Thinking of objecting to your revised Capital Value?

by Alistair Helm in


This week the story that just won't disappear from the media headlines has been the new Auckland CV's (Capital Valuations). Described by Auckland Council as the most likely selling price had the property (including buildings and all other improvements on the land, excluding chattels) been sold on 1 July 2014”.

Now the fact is Auckland is not alone in being exposed to a whole new set of CV's - there are 11 councils that have or will have released rating revaluations in November alone, however the scale of property price inflation in the Auckland region over the past 3 years is what is drawing so much media attention.

Accessing this new valuation for Aucklanders has been a headache, and in many ways the archaic approach taken by their digital team to my mind reflects a somewhat archaic approach to the whole process, however that is another story and a separate article!

I have decided to object to the new Capital Value ascribed to our house and in doing so I though I would share my thinking and the process as a public service to you as readers. Our circumstances as ever, may well be very different to other people's circumstances, however I think there is value in sharing the principles of the objection. We will have to wait until mid December to see if our objection has been confirmed or rejected. Remember you have to object before the 19th December.

Out circumstances are that we purchased our property in the past 3 years since the last revaluation in 2011. This latest revaluation published this week has increased the value of our property by 14% since the 2011 revaluation. We live in Devonport. However the price we paid a year ago was actually lower than the 2011 valuation. This has resulted in our new Capital Valuation which of course is based on the Council's July 2014 notional valuation being 19% higher than the price we paid. I propose to object on the grounds that the value of our property has not increased by 19% in less than a year. It is in my mind irrelevant that the 3 year increase is 14%, what is relevant is recent sale of the property as clear benchmark to notional property value.

I therefore have objected on the basis that the new CV should be based on the last sale price adjusted for the general increase in property valuations of property in the local suburb over that time period.

The QV website has a suburb specific page within which is a chart which tracks the Median E-Valuer for the suburb going back over the past 5 years. Simply type in the name of your suburb on the home page of the website instead of your address. By hovering your mouse on a date on the chart line you can read off the median E-Valuer price for a specific month. 

In our case I selected September 2013 at $1,121,700 (we purchased the property in August so the following month figure is the most accurate) and then the July 2014 figure at $1,215,100. I therefore submit to the Auckland Council that our property has appreciated by 8.3% since we purchased the property in August last year. So applying this 8.3% increase to the purchase price lead correctly in my opinion to the view that the “most likely selling price had the property (including buildings and all other improvements on the land, excluding chattels) been sold on 1 July 2014” would be (sale price * 1.083) = submitted revised CV.

The process of objection requires you to complete a form online or on paper and by snail mail which can be downloaded from the same page of the Council website. The process requires the completion of the details for the property and then the "Contended Value" (your challenged view of the new CV). This needs to be broken down into the Land Value and the Value of Improvements. I chose to use the Land Value in the new assessment and adjust the value of improvements.

As a guide I used this wording which may be of help:


The re-valuation of our property at XY Street, Devonport has defined a Capital Value of $A . This assessment is as defined by the Council is the “most likely selling price had the property (including buildings and all other improvements on the land, excluding chattels) been sold on 1 July 2014”.

I contend that this re-valuation is inaccurate based on the property having been sold on the <sale date> for a price of $B. 

The most appropriate method of establishing the “most likely selling price had the property (including buildings and all other improvements on the land, excluding chattels) been sold on 1 July 2014”  would be to evaluate the comparable valuation of all Devonport properties in September 2013 (based on sales in August) with that in July 2014, 10 months later. 

Based on the published data from QV the median valuation in Devonport as reported at 1st September 2013 was $1,121,700 and as at 1st July 2014 it was $1,215,100. This represents an appreciation of value of 8.3% between the sale date of this property and the re-valuation date of 1st July, a period of 10 months.

On this basis the re-valuation of XY Street should be Capital Value of $C. 

Source: http://www.qv.co.nz/suburb/area-profile/devonport-auckland/2896


I should stress that this is my approach to addresses what I think is an inaccurate re-valuation of our property based on our circumstances. I recommend everyone makes an evaluation based on their own circumstances. I have no idea whether my appeal will be upheld and our Capital Value adjusted  or if we fail. I do however believe that this matter is worthy of time and consideration. I do not naturally put myself out there as an advisory or expert. I  simply want to highlight this subject and the approach I have chosen to take.

I believe this time around as compared to 2011 there are likely to be more objections lodged simply because the inflation in property prices and therefore CV's is far more significant and the knock-on effect on rates is likely to be just as significant.

To answer what might be a nagging question you might have as to why I don't just celebrate this somewhat elevated Capital Value? Simply put I have never held much sway by the CV of a property as I have expressed in prior articles. The CV will ultimately have no bearing on the  true value of our property; that will be only judged by a future purchasers, whereas Auckland Council want to levy their rates based on a formula which I judge in our situation is inaccurate.

 

 


Auckland property market shows little sign of life

by Alistair Helm in


The first of the monthly property data is in and it does not bode well for those thinking / hoping that the election in September had in some way held back the market and that the traditional Spring surge would arrive albeit late in October.

Sales as reported by Barfoot & Thompson were down on last month and last year. Now normally sales volumes in October are around 10% higher than sales than September, this year sales for Barfoot & Thompson in Auckland fell 2% compared to September and as measured against last October sales were down 22%.

October was the 9th consecutive month to show year-on-year declines in sales volumes. Measured on a 12 month moving average sales in Auckland for Barfoot & Thompson has fallen from a peak 12 month total of 13,232 in October last year to a total in the 12 months to date of 11,699.

Barfoot & Thompson is a fairly accurate bell weather for the national statistics which have seen the same trend of moving annual total peak a year ago and continue to decline through this year, resulting in what is looking to be a 2014 calendar year total sales of just 70,000 down from 80,000 in 2013.

 

Sales below $400,000

Delving into the richer analysis of property sales by price range shows a continuing trend of fewer sales in the lower price segment of the market in Auckland. Barfoot & Thompson October sales in the $400,000 and below segment amounted 126 of the 939 total sales in the month, that represents just 13% of all sales.

A year ago that segment represented 22% of sales and back in 2010 38%.


These numbers reflect the combined impact that as the median price creeps ever higher in Auckland (Barfoot &Thompson Oct '14 $655,000) there are simply less properties to buy and therefore to sell below $400,000 added to which the LVR impact has hit this segment. The $400,000 and below segment is fast disappearing from the Auckland property landscape.




The Auckland property market is cooling

by Alistair Helm in , , ,


The latest batch of property statistics provide what I think is a vital support to the view that the Auckland property market is cooling. 

A year ago the Auckland market was powering on at a pace. In its September 2013 monthly housing market update Barfoot & Thompson reported year-on-year sales up 14%, with the median sales price up 14%. At the same time the inventory of property for sale on the market as measured by the Realestate.co.nz NZ Property Report slumped to just 11.5 weeks down from 17 weeks a year earlier .

Examining each of these key metrics of the property market a year later we will see just how much as changed in the past year and supports the view in my opinion that the heat has certainly come out of the Auckland market.

 

Property Sales

Sales are the leading indicator of property demand and as the chart below shows the trend is down.

Monthly sales as reported by Barfoot & Thompson who representing close to 40% of all Auckland sales provide a robust view of the market. Their data shows sales in the 9 months so far of 2014 below the 2013 level for 8 of those 9 months, with the differential if anything growing wider in the past 3 months with September down 13% as compared to a year ago.

 

Listings

New listings coming onto the market provide a view as to the confidence in the market amongst sellers and as the chart below shows the level of new listings is down in all but 2 of the months of 2014.

From Realestate.co.nz data total listings across the Auckland region in the first 9 months of 2014 amount to a total of 30,449 as compared to the same 9 months of 2013 at 32,484 down 6%.


Inventory

With sales in the first 9 months of 2014 down 12% and the level of new listings down 6% it would come as no surprise to see that the inventory of property for sale has been rising in 2014 as the chart below demonstrates. 

This metric of inventory of property on the market uses the current rate of sales to estimate the time it would take in theory to sell all the property on the market at the end of September. It certainly shows a significant improvement in the weeks of inventory. In case you were wondering if the actual number of listings was higher this year than last year the chart below will answer that easily. It may not be as significant a rise in inventory but there are more properties for sale at the end of September this year than last and of course fewer are selling.

Sales Price

Sales price tends to lag sales volumes which tend to reflect demand and supply as measured by inventory and new listings. The chart below based on Barfoot & Thompson median sales price indexed to the January sales price in each of the past 3 years shows a strong start to this year but since April the median price has hardly moved with the September level barely up on August.

So in summary. Sales are down, new listings are not flowing onto the market as sellers lack confidence, this is lessening any pressure in the market from buyers who are subdued and as a consequence the pressure of constrained inventory has lessened and this has signalled a plateauing of property sales price. In short - the heat has come out of the Auckland property market. 


The regional view of Auckland's property market

by Alistair Helm in ,


I hope I can be forgiven for focussing repeatedly on the Auckland property market. I know there are other regions of the country and they have quite unique property markets impacted by factors far removed form those of Auckland. The fact is though, that Auckland is the largest region, accounting for around 36% of all sales nationally added to which the data for Auckland is just that bit more comprehensive.

Up until now the analysis I have undertaken of the Auckland market has been restricted to seeing it as one market, however the data is available to analyse the region across what are still recognised as the historical boundaries of North Shore, Waitakere, Auckland City and Manukau. So I have crunched the numbers to paint a clearer picture of what has been going on across these four regions over the past 6 years. 

As a reference point I undertook some evaluation of the multiplicity of property data on the Auckland market recently and determined that the key data was the REINZ Stratified price index and the QV valuation index. However when it comes to the regional data there is no stratified data published by REINZ so I have used the median price data calculated on a 12 month moving average. This method provides a clearer view of trends.

But before looking at the price trends, let's start with volume sales. On average 2,100 sales a month are completed across the Auckland region with Auckland City representing the largest share at 39%.

In terms of sales trends over the past 6 years I have indexed sales to the 12 months moving average to January 2008 at 100. 

As can be seen the most active region has been the North Shore which rebounded first and most significantly from the property crash and has gone on to lead sales growth over the past 6 years. Having said that it was also the first region to peak in September last year and is now closing in on the same sales levels as 6 years ago.

The Waitakere region has seen a very strong growth in sales over the past 2 years although sales peaked in December last year and now have slipped below the base of January 2008.

The performance of the Manukau region is the weakest of the 4 regions suffering the largest fall off through 2008 and then again in 2010 and has not attained the level of sales achieved through the 12 months to January 2008. 

In terms of price appreciation I have used the same method I use for the Property Dashboard which is to calculate the variance between the current 12 months moving average median price and the prior 12 months moving average median price.

The chart below tracks the 6 years from January 2008.

The most significant region is Waitakere which has witnessed a recent marked rise in property prices starting in December 2012 at 5% year-on-year growth and rose very steeply for 12 months to hit 20% year-on-year growth before tailing off in the past 6 months.

The other regions have equally seen price appreciation rises of up to 15% over the past 2 years although all have seen a tailing off of growth. As with sales performance the Manukau region continues to lag the other regions of Auckland.

 


Auckland property prices - so much data!

by Alistair Helm in


There are now 6 separate sets of property price measures for the Auckland market. All of which are seeking to provide an insight into the trend of price across our largest city. This barrage of statistics published in our daily newspaper is enough to confuse at best, and paralyse at worst, the most ardent of property buyer / seller / investor and even agents!

Here was how the first 2 weeks of July appeared in the Herald:

2 July: Barfoot & Thompson - Auckland's biggest real estate agency has this morning released sales data for June, showing a slight decline in sales volumes but average sale prices up $11,088 in the 30 days - which equates to a daily price rise of $369.60.

7 July: QVQV said the Auckland region as a whole had increased 2.7 per cent over the past three months and 12.3 per cent year on year

14 July: Realestate.co.nzThe country's largest house sales website showed Auckland's asking price hit a new all-time record of $732,240 last month.

14 July: REINZ - The stratified median housing price index showed that in Auckland, prices rose 1.6 per cent in the month

Fair to say that an average person could walk away from reading these reports from the first 2 weeks of the month with a sense of confusion as to which set of data to trust and belief. Sure they all point to rising prices and some speak to hitting a peak, but the margin of increase varies considerably as does the indication of a trend.

Charting these separate measures produces a chart that is worthy of some analysis and commentary.

First let me explain the format of the chart. All of the price data has been indexed to a base of January 2008 = 100 and all monthly data has been computed on a 12 month moving average which makes it easier to view in terms of trends and also excludes the seasonality that impacts all property stats.

As you can see there is a fairly significant disparity between the highest index in June (REINZ median price at 136 as against the lowest being the Realestate.co.nz Asking price at 126. Equally as you will see the path of the index through the property crash in 2008/9 saw some of the measures drop by 10% (QV) whilst others barely dipped into negative (REINZ median price).

Examining each of these as to their composition provides a method of evaluating the value and relevancy of each.

1. Realestate.co.nz Asking Price

This measure is actually the odd-one-out within this group as it measures the advertised price or advertised search price of property coming onto the market, whereas the other sets of data analyse the outcome of sales. A noticeable aspect of this measure is 'consumer sentiment' which tends to result in over estimated values in down-turns and under estimated values in up-turns.

This may seem counter-intuitive as you would expect to see over estimation of value - the 'over-inflated expectation of sellers' in bubbly markets as we have been in in Auckland. The reality though is that whilst the vendors may genuinely have inflated expectation, their agents tend to price for search online at more conservative levels as we have seen recently.

So tracking the path of the index of Realestate.co.nz Asking Price shows it currently tracking at the lowest of the 6 indexes over the past 6 years.

 

2. Barfoot & Thompson Average Sales Price / Median Sales Price

The data from Barfoot & Thompson whilst not reflective of the whole of Auckland is more timely than the others and with close to 40% share of the Auckland market and representation in all suburbs, does afford it credibility.

The average sale price though is an imperfect measure of property prices as it is open to skew if the composition of sales in a month changes significantly. For this reason Barfoot & Thompson has started publishing a median price which is a more statistically valid measure of property prices. It is though interesting to see that the median price has crept ahead of the average price over the past 2 years. This situation would tend to occur when sales volumes of extreme high value properties slows in proportion  to other segments of the market. This though would seem to be contrary to the data which shows $2m+ properties have doubled in each of the past 2 years, whilst sales of sub$400k priced properties have fallen off. More likely is a situation where the majority of sales in the $500,000 to $1,000,000 bracket have edged up significantly driving that median from $450,000 to $625,000 in the space of just over 3 years.

 

3. REINZ Median Sales Price / Stratified Median Sales Price

The data collated by the Real Estate Institute is the most comprehensive and timely data in that it aggregates sales records from its members as licensed real estate agents who account for around 90% of all transactions each year. The data is of unconditional contracts and thereby is recorded closer to the date of transaction than settlements registered at LINZ and utilised by QV for their data. 

The REINZ median sales price has been reported monthly since 1992 and is one of the most complete data sets for the whole country. However as presented in this chart, the index is the highest of all the data sets presenting what from outside would seem to be an optimistic view of property prices as it hardly reported a dip in sales price in 2008/9. 

The reason that the median price in Auckland as reported by REINZ is so out of kilter from the other metrics is exactly the reason why REINZ implemented the Stratified Median Sales Price in 2010. The Stratified price index makes adjustments within the market to ensure the composition of suburb sales is representative when the market tends to skew towards certain suburbs as has been the case in Auckland over this 7 year period. For this reason the Stratified price index provides a much more accurate representation of true price movements and the trend on the chart certainly bears this out.

 

4. QV

The data from QV is in many ways the most accurate, yet it does suffer somewhat from lagging the other data sets, requiring as it does the data from property settlements and title changes to be registered at LINZ. Something that largely happens online nowadays and thereby removes some process time delays.

The data is not reported as a median or stratified median but is analysed to assess the actual sales price of each property sold against the estimated property valuation that QV has on record for every property in NZ. So their system and the resulting valuation index is a closer evaluation of the trend in core property values and takes into account the improvements and developments that are undertaken on properties that do materially effect the value of a property which are not accounted for in any of the other data sets and can cause skewing of data. This factor has been a driving component of the Auckland property market for many years as the pace of gentrification of the inner suburbs has seen extensive renovations drive enormous price movements


One of the benefits though of these numerous data sets of property prices in Auckland is the ability to see the variance between these data sets on the chart and also to provide the ability to visually see the the set or sets of data that are in someways the midpoint and therefore the most likely to be the most accurate. From my reading of the data this would be the QV valuation data and the REINZ Stratified median price. Both of these data sets benefits from computational analysis by qualified and trusted professionals. In the case of the REINZ Stratified price with the assistance and guidance of the Reserve Bank and in the case of QV the professional teams of valuers and the resources and skills of Core Logic.

What I find very interesting is that it would appear that the Barfoot & Thompson median price data tracks very accurately to the trend of these other two. It may still be a bit too early to tell for sure, but the indication is clear. This could well be the result that Barfoot & Thompson sales are a true representative sample of Auckland property without extreme outliers.




Barfoot & Thompson post a record year of sales for 2013

by Alistair Helm in ,


B&T image small 2.png

The largest real estate company in Auckland, Barfoot & Thompson published their most recent sales report for the last month of December capping off what has been a stellar year for the company.

Whilst December witnessed a slowing of sales with just 817 properties sold down from the 920 sold in the December last year the company accounted for sales of 13,123 properties in the past 12 months a growth of 12% amounting to an extra 1,413 sales compared to 2012. Set against a total of 31,782 properties sold in Auckland in the past year this gives Barfoot & Thompson a market share of 41% - 2 of every 5 homes sold in Auckland was sold by them in the past year.

The key statistic though is the shear scale of transaction value - $8.5 billion of property sales undertaken by the company, an increase of 24% on the prior year. The company currently is selling  properties at the rate of over 6 properties every hour of the working week and billing services at the rate of around $100,000 every hour of the working week.

Barfoot & Thompson annual sales and value 2013.png

The company has benefited from the significant resurgence of the property market in Auckland selling more than twice as many properties in 2013 than in 2008 at the depth of the property collapse. in dollar terms the value of sales have risen faster especially over the past 3 years with value of sales up 68% in just 2 years.

The stellar rise in sales volumes though does show signs of slowing as analysis of the past few months shows. On a seasonally adjusted basis December sales were down 6% following a 12% seasonally adjusted sales volume fall in November. As cited last month part of the reason for the fall could well be put down to the impact on the first time buyer segment as a result of the Reserve Bank restrictions on high LVR lending.

Barfoot & Thompson seasonally adjusted sales 2013.png

The latest analysis of the sales volume by price segment of Barfoot & Thompson sales data shows that this bottom segment - sub $400k which is very much a target market for first time buyers remains a declining proportion of Barfoot &Thompson’s portfolio of sales. In November it represented 17% - a month later it had fallen to 16%. A year ago this segment accounted for nearly 1 in 4 of all sales, such has been the slide in activity in this segment of the market.

Barfoot & Thompson sales sub $400k Dec 2013.png

This movement between price segments has been a trend witnessed across all property sales over the past 4 years as the market demands of property in the Auckland region have accelerated prices and fuelled higher priced segments. 

In the past year alone Barfoot & Thompson has sold over 1,500 properties at a price of over $1,000,000 , this compares to 500 just 3 years ago and in the $2,000,000 and above segment sales in 2013 totalled 176 properties compared to just 52, 3 years ago - that is going from selling 1 per week to selling 3 per week.

Three years ago the largest segment of sales representing 2 in every 5 properties sold by Barfoot & Thompson were at a price of less than $400,000; whereas today that largest segment is represented by property priced between $600,000 and $1 million which represents 1 in 3 of all sales, whereas property below $400,000 has slipped to less than 1 in 4 of all sales.

Barfoot & Thompson sales by price range 2010 2013.png

Clearly the Auckland market continues to show strong demand and appreciating prices - in December Barfoot and Thompson reported that the average price for all property sold in the month has exceeded $700,000 for the first time ever. That growth is not likely to be arrested any time soon given the signals of economic growth and vibrancy of the Auckland economy in the coming year. 


Auckland house prices continue their relentless rise

by Alistair Helm in


In the space of just 5 years the Auckland property market has risen by 52%. Back in November 2008 the Stratified median price in Auckland as measured by the Real Estate Institute was $435,700. The November sales data for 2013 shows that median price is now $664,100. Five years, a total increase of $228,400, that's more than the average annual earnings in Auckland over that period!

 

Auckland Stratified Nov 13.png

As ever peaks and troughs in property markets are only ever able to be judged in hindsight, but buying a property in November 2008 now seems like a smart move, although at the time there would be many calling it a risky move given the trend of declining prices at the time.

Future Trends

The question often asked in relation to the prediction of property prices is how best to judge future prices based on past trends. This is, as often stated, not an exact science. However with over 30 years of data from the Real Estate Institute it is certainly worth exploring.

For comparisons to be made from one time period to the next requires a degree of normalising; which when it comes to prices, whether that be for property or households goods means adjusting for the impact of inflation. The general rise in prices as a function of inflation is far different from specific price rises caused by pressure of supply or demand, as is often the case with property.

Using the Reserve Bank Inflation Calculator and applying it to the monthly data of Auckland Stratified Property Prices produces this chart below which shows a somewhat different picture as to price movement for the past 6 years.

Auckland CPI adjusted recent years.png

 

The rise of 52% in today's dollars equates to a 37.8% increase when adjusted for inflation - still a significant rise over 5 years, however as can be seen almost all of that rise occurred in the past 2 years, as before that property prices adjusted for inflation hardly rose at all.

This steep rise of the past 2 years is pretty significant. From the starting point of October 2011 - 26 months ago the CPI adjusted Auckland median house price has risen by over 29%!

I thought it would be interesting to compare this rate of increase with the last time we experienced a very active period of house price growth back in 2002. That point was the start of what became a relentless rise which over a 5 year period saw property prices rise close to 70% in real terms, only ending with the start of the Global Financial Crisis.

 

Auckland CPI adjusted since 92.png

Taking just the comparable 26 month periods which commenced these periods of steep growth the period of December 2001 to Jan 2004 was a 27.2% rise. So by this measure we are current witnessing a faster rate of property price appreciation than the period cited by many as a period of rampant property inflation that we would never see the likes of again!

The question then has to be asked as to the likelihood of the property price appreciation continuing for another 3 years from now based on the parallel of the past 26 months of the 2001 run in property prices?

As ever that is a very hard call to make. The factors driving the rise in 2003/4 were very strong global economic activity backed by a strategy of targeted low interest rates as the US Federal Reserve sought to ensure the US economy staved off the recession and impacts of 9/11. Technology was driving prices lower and the powerhouse growth of China and the rest of  BRIC countries.

That was 2003/4, as to 2012/13 the world is emerging, still slowly from the GFC, the US economy and the British economy are picking up steam and the forecast for the NZ economy is for very strong growth, some say growth not seen since the 1970's. Add to this the migration expectations as they are likely to be felt more strongly in Auckland and then overlay the ever present issues about new construction of residential property and you have the seeds of strong factors for continuing property demand. Finally the cost of finance is targeted to rise, certainly a dampener on property prices, but when and by how much is debatable. In relative terms a 1% or 2% increase in mortgage rates will be significant when the current rate of 6%, but finance for property at 7.5% or 8% is in the long term still considered manageable.

In the short term the trend of property prices will likely be a slowing of growth. That is to say that when property prices take off as they have over the past 2 years the rate of growth has to slow as rises of 15% or put to 20% are unsustainable -  a 10% or below rate of annual growth is more likely - still seeing prices rise.

The chart below tracks the first 36 months of the property rises from December 2001 as measured as year on year growth and then tracks the 26 months of the 2011 to date run. An similarity of price growth trend - but very likely to tail off in the next 12 months. 

 

Auckland monthly growth comparison Nov 13.png

 

 


Auctions are getting out of control in Auckland

by Alistair Helm in


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The latest data from the May property market as reported by REINZ states that of all sales in Auckland; 38% “went under the hammer” – up from 28% a year ago, outside of Auckland auctions are also on the rise albeit off a smaller base up from 7% of all sales a year ago to 9% in May.

The comments within the real estate industry as expressed by Harcourts Northern regional manager support these rises saying “Sellers are wising up on the benefits of auctions – higher prices with less fuss”! She went on to say “sales by auctions had shorter and more thorough marketing campaigns that limited ‘stress periods’ for vendors

Sounds perfect – less stress, less fuss, higher prices!

The fact is, not only are auctions becoming more the norm, they are also being compressed into a shorter marketing period, which in my view is dumb and somewhat illogical.

Take the data for today (13th June) – in Auckland 185 new properties came onto the market. A pretty normal day, although Thursday’s tend to be busier (a hangover from the days when this is when the property magazines used to publish the weekly selection). Of these 185 properties; 98 (53%) were auctions, with 28% being marketed with a price and the balance for sale ‘By Negotiation’.

More than half of all new listings today are being marketed by the auction method of sale.

However when analysing the auction date for all of the 98 auctions, what I found even more alarming is that nearly two thirds of those new auction listings have an auction date of 3 week or less from today. A staggering 1 in 12 have an auction date before the end of June, with one providing only 9 working days between listing and auction.

 

Akl auction periods are being shortened.png

Making the process of selling your house a rushed and truncated process is sure to do one thing – spook buyers.

Buyers who are already pulling their hair out trying to bid on houses with so little time to do undertake due diligence. As to the claim made by Harcourts Northern regional manager of ‘higher prices’. This is a claim that can never be truly substantiated, there is never a ‘control’ benchmark for houses; they are all unique in form, location and circumstances; measuring against CV is misleading as that is proven to be a poor benchmark.

So real estate agents who are paid a commission by sellers and who have the sole interests of sellers at heart, are constantly pushing auctions. Nowadays as the supply constraints grow larger these agents are choosing to recommend shortening the selling period. In my view this can only drive more potential bidders / buyers from the market, rather than as they hope, bring more buyers together to bid up the price.

Just imagine this scenario played out by an Auckland couple who are in the market ready to buy.

This young couple have been looking at buying a house for over 6 months, they constantly hear tales of super-heated property market and having already lost out on an auction or two already, stress levels are high! They get an email alert today for a property which meets their criteria. They review and decide to view at the weekend, they can’t do Saturday as they are away, so they attend on Sunday. They like the property a lot, but the auction is on the 3rd July, just 13 working days away. Now normally they would go back to view again the property on the second weekend before deciding if they are keen, but they realize the urgency. So they talk to their bank next Tuesday who show support for the price they think they can bid to, however the bank tells they will need a registered valuation.
The couple pause – they don’t want to spend another $600 for a valuation – after all they have only seen the property for 12 minutes so far!
They decide to wait until a second viewing at the weekend which goes well; so on Monday 24th June they decide to get a valuation. The valuer though says he cannot fit them in until Friday the 28th (just 3 working days from the auction). The next question is should they do a building inspection? – left with just 6 working days they decide to forgoe this, although they do request a LIM through their lawyer.
Days go by and the weekend of the 29th / 30th lets them see the property a third time, but with no real idea of the condition or what the valuer says he will value it at. By Monday pulling their hair out and loosing sleep, the valuer delivers the valuation placing the property at a value just below the level they had hoped based on their loan to value ratio. However all is not lost. One of the parents has said that if they needed they would lend them $30,000 to help if they needed it. They call up on Monday night to literally plead for help, however the access to the money is not available due to the money being on a term deposit. Whilst they could have bid at the auction and as they find out later with that $30,000 they would have been able to buy the property; they just gave up - totally frustrated on Wednesday night, instead of celebrating their new home, they drown their sorrows, vowing to give up on buying a house - they have a guts full!
(Note this is a scenario of a couple who are renting and don’t have a place to sell, just imagine the compounding issues if they had that property to sell, scraping together the cash deposit and then the panic about selling their own house).

So another prospective buyer fails to present themselves to the seller, unbeknownst to the agent. How many buyers are being squeezed out of the market by such circumstances? Equally how many buyers are buying without due diligence? This could be a dangerous long-term issue especially if there tuen out to be structural issues with the house.

Agents may well like short notice auctions. They may well get a sale and thereby service the vendor in a shorter period (this is clearly their idea of reducing 'stress') it certainly meets their needs as they get paid sooner with less work. Let's not forget that an auction requires less work by the selling agent around the process of facilitation and negotiation, the auctioneer actually does the negotiation at the auction.

Finally what about that claim about auctions provide 'more thorough marketing campaigns'? Auction marketing is no different to any other form of property marketing, except for the date of sale and the word ‘auction’ in the marketing material and of course the cost of the auctioneer. Properties all get loaded onto Trade Me and Realestate.co.nz in the same way and promoted online the same way regardless of the chosen form of sale. Arguably and perversely the shorter auction period is further reducing the relevancy of print advertising, as lead-times for print are measured in days rather than the seconds it takes to get a property online.

Auctions are undoubtedly the favoured method of sale by agents, this they detail to vendors citing the data of 38% of all Auckland sales being by auction, but beware of these number as sometimes what is reported as an auction was not a true auction sale. However the vendors should be more wary; they actually end up undertaking a sub-optimal marketing of their property by going for an auction or worse a short notice auction. They may actually end up eliminating buyers and thereby reduce demand for their house.

The underlying problem is that this situation in today's market not become transparent as due tot he current demand as long as they get just 2 bidders at the auction the property may well sell; but the question has to be asked, was money left on the table?

In my view marketing a property needs to be focused process undertaken with consideration. It should be undertaken with an appropriate period of time. Sufficient enough to allow prospective buyers to satisfy themselves of the property, undertake due diligence and approach the sale in a clear-headed manner. That period is probably between 3 and 4 weeks. I think a fixed date of sale is appropriate in fact I think there should almost be a sell-by-date. I favour tenders as a method of sale - it achieves the same outcome as an auction without all the hype, razzmatazz and undue very public pressure!  

Whilst on this topic it is relevant to reference the analysis undertaken by highly regarded ecomomists and authors of Freakonomics Stephen Dubner and Steven Levitt who, when analysing the sales of agents homes in the US (as the video below shows) and found that agents marketed their homes for longer; 10 days longer than their clients' homes, and they ended up getting a better price. Makes you think!

 


Auckland inventory levels plummet

by Alistair Helm in ,


iStock_000006291799XSmall.jpg

It may be hard to believe but a year ago there were 11,272 properties on the market for sale across Auckland. At that time an average of 2,000 properties a month were sold across the region. Leap back to the current time - May 2103 and there are now just 7,557 properties on the market across Auckland, a drop of nearly a third in just 12 months. Over the same period sales have risen over 20% on a moving average to around 2,500 per month.

Auckland is very nearly running out of properties to sell.

Based on the seasonally adjusted sales matched to available inventory if no new property came onto the market, the Auckland property market would stall, with the very last property being sold on 23rd August, just 12 weeks away!

Now this is a hypothetical calculation but for context look at the Auckland property market over the past 5 years as seen in the chart below tracking sales on a 12 month moving average and the representation of inventory using the Property Dashboard from that time.

Akl MA sales & inventory dashboard May 2013.png

Five years ago in April 2008 you couldn’t give property away! – there were 18,266 properties on the market, which is virtually two and a half times as many as there are today. That total at the time represented over 60 weeks of equivalent sales. From 60 weeks to 12 weeks in 5 years, how the property market has shown its cyclical nature!

Whilst this is the current picture, the real question looking forward is – when will things improve?

By the nature of cycles they do self-correct and tend to overcompensate, so at some stage the Auckland market will move out of being a sellers’ market. However don’t wait for this flush of new building (estimated at 30,000+ over 3 years) to ease the problem, the issues are more immediate, new builds take 12 to 18 months before they appear in inventory in a best case situation.

The picture tracking new listings and sales looks pretty dire as the chart below shows – sales are growing at a year-on-year rate of 20% whilst listings are falling on a comparable year-on-year rate of over 25% and actually getting worse!

 

Microsoft Excel.png

This decline in listings is actually the result of the low inventory in what is becoming in my opinion a downward spiral. Property owners, ready to sell, know full well now that property sells quickly in this sellers' market, yet at the same time they also know that such a tight market with rising prices means that they are being held back from selling because they fear not being able to buy.

This problem is also potentially being exacerbated by the focus on auctions as the predominant  method of sale. Whilst auctions might well favours sellers, they do not suit buyers who themselves need to sell their house in order to complete the desire transaction.These buyer/sellers' therefore are cautious about making unconditional offers and finding the necessary 10% deposit when there own house is not sold, or even on the market.

How to unblock this log-jam? 

This situation could be alleviated by agents moving away from auction as the preferred method of sale. Not a likely scenario as it is their own favoured method. What is more likely to happen is that at some point, and in my view we have reached this point within the inner ring of Auckland suburbs, auctions will start to falter, resulting on property moving to ‘sale by negotiation’ which then suits conditional offers thereby allowing those buyers to then put their house on the market and create some liquidity in the market.

What we have witnessed in the Auckland property market over the past 18 months to 2 years has been a kind of tidal wave of property activity and increasing prices which started in the top suburbs, the inner ring of city suburbs and is moving out to the outer suburbs now. This tidal wave heightens demand and sales volumes which sucks up inventory driving prices, before we see this situation self-correcting as property sales stall and inventory rebalancing.

Data for this analysis is supplied from the Realestate.co.nz NZ Property Report


Quarterly trend for supply and demand in the NZ property market

by Alistair Helm in


The core analysis of the property market as with any market is the balance between supply and demand. In the case of property this relates to sales and listings - the balance represented by sellers and buyers.

Each month the relevant data is published, in the case of sales by the Real Estate Institute and for listings by Realestate.co.nz.

In the past I have liked to aggregate these two sets of data to see the trend in these two indicators paired up. Analysed on a quarterly basis, the reports for the whole country as well as each region provide a valuable view of where the market is heading.

The last such report was published in July for the 2nd quarter of 2012. I have updated the data and provided below the charts for the final quarter of 2012 - the 3 months ending December.

Total NZ

The level of sales in the final quarter of 2012 increased again up 27% vs prior year whilst new listings were up only 4% indicating that the overall market in NZ rmains tight with a strong demand and limited supply.

NZ Quarterly supply & demand Q4  2012.png

Auckland

Sales in Auckland in the final quater of last year staged another leap with a 39% year on year growth, this is now the 8th straight quarter of consecutive growth. Whilst listings are showing a consistent 4 straight quarters of growth their rate of growth is far behind the growth in sales.

Auckland Quarterly supply & demand Q4 2012.png

Wellington

Wellington saw a strong surge in sales in the final quarter up 25 on prior year, however as with so many regions the level of new listings failed to keep pace with this demand only rising 4% year on year.

Wellington Quarterly supply & demand Q4 2012.png

Canterbury

Sales in the Canterbury region were up 11% in the final quarter of 2012 with new listings up just 2%, these rises are modest as compared to the earlier period in the year; however that period was off the very low base of the earthquake in the first quarter of 2011.

Canterbury Quarterly supply & demand Q4 2012.png

Northland

Sales in the Northland region enjoyed a strong surge in the final quarter of 2012 rising 37% year on year. The year overall has seen strong growth in sales volumes. However on the supply side listings wre down 4% in the quarter and show a steady decline in growth through the year indicating a tightening of supply.

Northland Quarterly supply & demand Q4 2012.png

Coromandel

The property market in the Coromandel lags behind the growth in other regions of the country with sales down 3% in the final quarter following a 20% growth in Q3. On the supply side the market has seen a resurgence of listings up 11% year on year in the final quarter.

Coromandel Quarterly supply & demand Q4 2012.png

Waikato

Sales grew by 27% in the final quarter of 2012 as compared to the prior year up from 13% in the third quarter. Listigs coming onto the market though rose only 7% indicating the tightening in the market.

Waikato Quarterly suply & demand Q4 2012.png

Bay of Plenty

Sales surged in the final quarter of last year in the Bay of Plenty up 28% year on year, however listings are failing to respond fast enough to this surge with just a 3% rise in the quarter following a 9% fall in the prior quarter, adding to the tightening of supply in this region of the country.

Bay of Plenty Quarterly supply & demand Q4 2012.png

Gisborne

The property market in Gisborne continues to experience a strong resurgence with sales up 40% year on year in the final quarter and new listings up 14% - somewhat behind sales but tracking in the right direction to support the new highly active market.

Gisborne Quarterly supply & demand Q4 2012.png

Central North Island

The property market in the Central North Island continues to contract with sales only up 6% in the final quarter tracking a declining trend of growth through the year. Listing equally have been seeing slower growth with the final quarter seeing a 15% decline year on year.

Central North Island Quarterly supply & demand Q4 2012.png

Hawkes Bay

Property sales in the Hawkes Bay saw a strong surge in the final quarter of last year up 32% year on year. Listings also rose 12% to demonstrate an active and well balanced market.

Hawkes Bay Quarterly supply & demand Q4 2012.png

Taranaki

A very strong end to the year saw sales in the final 3 months of the year surge 30% in the Taranaki region a consistent growth witnessed over the whole year, however unlike other regions listings are coming onto the market in large numbers up 37% in the final 3 months of the year.

Taranaki Quarterly supply & demand Q4 2012.png

Manawatu / Wanganui

Sales across he Manawatu Wanganui region rose 8% in the final quarter of the year with listings up 13%. The past 3 quarters have seen a faster rise in new listings than sales and this is likely leading to a larger inventory of properties on the market - good news for buyers.

Manawatu Wanganui Quarterly suppy & demand Q4 2012.png

Wairarapa

Sales in the final 3 months of the year surged 38% in the Wairarapa to see a continuation of what has been a very strong year for sales in the region. At the same time the level of new listings whilst not showing the same levels of growth is adding to the available pool of properties on the market.

Wairarapa Quarterly supply & demand Q4 2012.png

Nelson

The property market in the Nelson region is continuing to show no growth. The final quarter of the year saw sales up just 2% whilst new listings fell by 3%, this trend has been seen over the past 3 quarters of 2012.

Nelson Quarterly supply & demand Q4 2012.png

Marlborough

Property sales in Marlborough surged in the final quarter of the year up 50% on the same period in 2011. The year overall has seen strong growth in sales and strong levels of new listings providing a perfect environment for property sales.

Marlborough Quarterly supply & demand Q4 2012.png

West Coast

The property market on the West Coast is suffering significantly over the second half of the year having seen a strong start to 2012. The sales in the final quater were down 5)% with listings down 8%.

West Coast Quarterly supply & demand Q4 2012.png

Central Otago / Queenstown Lakes

In the Queenstown Lakes region including Central Otago the final quarter of 2012 saw a surprising and a significant surge in sales up 39% as compared to prior year - this following some tailing off of sales growth through the earlier part of the year. Listings which had fallen significantly earlier in the year are on the increase but there looks to be a tightness in the market.

Queenstown Lakes Quarterly supply & demand Q4 2012.png

Otago

Sales in Otago surged in the final quater up 19% with new listings up 12% which is identical to the increase in Q3 this would seem to indicate that the market is active and well supplied with property for sale.

Otago Quarterly supply & demand Q4 2012.png

Southland

Sales in Southland grew 12% year on year in the final quarter of 2012 with new listings growing ahead of this by 21%, this follows an 11% growth in new listings matched to a 2% rise in sales in Q3. This would indicate the market is active with demand but buyers have plenty of choice.

Southland Quarterly supply & demand Q4 2012.png

Auckland house prices - making sense of the data

by Alistair Helm in


Auckland house market cools in hot January - Business - NZ Herald News.png

If there is one certainty with property prices is that there is always uncertainty! - That is never more true than with the Auckland property market and its property prices.

The headline from earlier this week speaks of property prices falling in Auckland as the market cools in January; yet a few days later another report seemed to scare us with the view that Auckland is within the world's top 20 priciest cities!

What can we make of the mix of data and where is the market going?

My view is you have to be focused on core data and avoid being hijacked by random erroneous data, reports and surveys. The good news is that we in NZ do have good property data, it is well structured, easily accessible and is right up-to-date.

The most reliable indicator of property prices in Auckland is the REINZ Stratified median price index. Published monthly it uses the most recent month's sales data and makes adjustments to ensure that for example higher sales in high priced suburbs, matched to other extremes such as low sales in low price suburbs does not skew the median price. The method is professionally administered by The Reserve Bank and used as a trusted pricing method for property reporting worldwide.

The latest data including January for Auckland shows that the last 2 months has seen property prices ease. From the peak of $578,150 in November the stratified median price has slipped to $548,750.

Auckland house price index Jan 2013.png

As the chart above shows this is now 13.3% above the peak of prices seen before the GFC in 2007.

However as a cautionary reminder if you adjust for inflation as the chart below shows Auckland prices have barely made any gain in the past 5+ years. In November we came within 1% of the CPI adjusted peak price from July 2007 but the past 2 months has seen this fall to 5.3% below that peak. So based on this you would have to assess that property in Auckland barely keeping pace with inflation over half a decade.

Auckland house price index CPI adjusted Jan 2013.png

Other sources of property price information

There are other sources of property price information available for Auckland, the most recognised one is the Barfoot & Thompson data. Now B&T are the largest real estate agencies group in Auckland and currently represent around 40% of all sales in the region which makes them a key indicator of the market. However they do not represent the whole market, 6 out of 10 properties sold in Auckland are not sold by B&T. Additionally their property data which is released within the first few days of the month and therefore gains early media attention is very raw data, however a major weakness of their data is that their property prices are just based on average price, rather than median or stratified median which leaves the data open to fluctuations, especially with high priced property sales.

Whilst the average price of sales by Barfoot & Thompson may be out of line with the REINZ Stratified median price for Auckland property as the first chart below shows, the trend of price movements as the second chart shows is more consistent.

B&T REINZ monthly property prices to Jan 2013.png
B&T REINZ price movements to Jan 2013.png

I would therefore as ever be cautious in reading media reports and look to the REINZ Stratified median price as the best guide for what is happening to property prices in our major city. Certainly read the indicator trends of the B&T data when it is released but be wary of that average price which they now shows to be sitting atop $600,000


Auctions dominate the market in Auckland

by Alistair Helm in ,


Auction iStock_000010524733Small.jpg

I read with interest the latest REINZ property data for sales in December with a mix of surprise and disbelief this week - focused on this statement:

“A key development during 2012 has been the growth in sales by auction, with the number of properties sold by auction growing by more than two-thirds compared to 2011.  The growth in auction sales has been particularly strong in Auckland where almost two of every five sales are now by auction.  The trend in auctions is evidence of the continued tightness of some parts of the residential real estate market where demand is increasing, but supply remains constrained.”

Total sales by auction growing by more than 66% and in Auckland 40% of sales as auctions!

REINZ auction sales data to Dec 2012.jpg

I found these numbers surprising and somewhat hard to believe. The REINZ has only recently been reporting sales by pricing type and I wondered if their data was inaccurate. The reason for my concern was prior data reported by Realestate.co.nz of earlier in 2012.

At the last period of reporting being March 2012, the number of new listings marketed as auctions was 13% nationally and 24% in Auckland. The data as presented below also showing the make up of auctions a year earlier in March 2011 by region of the country.

Could the representation of auctions in the marketing of property in Auckland have really risen from 24% in March to over 40% in December?

Unfortunately I do not have access to the data warehouse of Realestate.co.nz but the website does provide an easy way of counting listings by date and also by price type. Analysis of the numbers for just new listings coming onto the market over the first 17 days of January is quiet surprising in my mind.

Across the country in 17 days of the 3,621 new listings, just under 1 in 5 (673) were marketed as auctions, in the case of Auckland 424 properties were marketed as auctions out of 1,069 new listings - 40%.

New listings by price type Jan 2013.jpg

I am amazed at the extent to which auctions have taken off in the past year in Auckland, going from 1 in 4 of new listings in March 2012 to 2 out of 5 just 10 months later. Clearly the market is far more dynamic and property is selling fast and as a consequence agents are recommending this method of sale - the REINZ data is bang on, auctions are a key development in the NZ property market.


Gap narrows between asking price and sale price in Auckland

by Alistair Helm in


iStock_000018103127XSmall.jpg

It would make logical sense to see a correlation between the asking price for property and the selling price.

One will lead the other. There is likely to be a lag between the trends and equally there is likely to be a difference, naturally asking price will be higher than sale price.

All seems logical and intuitive – that was what I thought, and that was my first reaction when I read the news article this morning regarding the monthly NZ Property Report from Realestate.co.nz. The article quoted Paul McKenzie as saying “there was no significant discrepancy between asking and sale prices. They're normally pretty close. There are months when there are slight differences in ups or downs, but you're talking small percentages."

That type of comment always makes me keen to dive right into the data to see what the facts actually show and what can be interpreted. What I found was interesting – nationally there is a consistent ratio between sales price and asking price, but in Auckland not. Auckland is currently seeing a fairly significant convergence with the gap narrowing to around 5%.

The data

Taking the national data from REINZ of stratified median sales price and the Realestate.co.nz truncated mean asking price for the past 5 years provides a picture of the correlation as shown below for the data for the whole of NZ.

This shows a pretty stable picture over most of the past 3 years whereby the sales price is around a level of 15% below the asking price. There is a slight rise over the past 6 months. (Note the chart shows the 6 months moving average as the solid red line).

Now there is an important point of interpretation here. The asking price used in this analysis is based on all new listing coming onto the market in the respective month. The asking price is either the advertised price or the mid point of a price range if no advertised price is shown as in the case of auctions, tenders and other pricing methods that do not display a price.

Now contrast the chart for NZ with the same chart for Auckland and we see a whole different picture. Overall the correlation between asking price and sales price is smaller and over the past 18 months the trend has been a significant narrowing of the gap to where it is now close to just 5%. It would appear that whereas across the whole country property sells for around 15% less than the asking price, in Auckland it is just 5% less.

Hypothesis

So what could explain this situation? – is it a function of the rising Auckland house prices? Could it be more cautious real estate agents not pricing property too far ahead of expectation in Auckland?

Or could it be a whole different answer, that for example agents around the rest of the country try and be more bullish and advertise property with asking prices at least 15% higher to see what potential there is in the market.

The fact is I don’t know as there is no further data to analyse, however I could be tempted to offer this one hypothesis to see what reaction it provokes.

Auckland has a much higher level of property marketed for auction than any other part of the country – somewhere around 25% of all new listings. Properties listed for sale by auction are not displayed with a price but with a range. Agents who want to attract as many buyers as possible, maybe pitch a property with a range that is below the current market price.

Certainly anecdotal comments in the media constantly seem to focus on buyers becoming frustrated that property they go and see (after checking out property online) ends up selling well above the expectation.

Maybe what we need is for property websites as the primary display medium for real estate to  display a clear price range for all property so as to bring more transparency into the process?


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.


Property sales in Auckland starting to plateau

by Alistair Helm in ,


The latest property sales data from Barfoot & Thompson for September recorded the 4th straight month with sales were around 1,000. This level may be an early indication that the Auckland market may be reaching a new plateau as the seasonal adjusted stats show in the chart below.

Lets be clear this new level is a significant increase of around 24% as compared to the same period last year when seen over a rolling 6 month period. However as can be seen from the trendline the plateauing may have started. 

The current 6 month average (seasonally adjusted) would seem to be around 1,000 a month, that would take the current moving annual total for the whole of the Auckland region based on B&T average marketshare of 40% to 30,000 - this level is in fact the level of sales that were seen in Auckland during the majority of the period prior to the market crash in 2008. It would be therefore possible to infur that property sales may not continue to rise month-on-month during the rest of the year, they will still though post increases as compared to prior year.

It will be valuable to look more in detail at this situation once the national figures from the Real Estate Institute are released in the next week.

Property prices - Auckland

Turning from sales data to pricing the picture is pretty clear. Prices are continuing to rise. The chart below makes this abundantly clear.

The last 12 months has seen a very significant rise in property prices as represented by the sales of properties listed by Barfoot & Thompson. Now this is where it is important to make that point - this data is the sales of property from one agency in Auckland; albeit the biggest, with at times over 40% market share but still just one company. The other point is that the data in the chart is average sales price. 

The average sales price is not regarded by economists as a particularly reliable metric when it comes to house sales as extreme property priced sales can easily distort the data. The more reliable data is median price or better still stratified mean. Both of these data points are provided by the REINZ in their reports, again the September data should be available within the week so that will provide a better indication.

Having made that statement there is value in the Barfoot & Thompson data as a guide and examining the trend line it does provide an early picture, that whilst the actual average price of property sold by B&T in September was down slightly, the trend is most definitely upwards.


The trend for Auckland property prices is clear

by Alistair Helm in


Transient

It is often said that a trend needs to be established for at least 2 quarters before you can start to define it as a trend - that is certainly the official wisdom with economic recessions. As for the property market it is often safer to hedge your bets and look to 3 or 4 quarters before saying a trend is definitely a trend.

In the case of the Auckland property market and the movement in property prices I would be confident to say we are seeing a significant and enduring trend of price increases.

The most recent statistics from the Real Estate Institute for August shows that across the wider Auckland region prices set a new high of $505,500 when judged as a median sales price in the month and $547,375 when judged on the more accurate measure of Stratified Price. These prices were up respectively 12% as compared to August 2011.

The media is certainly alert to this trend and I was asked to comment on this subject in the TV One news segment on Sunday. 

I thought I would take the opportunity to present the sales price data in a little more detail to show the trend over the past 3 years and in segmenting Auckland into the main 4 regions.

Just to be clear around the source of property price data. The Real Estate Institute (REINZ) is in my opinion the most valuable data to use as it is collated from actual transactions of unconditional sales in the month making it the most timely data. The data is most often presented as a median price to ensure that extreme priced sales (ie for example $10+m) do not skew the data. In addition and with the assistance of the Reserve Bank they have developed an excellent and far more accurate measure called the Stratified Mean. This price index uses a statistical model to remove the influence of more of one price range of property in key suburbs do not skew the data.

Looking at the wider Auckland region to start with the chart below shows the trend of prices measured as both median and stratified going back to January 2009.

The solid blue line presenting the stratified price shows the first strengthening of prices across the region late in 2010, this trend really became established in July of last year when since then prices have consistently risen by 12% over the period to the current peak of $547,375. The pure median price as shown by the red line shows a slightly earlier take-off point of May of last year when from that period prices have risen a total of 9% to $505,500.

Turning to each of the 4 regions within Auckland the one showing the greatest appreciation in property prices is the North Shore. As shown from the chart below prices have risen by 16% from the starting point of 12 months ago - well ahead of the regional growth of 12%.

The new peak of sales price on the North Shore of Auckland is now $625,173.

Auckland central suburbs is where the majority of interest has been shown in recent months and in this region property prices have certainly been on the move. The August median price peaked at $590,500 up 14% from the start of the trend back in March of last year. The year-on-year comparison for this region does show a very alarming 23% increase but this should be taken cautiously as the chart below shows that August 2011 saw a very significant one-month fall in median price.

South of the city in Manukau property prices have seen a strong trend of increase starting back in March of last year. Over the 17 months prices have risen 8% to $493,000 with a new peak in June at $495,200.

Out in West Auckland the trend in property prices has been somewhat more subdued than in the central and North Shore area. Here in the Waitakere region prices are reaching new levels although August did not see a new peak month. The trend over the past 11 months since the upturn began is a more modest 5% increase to $410,000.