If you want to have a bit of fun at the next quiz night then ask someone what they think will be the likely median sales price in Auckland in July or August of this year as well as the likely number of sales? You don’t need to be a expert in such matters as the likely answer will be $850,000 in the case of the median sales price and for sales volumes look no further than the July and August sales figures from last year (1,777 and 1,837).
The fact is the Auckland property market is stuck in that ever repetitive syndrome known as Groundhog day. Whilst just last month I thought I could detect some signs of an upturn in the clearance rate as a lead indicator of market sentiment and activity levels, the hard frosts of winter seems to have killed of those spring buds, leaving us back waking up again on another Groundhog day!
Total property sales in June across Auckland were 1,819. Last year the June sales were 1,879 and back in June 2017 they were 1,822. You get the picture, the Auckland property market is stagnant. Just for fun let’s remember the time back in June 2003 when in that same 30 day period we saw total sales of 3,441, that is 1,622 more sales than this past month. Back in 2003 we had no commentary of a housing shortage and the city’s population was around 1.2 million. Today it’s home to more than 1.6 million people. We are simply not transacting as often as 16 years ago. Investor activity has scaled back massively and the banks are way more circumspect about lending, even though interest rates are so low.
This stagnation of property sales can best be seen in this chart of the moving annual sales for the past 10 years.
The current level of sales over the past 12 months at 21,069 is down 38% as compared to the last peak of sales back in 2015. The stagnation began in December 2017 (18 months ago) when annual sales hit 21,854 and stopped falling. These past 18 months has seen sales hover at or around 21,000 with barely a movement although the past 9 months has seen some further weakening as that total looks to be heading below 21,000 sales per year.
It will come as no surprise that just as sales volumes have stagnated over the past 18 months so have median sales price, although the stagnation has been going on now for over 3 years. It was in August 2016 that the median sales price across the Auckland region topped $854,000 and for the next 3 years prices have hovered around that level with never a clear, consistent and sustained trend to see a rise or a fall.
Not since the GFC has the Auckland market sustained such a prolonged period of nil or negative price movement. In fact in April, May and June the median sales price has been identical to the same month last year - no price movement year-on-year for 3 consecutive months.
This is the metric that I believe best highlights the emerging leading indicator as to the health of the property market. Last month I judged that we were seeing a brighter indication of future activity in the Auckland market as clearance rates were ticking up. It appears as ever that that forecast was premature as the past 3 months has seen that trend curtailed.
The current clearance rate of 54% for June is not rising and after a false-start earlier in the year, it seems as though the strength in the market is not sustainable, and it is unlikely we will see much change as we head into the second half of the year. As can be seen from the 11 years of this data set, clearance rate is not a seasonal factor in the market it is the underlying metric that looks to examine the proportion of new listings-to-sales ratio as a true measure of supply and demand balance in the market.