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. 

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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.

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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. 

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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!