.

When examining property sales over a long term perspective, a key influence that has to be factored into the analysis is the core underlying growth in the number of properties across the country. Twenty five years ago back in 1992 when REINZ started collecting and publishing real estate statistics there were just under 1.2 million properties across the country and in that year total sales amounted to 63,000. At the end of 2017 there were an estimated 1.63m properties, an increase of over 435,000 properties, up 36%, whilst total sales in the 2017 calendar year was 73,557, an increase of less than half that of the growth of number of properties. Property sales have gone through around 8 cycles in those 25 years reaching a all time high of 121,777 in April 2004 and an all time low of 53,463 in February 2009.

These highs and lows of the market have represented, a proportion of sales to actual dwellings with a high of 8.4% and a low of 3.5%. Across the past 25 years the average has been 5.7%. Over just the past 10 years the average has been around lower at 4.7% with the current level of the 12 months to March 2018 at 4.5%, certainly below the 10 year average and the longer term average. This further reinforces the view that the market is lower than would be expected.

Complementing the sales component of the market assessment, I am keen to examine the latest data of the clearance rate. This metric I introduced back in January when assessing the year-end data for 2017. It is the measure of sales as a % of listings applied to the latest 12 month moving total.

The picture for clearance rate which as I demonstrated back in January tends to track pretty consistently to median price movement over the years. Looking at the most recent 3 months the clearance rate appears to have arrested its decline and similarly the annual median price movement has stablised at around 5% allowing for the monthly volatility.

Taking all these data points into consideration it looks to me that we have reached the bottom of a cycle of property sales. Given the scale of the current residential dwellings at a level of 1.63m, a sales level of 70,000 is a low point and over a forthcoming period of what maybe 2 to 3 years we will likely see sales rise up again to an expected level of around 90,000. This assumption is predicated on the belief that a sufficient flow of new listings will come onto the market to facilitate this lift in sales, for without this, the latent demand will be unsatisfied and that has the potential to stall the market.