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. 


Auctions are once again dominating the Auckland market

by Alistair Helm in ,


Earlier this year there were signs that auctions had lost their lustre, but examining the past 7 days of new listings coming onto the market in Auckland shows that close to half of all new listings are being marketed as auctions!

Here are the facts - between September 22nd and today (the 29th), 808 properties have been listed across the Auckland region from data on Realestate.co.nz. Of this total 400 are being marketed as an Auction. Over the month of September a total 1,113 properties on the market today are marketed as auctions which represents 43% of the total of properties listed in the month. Of course properties listed in the first week of September with a 3 week campaign will now most likely be sold, thereby explaining the difference between the c. 50% in the past 7 days and 43% for the past month.

Clearly auctions are the hot topics and the most favoured method of sale.

But as ever the question should be asked as to the success of auctions. However when it comes to the success of auctions, this is where interpretation of figures becomes something of an art form!

Last week there were a couple of media articles which showcased auction performance.

The NZ Herald on Saturday examined the Barfoot & Thompson auction in the city office and stated that they sat through 27 auctions of which 11 sold under the hammer with 10 passing in below reserve and 6 with no bids - a 41% success rate. The article went on to quote Peter Thompson reporting a 55% success rate - this number being the total of 11 sales plus a further 9 properties which had sold prior to auction. Now you can see why reporting on auction success is an art form!

The article quoted Harcourts saying that at a Christchurch auction in the week there were 23 sold from 25 presented at the Harcourts Grenadier offices in the city. Across the city another Harcourts office (Gold) reported selling 10 from 15 under the hammer.

Now none of these figures will surprise as circumstances at every auction event will be very different and so will be the outcome. However in my mind the key matter in reporting auction success is simply this. Success is defined as how many properties of those offered at ann auction event are sold under the hammer or at least within the next working day as is now the defined period under the Fair Trading Act. It is not relevant or appropriate to add to this list properties sold before the event (even if they were sold at an auction) nor properties that sold outside of this defined new time period.

I applaud Barfoot & Thompson who have embraced this new law change in their publicity of auction performance as they now simply detail (i) sold under the hammer (ii) sold prior (iii) sold by 5pm next working day to arrive at total auctions. However they have ceased to detail total passed in as they used to do.

I have been keeping a record of these monthly reports from Barfoot & Thompson for the past 18 months and as you can see they provide a vital snapshot of the Auckland market (accepting for some months of no data).

t the peak of the property cycle back in first half of 2013 Barfoot &Thompson were reporting property sold under the hammer (plus on the day) consistently exceeded 40% of all monthly sales. Through the first half of 2014 this had fallen to less than a third in March and May, although April was incredibly active and successful. The last two months though have seen a fall off. It will be interesting to see the September results.

Looking outside of Barfoot & Thompson and the Auckland market the REINZ data of auction sales is the most reliable. I would have to qualify that statement though by saying that the data of auction sale has no clear definition. I would hesitate to guess that it simply relates to the sale of properties which were listed as being an auction irrespective of how the sale  was concluded. 

The data for the past 3 full years shows this interesting trend based on the first 8 months in total for each of the past 3 years.

 

Auckland auctions rose significantly between 2012 and 2013 (27% to 37%) before easing off this year, however the focus of auctions has certainly spread outside of Auckland where now the proportion of sales represented by properties marketed as auctions has risen consistently to now represent 8.5% of the total sales outside of Auckland (equivalent to 1 in 12) in the first 8 months of this year.

It certainly appears that auctions are once again the most preferred method of sale for Auckland agents and a growing number outside of Auckland.


Law change will effect the reporting of auction sales data

by Alistair Helm in


Auctions continue to be favoured by the real estate industry as an effective and efficient method of sale. In the past 12 months according to REINZ data a total of 15,865 properties were sold by auction representing over 1 in 5 of all property sales. In Auckland the numbers are far higher with over that same period 38% of all sales being by auction.

However underlying this data may be a correction “waiting in the wings” which may well have a significant impact on these numbers.

With effect from the 17th June 2014 an amendment to the Fair Trading Act as it applies to Buying and Selling at Auction comes into effect. The specific amendment that most interested me was this:

The Fair Trading Act auction rules treat the property as being sold at auction if it is unsold at the end of the auction but the auctioneer accepts within one working day of the auction an offer from a consumer who attended the auction.
— Fair Trading Act : Auctions in Action

I have long held the view that an auction sale should be defined only by the sale occurring on the fall of a the hammer, however the real estate industry continues to hold the view that a property brought to market as an auction and subsequently sold irrespective of when it sells - sometimes up to 7 days later is considered an auction sale.

It was only last week when Peter Thompson of Barfoot & Thompson made this statement in the monthly report of sales for May:

Vendors are still choosing auction as their preferred method to go to market. The success rate at auction is around 80 percent within a seven day period. This is because we are experiencing a trend towards properties that are passed in at auction either selling later the same day or within seven days of the auction

Next month such a comment would be judged to be misleading and inaccurate under the terms of reference of the Fair Trading Act. This advert for April auction results might well present a somewhat different picture.

This move will bring the reporting of auction results much more in line with Australia which publishes 'clearance rates' weekly within 24hrs and judges an auction solely by the fall of the hammer.

A further implication of the amendment is that once the working day period has passed then the transaction will no longer be considered an auction and therefore the use of the Auction Sale & Purchase Agreement will cease to be appropriate as the property becomes open for offers by private treaty between the vendors agent and the prospective buyer. This is of importance for buyers to appreciate as the purchase terms and conditions need to be re-stated on a new S&P Agreement.


Latest B&T data reinforces impact of LVR

by Alistair Helm in


Barfoot & Thompson published its Housing Market Update for May highlighting what is a clearly a slowing property market with the year on year sales volume down 14% as compared to May 2013. The trend of property sales is downward, from a peak in October last year the moving annual total of sales by Barfoot & Thompson in the Auckland market has fallen from 13,232 to 12,572 in May.

Within the composition of sales for the month of May the most striking fact is that whilst total sales at 1,109 was down 14% compared to a year ago the sales of property below $400,000 was down 50% - the total sales in May 2013 of property below $400,000 was 301 properties, a year later this segment had fallen by half to just 151.

Just to reinforce these numbers, excluding the below $400,000 segment which still represents 1 in 8 properties in Auckland the remainder of the property sales, those over $400,000 saw sales volumes slip just 3% down from 991 in May 2013 to 958 a year later. So almost all of the 14% fall in total sales is as a result of the collapse of the sub $400,000 segment.

It can be no coincidence that this segment of the market has been the hardest hit by the withdrawal of funding for high LVR mortgages which are primarily for 1st time buyers seeking an entry level property which in Auckland has traditionally been this sector. 

The LVR restrictions came into effect in October of last year and since that time sales in the 8 month period for property at this lower price bracket of less than $400,000 has totalled 1,541 property sales a year earlier it was 2,123, nearly 600 less purchases over that 8 month period, at a time when sales volumes overall barely changed. The chart below very clearly shows the impact of the LVR - performance before October certainly showed a weakening in the lower price segment of the market; however after implementation the impact has been striking with the red bars for the lower prices segments showing the decline in year on year sales volumes. The retardant of LVR restrictions has certainly quelled the fire of the property market which  was burning brightly this time last year.



Barfoot & Thompson - the powerhouse behind the Auckland property market

by Alistair Helm in


I admire and respect Barfoot & Thompson for many reasons, but most of all because they take a professional and open approach to data.

On their site they publish facts. They share valuable insight into the property market. You can easily see how many properties they sold in a month, by price range, type and location. They also provide rental data as one of the leading property management companies.

This insight into their business should be celebrated, not so much for what it says about the company, as what it does to help us better understand the property market in Auckland - the powerhouse of the NZ economy and the hotbed of discussion of the property market.

Their ability to share openly their sales performance is a lot to do I suspect, with the family ownership; thereby allowing the directors to make the decisions that they believe are in the best interests of their employees, their self-employed real estate agent contractors and their wider community, as well of course of their business.

The Barfoot & Thompson business is huge. In 2013 they sold around 4 in every 10 properties in Auckland. A total of 13,123 transactions with a total transaction value of $8.5 billion.

2014 has so far been an even better year for them with sales in March exceeding a value of $1 billion in a month - a record very quietly celebrated internally I am sure, a staggering success. In March their total sales of 1,392 properties equated to 19% of all properties sold in NZ and they only operate in Auckland! (& Northland) although their data is based on Auckland.

 

Their success over the past couple of years is a testament to a classic marketing strategy I remember hearing in my early years in marketing. Increase your marketing investment in the downturn period of the economic cycle - just when your competitors are retrenching to save costs and secure shareholder dividends, that is when the smart company invests. As the economy improves as it has done in the past 3 years, then your investment pays off as your brand is well established with strong emotional triggers to ride the economy upwards.

Barfoot & Thompson are experts at emotional triggers being passionate supporters in the community - whether it be sporting, the arts, charities and of course their support of Starship - they wear their heart on their sleeve and back it up with resources to invest back into the community.

Their business model is smart - do what other competitors do, but makes your presence felt. They charge a commission rate just less than the competitors - not so much to be seen as a discounter but enough to provide a point of difference and a sense of being with the community. They invest in their physical presence. They have more offices than any other brand in the region - over 60 offices, so there is a presence on every high street in the region. They invest in people and they support them, offering salaried apprenticeship scheme to get people into the industry. They invest in brand marketing - you don't have to travel far to see a billboard or the back of a bus to get that recall of the brand.

All this investment is paying off, their market share in the Auckland market is growing, topping 46% in March alone to deliver a 12 month average of 42% up from 38% coming out of the recession in 2011. Almost all of this growth undertaken without buying up other franchise operations or building new offices (bar a very few exceptions) very much unlike how their competitors operate.

Barfoot & Thompson also deliver higher metrics than the other franchise groups in the country based on a per office or per agent basis.

They achieve almost twice the rate of sales per office per annum as their main competitors and deliver a higher gross transaction value per agent.

They are also innovative being the only real estate company to release an iPad app in NZ - an app that in my opinion is the best user experience for property viewing of any of the apps on the app store at this time - its only weakness being the range of listings, limited to just their own!

Returning to my opening remarks, the thing I most admire from the company is their publication of data, at a time when we need greater insight into the property market to assist us to make better informed decisions as to the state and trends in the market I am pleased we have such a forward thinking company in our leading city.


Choosing the right Property app for the iPad - a review of the NZ options

by Alistair Helm in , ,


Digital background iPad shutterstock_174836606.jpg

It’s just 4 years since the iPad first entered our lives and despite the view of some commentators, that sales might only top a couple of million, the product has become a legend and total sales to date far exceed 100 million and are likely to continue to accelerate in the coming years.

The device fulfils a role that is far removed from the functionality of the smartphone device or the classic desk-bound computing device. The device is tactile and is as likely to be found on the couch or kitchen bench, as on an office desk. For this reason, the iPad (and the other Android based tablet devices) is in many ways the battle ground for property apps, as property searching is largely a ‘lean-back’ experience undertaken in times of rest when you want to immerse yourself into a world of escapism with dreams of a new home.

For these reasons I would contend that the best property iPad app almost bears no relation to the iPhone or smartphone app. They provide platforms for very different use cases. The smartphone is all about proximity based discovery and routing to viewings as well as alerts to new listing - functional activities requiring key information, easily and quickly accessible. The iPad is all about browsing in a mode that the traditional laptop or desktop could never deliver to the needs of the buyer or renter. The experience needs to be more of a magazine experience - rich in imagery and immersive in context. The iPad is an intimate device that is held close and in effect caressed and so the experience of an app needs to bear that in mind.

For New Zealanders however I have to sound a note of cautions for the options here are limited and to be honest none of the 3 I have reviewed really deliver to the experience of some of the best in the world and for me some of the best are found in the highly competitive US market with the app from Redfin being a great example.

So let me share my thoughts on the 3 options for New Zealanders, from Trade Me Property, Realestate.co.nz and uniquely a real estate company app from Barfoot & Thompson. I propose to deliver this review in the similar manner as a car review, scoring points based on key categories. These categories are ease of use, content, search and overall user experience.

Just for clarity this review is based on these versions of the various apps:

Trade Me V2.0.13 March 27, 2014

Realestate.co.nz V2.0.2 April 1, 2014

Barfoot & Thompson V1.5 April 2, 2014


Ease of Use

In overall terms, all of these apps are easy to use and fairly intuitive. However to start with extra marks go to B&T for the new overlay intro tutorial which in a couple of screens gives you a great overview of the functions so nothing is left to chance. 

Both B&T & Realestate.co.nz choose to begin the user experience with a map defaulted to your location devoid of any filters. In my view this is the best landing screen for a property app on the iPad. Realestate.co.nz does things slightly better in having a right hand column of listings from the area ranked by latest listed date - a missed opportunity would be the contextual reference numbering which could show the location of these properties on the map.

Trade Me on the other hand defaults to a list view of properties ranked by latest listing but based on the whole database of NZ making the initial experience woefully irrelevant as context is everything! To get to the same experience of a local map as the other two apps takes 3 more taps - a tap too far!

When selecting a listing from the map to view details, B&T chooses to take you to the listing and ignore the location context of the map, whereas the other two provide a hybrid screen of map and listing details. Here there is a vast difference between Trade Me Property & Realestate.co.nz in terms of the amount of screen space given to the listing vs the map. Way too much focus on the map by Realestate.co.nz diminishes the viewing of a listing.

When in this mode it takes just a single tap on a listing pin on the Trade Me Property app to shuffle to another listing - very intuitive. Realestate.co.nz makes you work hard with a required 2 taps to get to a new listings.

None of the apps provide what I judge to be a logical interactive functionality - that being a map with a list of properties whereby the selection of a property on the list highlights (by changing the colour of the map marker) where it is on the map and visa versa - here's this in action on the Redfin app - not a perfect execution but valuable functionality.

The B&T app provides one form of functionality that the other two don't and I love it. It is a flipboard style image viewer which lends itself to the casual, elegant flipping through properties in a magazine style - great execution and a powerful point of difference.



Content - Listings

Untitled_2-9.png

Listings are what powers these apps and each have the same core data regarding their portfolio of listings. Clearly in richness of content the B&T app can only showcase their own listings thereby pushing them down the rankings however because they originate the content of the listings they show they are able (or have chosen to develop) functionality that is richer; I speak specifically of videos and floor plans.

Trade Me has the most comprehensive portfolio of listing, especially considering the dominance in rental listings the site enjoys as a function of the private landlord market. Talking of rentals, a point of note is the fact that the B&T app does not feature rentals, only property for sale.

The most important component of all listings are the photos, this is key whether you are viewing on a handheld device or a laptop, but to fulfil the desire of a lean-back browsing based couch device the iPad has to have stunning images. The raw data of image files for each app is identical (although B&T has the advantage of the original raw image files) but sadly Realestate.co.nz lets itself down by what looks like the use of compressed image files designed to be viewed on an iPhone. The sequence of images and 'blow-ups" below graphically illustrates this.

Untitled_2-4.png




Content - Complementary data

Untitled_2.png

I added this category to make a point. That point is School Zones which is the differentiator between the B&T app and the others. Neither Trade Me Property nor Realestate.co.nz offers any complementary data other than listings. But that is what we want! - I hear you cry!

Well there in theory could be so much data that could be of value:

  • Crime stats
  • Flood zones
  • Postcode
  • Sun angles
  • Walk score
  • Transport routes
  • Parking zones
  • High Speed Fibre coverage
  • Flight path routes
  • Rateable value
  • Property valuation estimate
  • Council Zoning

Many of these sets of data are simply not available in NZ or only at prohibitive cost. However the point is valid and I think important. School zones are public data and easily incorporated into an app and yet the two leading players choose to ignore the details. Good on Barfoot's for showing the way.

However B&T don't stop there they also have a tab in the listing view that includes the StreetView from Google - beautifully integrated into the full screen view - beautifully executed!


Search

The Realestate.co.nz app is the only one of the 3 to use aggregation of listing 'pins' which on the zoom out function reverts to a number to show the total of listings in an area. Trade Me uses red pins which cluster on zoom out until they disappear with a notice instructing you to zoom in - not a very friendly experience. B&T adopt a kind of mid solution - red pins which don't cluster but when you click on them on zoom out show a number of listings for the local area.

Only Realestateco.nz uses differentiation in the pin design to highlight 'New' listings, in my view a valuable feature it is the only app allowing you to also filter the search by 'days-on-the-market'. Both B&T and Realestate.co.nz do display 'Open Home' flags on listings with B&T offering an ability to filter the parameter of open homes by 'any time / this week / today / open in next hour' which I find really useful.

In terms of search filter the Realestate.co.nz and Trade Me apps rely on the iOS format scroll wheel for price and tick boxes for other criteria. As noted in the review of the Realestate.co.nz iPhone app the somewhat restricted search ranges especially on price and on bedrooms as compared to the website is surprising. B&T adopt sliders for price, bedrooms and bathrooms, something I find difficult from a user functionality perspective as the finger tends to obscure the slider and there are no visual cues to the gradations on the slider.

A key part of search on any device is the context of location presented by maps - real estate is always conditional on location and therefore despite the fact that the use of the iPad app may be on the couch the map view is important. Here the 3 apps differ, with in my view Realestate.co.nz taking top honours by using the Google map application layer whereas both B&T and Trade Me Property have defaulted to the Apple Maps layer. This is so evident as a drawback when viewing in Satellite mode - the resolution on the Apple Maps layer is so inferior to the Google Maps layer. These images below show the highest zoom in you can achieve in each app before losing resolution - a vast and significant difference.


Overall User Experience

Getting to use these apps begins to show their respective strengths and weaknesses. In reference to my earlier comments, in my view Realestate.co.nz is the weakest, as simply this iPad app is the iPhone app adjusted to fit the format of the iPad, and sadly as noted earlier the issues with screen resolution makes it the least likely app for 'lean-back' browsing. Too often the majority of the screen is taken up with the map view which does not interact with the property or list view in an intuitive manner. It does have the value of the higher resolution satellite imagery but this is not enough to make for the shortfalls.

Trade Me Property delivers a better solution, however given the resources and capability from a company of their size and knowing how critical the property sector is to the overall performance and long term value of this publicly listed company, I would have to say the app delivers at the lower end of expectations. Too much focus remains driven on the user experience of the web and too little time seems to have been spent on experiencing other property apps and other magazine apps in general as a benchmarking exercise.

The winner by a wide margin in my view is the Barfoot & Thompson app. A well executed iPad app that has been thought through and tested to deliver an experience that I would enjoy using - a credit to the marketing and tech team there.

The saddest conclusion though is that the best app is at best a great platform which will be so seldom used as fundamentally who will ever use it? - it showcases just Barfoot & Thompson listings - sure that is close on 4 out of every 10 listings in Auckland, but what use is that?

Given the clear advantage that the app delivers if I was in the role at Barfoot & Thompson I would make a smart decision. I would as a 22.22% shareholder in Realestate.co.nz* license the app to Realestate.co.nz and thereby benefit doubly - prove the credibility of the technical and marketing prowess of the team and at the same time earn a license fee whilst at the same time deliver to Realestate.co.nz as a championing industry owned website to challenge Trade Me a superior app to the current one - food for though!

Note * Realestate.co.nz is a joint venture between The Real Estate Institute of NZ (REINZ) (50%) and Property Page (NZ) Ltd (50%). Property Page (NZ) Ltd is owned by Harcourts Group Ltd (22.22%), Ray White (Real Estate) Ltd (22.22%), LJ Hooker New Zealand Ltd (22.22%), Barfoot & Thompson Ltd (22.22%) and Bayley Corporation Ltd (11.11%)

 

 


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. 


LVR impact in Auckland market hidden in the data

by Alistair Helm in ,


November_2013_Market_Update___Barfoot___Thompson-3.png

The headline from the Barfoot & Thompson's November Market Update stated confidently "Mortgage restrictions no barrier to Auckland house price increases". The commentary then went on to say that the LVR impact has yet to show up in housing activity (sales) or sale prices.

The data then stated that both average sale price and median sale price were up again as highlighted by the chart below.

B& T price Nov 13.png

 

A cause of the further rise in sale price for November was the record level of sales of homes over $1m - 189 of them a record for the company. In November last year that total of sales over $1m was 129, a variance of 60. That increase in sales at the top end would impact the average price but the median price would be less impacted. However what is more likely to impact the median price and the average price was a variance of 97 in sales of lower priced properties. In November 2012 B&T sold 292 properties below $400,000 this November that number was 195. Seen as a proportion of all sales in the month as the chart details below the drop is significant.

B&T Nov 13.png

 

Clearly the monthly drop in November was significant but the trend has been established for quite a few months now as the lower end of the market as served by B&T in Auckland (who represent around 40% of the market) has fallen away. The November one month fall from October this year is more significant than either of the past 2 years indicating that the impact of the LVR restrictions are being felt through the numbers.

These detailed sales by price bracket data is provided by B&T on their site and I applaud them for that openness, something that we have seen withdrawn by the Real Estate Institute who used to make such data accessible but now decides to charge fees to access. 

As I stated last month in the article "The LVR speed limit - crippling or merely cooling the market"

We will need to wait until at least the November sales figures and more likely until the new year as well as to study housing loan approvals before the definitive statement can be made as to the true impact on the changes as a consequence on the high LVR restrictions, indications certainly show an impact, though that impact in sales is not huge as yet.

Here we have the first indicator through the Auckland market from B&T - not featured in the headline, but buried in the detail. As I said the November sales figures should give us some indications. Here is some such data - will we get detail from the Real Estate Institute in their data or will the headline smooth over the facts?


Auckland house prices did not leap by $33,000 in a month

by Alistair Helm in


The October sales report from Barfoot & Thompson had the media jumping around proclaiming that Auckland property prices had set a new record, exceeding for the first time $600,000 and rising over 5% in a month equivalent to over $33,000 gain in just 30 days.

Did nobody bother to read the whole report, or ask a simple question?

The key message in the report that should have been glaringly obvious was that Barfoot & Thompson had sold over 119 properties for in excess of $1million, the highest monthly total since before 2007.

That message should have set of alarm bells. It certainly got me thinking and doing some calculations. If the number of $1million+ properties sold was that high, up from just 78 in September, then it is quite possible that the average price could have been skewed.

Let’s look at the data. Barfoot & Thompson sold 1,081 properties in October with a total sales value of $668,822,370 giving an average price of $618,707. Of the total; 119 properties were sold with a price in excess of $1m. That is 11% of sales in the month, by far the highest proportion sold this year.

Now let's do a calculation to try and evaluate the movement in prices for the majority of properties sold by the company - below $1m. For this calculation I have made an educated guess to say the average price of property sales in excess of $1m+ is actually $1.35m. I have actually used some data I have around the distribution of listings at differing price ranges to give me a guide. By calculating the monthly total value of sales of properties over $1m I can then deduce the average price for the 90+% of the market that is below the $1m mark. 

Undertaking this calculation has enabled me to produce this chart below, which in the grey line shows the reported average sale price for all properties sold by month. This clearly shows the extreme skew in October. The red line on the other hand shows the average price per month for all property sold below $1m - the vast majority of properties.

Now to my mind that line would better reflect the true picture of Auckland property prices. Prices in October recovered from the slight fall in September to continue in an upward trend from $520,000 towards $527,000 in the past 6 months.

I think it is time Barfoot & Thompson reviewed their statistics reporting, choosing in favour of median price over average price.

The fact is statisticians and economists all favour the use of median price for the reporting of property sales – the Real Estate Institute favour median and also go so far as to use Stratified median price, in my opinion the most accurate representation of true property price movements. It is for these reasons that I judge the better view of Auckland property price movements should wait until the October stats are released by REINZ early next week.


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.