July Property Market Statistics

by Alistair Helm in ,

graphs iStock_000015752104Small.jpg.png

The latest set of data released by the Real Estate Institute provides a further update on the state of the property market around the country. I have taken the details of sales volumes and prices and inputed them into charts to provide some clarity around the key trends and what that can tell us about the current market and the outlook for the next year.


Sales Trends

In terms of property sales the number of sales per month keep slipping - 5,893 properties sold in July, down 13% as compared to July last year. This takes the total for the first 7 months of the year to 42,057 as compared to the first 7 months of last year with a total of 47,423 a decline of 11%. 

The market peaked in October last year when the moving annual total hit 80,677. The current moving annual total has slipped to 74,753 as shown in the chart below.

Property sales are the lead indicator of the market and as such tracking a trend in sales is key to the potential future outcome of the market in price movements. As such the next chart is important as it looks at a 3 month moving average period of sales data. This is showing a change in the trend in sales volumes as the rate of decline is reversing and potentially in a couple of months we could well be seeing year-on-year increases again.

The factors behind this reversal of the decline in sales is a shift in the balance between the positive effect of the broader economic growth pitched against the financial constraints placed upon the market by the combination of LVR and rising interest rates. There is no doubt that the latter has had a major impact on sales coming as it did (far from coincidentally) starting in October of last year. However I suspect that the improving sentiment around recent references to delays in future increases in interest rates and potential loosening of LVR policy may be bringing about this reversal with the underlying economic strength winning through.


Price Trends

Pricing as stated earlier is more of a lag indicator of the property market and this is seen in the latest set of statistics of the Stratified Median Price Index from REINZ. The data is reported monthly for each of the main 3 metro areas as well as the whole of NZ and the balance of the North Island and the balance of the South Island excluding these main cities.

Detailed below are the chart for each of these 6 views of the property price trend covering the past 7 years tracking the latest data for July matched to the peak of the market pre-GFC and the bottom of the market in late 2009.

New Zealand




Other North Island (excluding Auckland / Wellington)

Other South Island (excluding Christchurch)

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.

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.

What can we glean from the April property market data?

by Alistair Helm in ,

The most noticeable component of the monthly summary from the Real Estate Institute for April was how conspicuously it lacked any great hyperbole. The facts were clear - sales volumes continue to fall and the fall was significant in the month, down 22% from March and down 20% year-on-year.

The fact is that sales volumes have been trending down since they peaked in October last year, reaching 80,677 on a moving annual basis. Since then they have fallen 4% to a moving annual total of 77,151 including April.

The April total of 5,670 sales was as the Institute stated the 7th lowest April since the data commenced over 23 years ago. I would go as far as to say that there were extenuating circumstances that partly accounted for the fall in sales. The Institute did reference the coinciding of school holidays and Easter and its effect on working days. I would judge that the key coincidence was the fact that the Easter week ended with Anzac day thereby creating two sequential long weekends and a very short 3 day business week which was a chance for people to escape in the last rays of summer as they did.

The last time this occurred was in 2003 when the impact on sales was equally significant - April 2003 saw a 1% fall year-on-year coming off a sequence of strong months in January / February / March of that year respectively +21% / +11% / +11%. By comparison 2014 saw January year-on-year sales down 4%, February down 8% and March down 10% before the April fall of 20%. Out of interest May 2003 saw a rebound with sales up 25% year-on-year. It could be that we may well see a rebound in May this year.

The fact is real estate agents are in many ways more influential in the marketing of property these days than a decade ago. Action was noticeably focused to getting listings onto the market in early March coupled with the avoidance of auctions and other time-bound campaigns ending around the Easter period. This did in some way help to deliver what was actually quite a strong March. 

In terms of price data the median price fell in April from a record high set in March of $440,000 to $432,250. The more reliable Stratified price edged a small increment higher from it's peak in March of $447,003 to $447,646.

As has been discussed recently there have been questions asked as to the true indication of property prices as represented by these two measures given the artificial inflation of median price as a consequence of the significant decline in sales of low value property. On a year-on-year basis the sub $400,000 price bracket saw sales decline by 32% - far in excess of the 20% decline in total sales in the month.

This factor is clearly impacting the true measure of property prices for just as the composition of sales is changing away from sub $400,000 properties, so it is skewing towards the $1m+ properties which grew by 14% year-on-year thereby exerting a larger influence on the median.

Gradually the impact of the this slow sales of lower price property will be reduced and the median price measure (either in raw form or stratified) will begin to reflect the true selling price of a representative selection of property sales. At that time and I believe the April figures are for the first time beginning to reflect this, we will likely see some easing in property prices, clearly showing that the market peaked in price and sales volumes back at the end of 2013. 

Is there really a shortage of properties for sale?

by Alistair Helm in , ,

We have been seeing statements in the media for years now, stating how we have a shortage of properties for sale - ever since the property crash in 2008 in fact. However the question I constantly ask (myself as much as anyone) is, if this were a real issue then how come it could continue to be a real issue 6 years later?

I wonder if this issue is as much a function of available data as an intrinsic problem. Prior to 2008 there was no available data on inventory or new listings - the supply side data of the property market. Up until that time the only available data on the property market was transaction data on sales volumes and prices. Then in April 2009 Realestate.co.nz published the first NZ Property Report covering the market in March 2009 looking back 15 months to January 2007. This report provided a whole new set of data particularly centred around new listings and inventory as well as asking price.

The data set of the NZ Property Report covered the period from January 2007 as this was judged the most accurate starting point, due to the fact that the database for the website was truly reflective of the whole market from late 2006 - the inaugural year of the website.

The problem is that without data from say the nineties and early years of this century we have difficulty in accessing what a normal market was, as 2007 was the last of the froth of the property market before the crash and subsequently the market has moved into very different modes over the past 6 years.

I thought I would look at the core data and see what components are valid and what we may be able to shine a light on to see a clear picture of the market to be a true indicator of trends and to answer the question as to whether there is a shortage of property for sale.


1. Inventory data

The actual level of available property for sale on the market over the past 6 years has not changed that much.


It has been as high as 53,000 properties and as low as it is today at 39,000 properties - but then at 39,000 properties that is nearly half of the total current annual sales. Certainly buyer and real estate agents would love to see more properties on the market, but 6 months stock is a pretty good level and in relative terms the availability is pretty consistent.

Inventory on its own does not really help us understand the trends in the market


2. Sales and New Listings data

The supply side data of inventory and new listings, takes on a greater relevance when assessed against the rate of sales through the addition of the monthly sales data which provides a greater contextual insight.

This chart whilst a little confusing with dual axis tries to capture the key data sets and align them to provide insight. Inventory as per the previous chart is measured in actual monthly levels in the grey area at the base of the chart. The red and blue lines measure listings and sales respectively - both are reported on a moving annual total basis. This method of reporting removes the seasonality, so much a component of property data.

The take out from this chart is the almost flat level of new listings coming onto the market over the past 2 years - steady at around 130,000 per annum. Whilst at the same time sales have risen over the same period from an annualised total of 55,000 to 80,000. This shows clearly the component of demand in the market. That demand has not driven more listings to come onto the market despite all the communications from within the real estate industry and yet despite this, inventory has not actually fallen that drastically. This indicates more of a 'liquid market' where sales occur more quickly.

These charts which to me provide insight I know are to many confusing and I have been looking for ages for a simpler indicator of the overall sentiment of the market in regard to supply and demand - something that better answers the question as to the pace of the market and whether there is a shortage of supply. I will note here that I hold the view that price is a lagging indicator and as such tracking the market sentiment of supply and demand will provide the key to future trends in price.

I recently saw this chart from the UK property market showing actual inventory (green bars) matched to monthly sales (blue line).

It got me thinking that this measure had relevance tracking the effective rate of sales each month as a proportion of the available stock.

Producing this chart for the NZ market shows somewhat of a different chart. The seasonality of home sales in NZ seems far more pronounced than in the UK and therefore it is harder to determine easily a trend, whereas I would judge that there are key trends easily determined in the UK data - significant rising sales in the past months matched to falling inventory.

So how to present this data in a meaningful and simple way was the challenge, as I sensed the data contains the core insight needed. Especially at this time where I see the property market slowing and a lack of inventory is not the real issue or the driving factor. 

It came to me! - inventory and monthly sales - what we are really looking at is "Property Clearance Rate" - what percentage of the available stock of properties on the market in a month are sold in that month. A quick analysis produced this chart which shows the ratio of sales to inventory.

Again the seasonal volatility makes it hard to see a trend - the dotted line is a trend line overlaid, but as we all know applying a different fundamental equation to the trend line could produce a different picture! 

Then it came to me - take the 12 month moving average monthly sales and apply it as a percentage to the available inventory and I think we have what to me is a very relevant picture of the NZ Property Market.

Now I could be guilty of endlessly seeking data to fit a story, but in my mind this is a visual of the property market that to me makes sense. It uses the current rate of sale (adjusted to remove the seasonal fluctuations and short term movements), combined with the available stock which is itself the function of existing unsold inventory, new listings and sales.

The telling image from this chart is the sharp rise in the clearance rate once the property market got into gear around 2011 - that rise, from 9% to 19% speaks to the dynamic market we have seen over this past two and a half years. However what this chart graphically shows which I have sensed is that the market has turned. It turned even before we saw the LVR restriction introduced in October as this chart shows the turning point in August / September of last year and the latest data from REINZ on sales in March only reinforces this fact. 

So in my opinion given this declining clearance rate is the key trend and talk of a shortage of properties for sale is nothing but a red herring!




The LVR speed limit - crippling or merely cooling the market

by Alistair Helm in ,


The Real Estate Institute in their monthly report for October stated in headlining their report that "LVR Restrictions Impacting Sales Volumes" - they went on to say "sales volumes eased back in October following the introduction by the Reserve Bank of restrictions on high LVR lending". The actual sales in October were 6,778 which was up 2% on a year ago, that month of October 2012 was up 32% on the prior October of 2011, which itself was up 28% on the prior year being 2010. So in the space of 3 years sales volumes are up 74%, in fact the level of 6,778 is the median for the past 21 years. 

Property sales growth is slowing - looking at the trend of monthly sales as compared to prior year we are coming to the end of a run of 30 straight months of growth in sales year-on-year, by no means the longest run, but a strong recovery from the property crash of 2008 as the chart below shows. Typical towards the end of a long run of growth comes more erratic variance as the growth begins to turn negative as we are seeing in the October figures.

REINZ monthly sales var.png


Added to these factual statistics from the Real Estate Institute was the monthly survey of real estate agents published by the BNZ and initiated through the Institute. This survey which I have mentioned before could be a vital sense of a pulse of the property market as the Institute represents almost all licensed agents. Given that it is a shame that from the population of close on 10,000 such low reporting of the monthly survey occurs. This month the survey looked for verbatim responses to the statement "What effects have you noticed from the LVR rules?". There were 247 responses published by the BNZ report. A quick count up had 180 of these comments showing a very pessimistic view on the impact of these LVR changes and the impact on first time buyers and open home attendance as well as performance of auctions. Here is sense of the responses:

 auction rate under the hammer has dropped dramatically

number of first home buyers in the market has decreased markedly

More very frustrated Vendors

Majority of first home buyers dropped from the market

Drastic decrease in competitive bidders/bidding

Massive decrease of first home buyers

Definite drop off in first home and migrant buyers

Huge decrease in people looking at property

A lot of Sale and Purchase agreements are not going unconditional or if they are it is at a cheaper, 
renegotiated price

Massive reduction of attendees at open homes

Overnight no enquiry from first home buyers. they have been scared away


Reading through these and the other verbatim comments reflecting a net 72% negative you would soon become depressed about the future months of property sales with a sense of up to 30% decline as that has been the often quoted component of 1st time buyers. However the reality is there is no accurate source of data that shows what 1st time buyers actually represent of the market so any prediction of effect is largely guess work, and the views of agents from what is a very small sample - just 247 from 10,000 (2.5%) should be taken with a note of caution.

There is though data from the Reserve Bank that reports the weekly levels of Housing loan approvals of both new mortgages and re-mortgages. Such data provides vital opportunity for analysis as I have done in the charts below.

RB actual mortgage approvals.png

This chart shows in the red line the 4 week moving average of the number of housing loan approvals made by trading banks. The last few weeks of October certainly showed an accelerated decline, however the trend as best seen in the grey line being the 12 week moving average shows that volumes had been declining since a peak in May of this year, however they still remain around 6,000 a week.

The next chart shows the trend of volume comparing the 4 week moving average year-on-year. This chart certainly would seem to show a picture of the announcement of the decision to implement the speed limit of high LVR triggering a slowing in volume of new housing loan approvals, in effect reversing a period of recovery which began in July, although as with the prior chart the longer term trend still shows slowing growth.

RB mortgage trend.png

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.




Global property markets follow in step

by Alistair Helm in

Global connections shutterstock_98332517.jpg.png

I am a big fan of Twitter as my predominant news feed, far more a news media service than a social media service. It is easy to follow those people and organisations that are the pipe-fee of news that is contextual top whatever area of interest you hold. For me it all about property and the real estate industry in New Zealand and Globally.

It was through one of these followers that I saw this chart providing an interesting perspective on the comparative performance of US house prices over the past two decades on an index whereby December each year becomes the base for the growth / decline in house prices month by month through the year.

So for the US market which went through a major boom and bust in the past 20 years it is interesting to see that this year they are tracking to see close to the best growth in house prices (admittedly off a low base). The chart below shows the actual indicies of house prices across the major markets over that 20 year period.

Global house prices 1992 to 2012.jpg

Having seem this chart tracking the US cumulative change in house prices from December, I was naturally drawn to create a chart for the NZ market. Thanks to the data from REINZ Stratified Price Index I have (thankfully!)been able to produce a match as seen below: 

NZ Stratified Dec index chart.png

It is quite striking the similarity between the US and NZ house price index - the worst performance year is matched at 2008, the US slipping further down 10% vs 7% in NZ, the best year is very close; NZ is 2003 at 13% with US 2004 with 11%.  

This would certainly be a clear demonstration that whilst domestic property prices have a local market factor they do seem to follow in step to global economic effects that flow through to the property sector.


Are we losing access to vital property data?

by Alistair Helm in

Access to data denied shutterstock_122234134.jpg.png

I feel like the lifeblood for the analysis of the property market is being drained from me. I have in the past commented as to how fortunate we are in NZ to have such rich property data, how timely it is and how openly accessible it is.

Sadly I now have to report that the core custodians of property information are heading down a path – either collectively or independently to close off access to such valuable data.

First we had the proposal by Property IQ to acquire Terralink. This is now in the hands of the Commerce Commission who I am confident will find that this acquisition would seriously remove competition in respect to consumer property information – for a start it would be the death of Zoodle as Property IQ would strengthen the dominance and profitability of QV as the only place where you could get as a member of the public, historical sales data and estimated property valuations. The decision is due from the Commerce Commission on the 11th October so I will await that notice with great interest. Out of interest the original date for the decision was the 13th September, this has been extended - could be that the CC team is looking closer into the issue or maybe their overall workload is holding them up?

Following that potential blow I now see that the Real Estate Institute (REINZ) is quietly closing off more and more data that was at one time publicly available for free.

Firstly they removed the downloadable spreadsheet for the Stratified House Price Index which provided historical monthly median and stratified median prices for Auckland, Wellington, Christchurch, Other North Island, Other South Island as well as National data month-by-month back to 1992.

REINZ HPI stats Sep 2013.png

The offering now is purely a pdf chart.


The raw data allowed me to produce the analysis charts I have regularly done to highlight the % variance to market peaks and troughs as per the example here.

Thankfully as I collated the data from 1992 though legal access to these spreadsheets in the past I can now update the data set with the monthly figures REINZ publishes. 


The other database that REINZ has turned off is the Market Facts Graph capability. This provided the public with the opportunity to access core data by month back to 1992 by aggregated suburb showing median price, number of property sales, median days on the market and total sales value.

REINZ Market Facts Graph Sep 2013.png

Below is an example of this report when it was available showing the wider Wellington region for a 12 month period.


REINZ market facts example Wtn .png

All that is now provided by REINZ in regard to this data is the press release together with the regional data pdf. The other valuable report the Residential Market Statistics which provides the regional monthly data for recent months down to aggregated suburb level is also no longer published after July; so my advice is to go and grab the archived residential reports before they too are removed.


REINZ Property Market report Jul 2013.png

In my opinion restricting access to data that was once available for free is a backwards step. This is both in terms of the general principle of making data accessible, so that people can be allowed to analyse and provide perspective and insights; and in the specific sense of an industry that I am sure wants to help people be better informed about buying property rather than what could be perceived as a revenue generating decision as highlighted by the newly appearing references to paying for access to data from REINZ by the general public.


Provincial NZ property in the doldrums

by Alistair Helm in

The quote for the week and possibly the month for me was made by the QV research director Jonno Ingerson. On Radio NZ he stated that "the already heated house prices should continue to rise strongly for another 15 months" - Wow!

Property prices stated to rise in January 2011 - they have therefore been rising already for 30 months; could we possibly see continued growth in prices for another year-plus taking the full run of prices to 45 months! - that is optimistic. His justification seemed to be - previous up cycles tend to be of this same order - is that really a compelling case for a forecast.

NZ Stratified at July 2013.png

I always saw QV being somewhat bearish when it came to property reporting relying as it does on data analysis and without a vested interest group to serve, but clearly that has changed. 

Counter to this more bullish prospect presented by property reporting entities, other notable commentators (Bernard Hickey & Shamubeel Eaqub) rightly believe too much focus as ever is applied to the Auckland property market as if it is representative of the whole country.

The excellent article in the NZ Herald by Bernard Hickey recently titled 'Provinces left behind' summed up the fact that this property cycle has had no effect on provincial NZ. He quotes that Auckland prices have risen 13% from their 2007 peak in real terms with Christchurch up 5% but for the rest of the country real prices are down 20% in real terms and still falling. Such figures warranted more investigation. 

Taking the REINZ Stratified Price Index data I delved beyond the usual stats for Auckland, Wellington and Christchurch and looked at two sub sets - 'Other North Island' which effectively measures the North Island excluding Auckland and Wellington and 'Other South Island' which excludes Christchurch from the stats from the mainland. 

The charts below ably speaks for themselves - this property cycle has yet to be really felt by those provincial regions. 

Other North Island Jul Strat.png
Other South Island Jul Strat.png

Gap between asking price and sales price narrows further

by Alistair Helm in

It is interesting to compare the expectation of property prices to that of actual sales prices, as in theory it provides a guide as to the state of the market. The closer aligned they are the more realistic are seller expectations, a situation more common in a rising property market. Conversely the more divergent, the more out-of-touch are the sellers’ expectations, usually as a consequence of a falling market.   

Today’s market is certainly not falling (well not at the moment) and presented below is the trending chart of asking prices and sales prices for the past 6 years covering this important period from just before the property crash, right up to date – May 2013.

NZ asking price to sales price gap May 2013.png

It is only in the past 6 months that the divergence between asking price and sales price when seen on a 6 month moving average basis has reduced to below 10%, a level it passed through in 2008 on the way down to a gap of 15%.

Across New Zealand the stratified median sales price for property rose again in May to $415,325. That places the median price of property across the country some 9% above the peak of the property market pre-global financial crisis back 6 years ago in Nov 2007. These figures are taken from the REINZ stratified house price index, in my opinion the most reliable indicator of house prices. However when viewed against the bottom of the market in January 2009 the market is up 23%.


REINZ NZ strat price May 2013.png

At the same time the asking price for NZ property has risen in May to a new record level of $454,795 based on the data collected by Realestate.co.nz in their NZ Property Report. This record high is up 7% from the peak of the market pre-global financial crisis back in January 2008. When measured against the bottom of the market in November 2008 the asking price expectation has risen a more modest 14% over the period.


NZ asking price May.png

Auckland Property Market

In the Auckland market the gap between asking price and sales price is much closer than across the whole of NZ. It is now back with sales price within 5% of the asking price on a 6 month moving average basis. A significant tightening as compared to the 15% gap back in early 2009.


Akl asking price to sales price gap May 2013.png

The stratified median sales price for property in Auckland rose again in May breaking through the ceiling of $600,000 for only the second time. That places the median price of Auckland property some 19% above the peak of the property market pre-global financial crisis back 6 years ago in July 2007. However what is somewhat more alarming is the fact that since the bottom of the property market in Auckland in November 2008 the stratified median sales price has risen by 39%. 


Akl strat price May 2013.png

At the same time the asking price for Auckland homes has risen to see in May a new record level of $631,656 based on the data collected by Realestate.co.nz in their NZ Property Report. This record high is up 16.5% from the peak of the market pre-global financial crisis back in January 2008. Since the low point in asking price of October 2008 the mean asking price has risen by 26% to the new high of $607,600.

Akl asking price at May 2013.png

As to the future, the analysis of the past shows that on the way down as we can see in 2008 the asking price lead the change to reverse the decline as vendors started to establish a base of asking price expectation which at the bottom of the market was met by demand and that began to fuel a rise in sales price. This time around we will need to watch for a turn in sales price as this will lead the asking price trend by at least 3 months.

The importance of sales volume trends in the property market

by Alistair Helm in

Property expert evaluation fixed.jpg.png

Watching the property market as an active investor or an interested property owner you are, I am sure, always looking to see where the current trend is heading to try and be ‘ahead of the curve’.

There is one basic fundamental that is key to remember and that is the fact that trends in property prices always follow trends in sales volumes.

Sales are a reflection of demand. If demand picks up, sale spick up and as a result property price rise. This is not the case with most other products or services; as a rise in demand usually leads to a rise in supply and that manages through competitive pressure to curb price rises. In the property market as the base product is not homogenous the supply side (vendors) is very poor at responding to the demand side pressure. Just read the constant headlines of the NZ Property Report of the past 2 years – low inventory of houses on the market drives a sellers' market leading to rising asking prices and, as we have seen recently, rises in the selling price of property.

Naturally as demand falls, then sales fall, and again as a result of the inability of the supply side of the property market to adequately and effectively respond to this change, the levels of unsold properties on the market rise and this drives a buyers' market which will see prices ease or fall.

This is why to be a smart observer of the market you need to focus on the property sales volume trend, as the price trend is a ‘rear-view-mirror’.

The definitive source of property sales data is the monthly REINZ report, however on its own it is not clear what this is saying about sales volume at this time. The latest report for the April month stated:

REINZ data shows there were 7,104 unconditional residential sales in April, an increase of 1,428 sales (+25.2%) compared with the same time last year and a fall of 12.6% compared to March 2013. The increase over March on a seasonally adjusted basis was 0.8%, indicating that sales were slightly stronger than what would normally be expected for this time of the year

Sales are up, they are slightly stronger and yet they were down!

As with all statistics it is how you look at them; get too buried in the minutia of the granular data and you cannot see the trends, take too holistic a perspective and you risk missing the inflection point.

To assist in this process of spotting trends I have developed a couple of charts which I think show a valuable perspective of the property market.

Monthly sales volumes.png

First the core data of monthly sales data for the past 13 years, this certainly shows that sales have risen considerably since 2010 and just last month topped 8,000 – however 8,000 a month sales were the norm rather than the exception through 2002 to 2007. This speaks to the fact that the current fascination for property transaction is nothing as compared to those heady days of the financial easy-money honeymoon, pre GFC.

The trend of property sales growth comparing year-on-year as the chart below shows, provides a valuable insight.


Variance in sales yr on yr.png

We have seen 2 years of consecutive year-on-year percentage growth, compare that to the 3 years of consecutive growth at the beginning of the last decade and the 2 years of consecutive decline through 2008/2009 and you get a reminder that property markets, like all markets have cycles – what goes up has to come down.

The final chart is for me the most interesting. It tracks the moving annual total of property sales as a percentage of all private dwellings in NZ.

Percentage of all NZ homes sold each year.png

The long-term average (1992 to 2013) is that 5.9% of all dwellings are sold each year.  The current level is 5.0%. The level of transaction is still well below the long term average, but considering the "new normal” that we may well be experiencing in the property market, post the GFC, then we may well not see the heady highs of 10 years ago of 8% of all homes being transacted as that rampant period of speculation and investor fever is well passed.

To me it ‘feels’ like we are going to see some cooling of property sales, this will likely see year-on-year drop in sales growth, this is likely to lead to a rise in available inventory of homes on the market and thereby ease some of the markets and edge them out of being sellers' markets. A consequence of that could well be an easing in the price increases of property and even some degree of a fall. That scenario is good for everyone (possibly with the exception of the real estate agents).

Auckland house buyer frustration is not a supply problem – it’s all about growing demand

by Alistair Helm in

The Auckland property market is not suffering from a low level of listings. The property market in Auckland is experiencing a lack of selection of property to buy caused by high demand which is depleting inventory.

It may seem a pedantic point but I think it is important. The analogy would be for a warehouse where the shelves seem only half full. The delivery from suppliers has not changed much over the past year but with more people coming into the warehouse and buying – even buying the dented and dusty products there is less stock on the shelves.

Looking at the data from REINZ and Realestate.co.nz published monthly highlights exactly what is going on and thereby avoids alarmist or self-serving statements like “number of properties being listed for sale was still way down" as stated by Helen O’Sullivan of REINZ, and "It's quite a battle to find the house that you actually want to buy, because of the low number of listings," from ASB chief economist Nick Tuffley.

Real estate agents want to talk about low levels of new listings, as their business is to list properties. It is admittedly hard to quantify demand in the property market, as sales volume is a resultant outcome of satisfied demand, unsatisfied demand that is sure to be high in the Auckland market at this time is harder to quantify.

The facts as shown by the data of new listings from Realestate.co.nz shows that for January the number of new listings coming onto the market was no lower than the past 4 years of January’s – January is a low month.

Auckland new listings Jan 2013.png

Examining the seasonally adjusted numbers from Realestate.co.nz as the chart below shows provides a useful perspective – January represented a very average month at the seasonally adjusted level of 3,594 new listings – there were 23 months in the past 4 years with less listings and 25 months with more listings.

Auckland seasonally adjusted listings Jan 2013.png

The core number to examine is inventory – the number of properties on the market. At the end of January this year there were 8,622, a year ago there were 11,162, in January 2011 there were 13,349 and in January 2010 a total of 13,396.

Property sales are up and property is selling faster. Very importantly there is less “redundant stock” on the market – property that at one time in the past 4 years might have been hard to sell is now selling; thereby reducing the available selection of property on the market.

This is best shown in the chart below which shows actual sales, listings and inventory of houses on the market over the past 4 years – that red line showing the extent of the decline inventory is the most telling.  As the sales over the past 3 years (as shown by the yellow average sales line) goes up so inventory falls.

Auckland - sales listings inventory Jan 2013.png

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


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 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


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


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


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


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


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


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


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


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


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


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


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

Have property sales returned to normal levels yet?

by Alistair Helm in

"Property sales up 21% on prior year to the highest level since 2007" read the press release from REINZ summing up the past calendar year.

Certainly the property market has seen a recovery which started last year rising 9% from the low of 56,000 in 2010, and then this past year rising a further 21% to the total of 74,000 property sales.

Property sales 92 to 2012.jpg

However as the chart above shows that sales last year were 10% below the average of the past two decades.

Ranked for those past 21 years from the lowest sales year (2008) to the highest (2003) shows in fact that the total sales for 2012 was identical to the year 1993 - can anyone remember that far back in terms of real estate ??

Property sales in ascending order 1992 to 2012.jpg

That situation where sales last year totaled the same as nearly 20 years ago brings to mind the analysis of relative sales to the number of dwellings in this country.

In 1993 according to data from Stats NZ there were 1.214 million dwellings and therefore the sales in that year of 73,959 represented 6.1% of all dwellings being transacted just above the 21 year long term average of 5.9%. At this time there are estimated to be (we are awaiting the next census) 1.558 million dwellings, so the total sales of 74,000 in 2012 represents just 4.8% of all properties being transacted in that year. Clearly we are yet to return to what might be called normal levels.

percentage of property sales.png

Gap narrows between asking price and sale price in Auckland

by Alistair Helm in


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.


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 property market in October certainly shows growing confidence (in Auckland at least)

by Alistair Helm in


The property market in October certainly shows growing confidence (in Auckland at least)

The Real Estate Institute released the October statistics to the headline of the "market roars into life" - well certainly it was a very active month with sales up 33% on the same month last year and property prices setting new records.

I think it is useful to see the property market as an industry employing as it does over 10,000 active sale agents and transacting over 72,000 properties in the past 12 months. The value of these annual level of transactions has grown in the space of 12 months by $7 billion; growing from $25.6bn in the 12 months to October 2011 to $32.6bn in the past 12 months.

For me the question remains - is this an Auckland phenomenon or is the "market roaring into life" across other parts of the country?

Just last month prompted by this question I examined the make up of the property market and the representation of Auckland within it and came up with the conclusion that the activity in the NZ property market is largely the Auckland factor. Applying the latest data for October to the same set of historical sales data confirms this continuing trend. 

In October Auckland represented 39.4% of all sales nationally, up from 39.2% in September and up from 36% a year ago. The chart below shows this trend with the red line representing the moving annual total percentage which is growing very strongly through 37% of all sales.

When viewed as sales tracking on a 12 month moving average basis the divergence between Auckland and the rest of NZ is very clear with the gap continuing to widen, although there was some pick up from outside of Auckland. 

As to the other major regions of Wellington and Canterbury, their respective performance is viewed in these charts below.

Wellington is showing some signs of growth, nothing of the order of Auckland and certainly fairly flat over the past 2 years.

Canterbury whilst showing some strong growth through 2011 has seen a plateauing in for the majority of 2012.

The 5th anniversary of the housing slump

by Alistair Helm in , ,


It was 5 years ago this week that in the UK the first cracks started to appear in what was then considered the bedrock of the financial markets, when it was revealed that Northern Rock had asked for help from the Bank of England. Within days queues were forming outside branches and the UK government was forced to guarantee deposits.

What began in the UK and yet was already underway beneath the surface in the US was a financial collapse of a scale never before witnessed in history, and whilst we can say that a great depression was in some way avoided by the collective skin-of-our teeth the impact ripples of the global financial crisis that followed has been felt in every corner of the globe and today, 5 years on many parts of the world still feel its impact.

Whilst the housing market was not the root cause of the crisis; it was without doubt a critical component, as without the construction of financial instruments built around mortgages the crisis may never have occurred or at least not risen to such heights.

It would take a whole year from the Northern Rock collapse before the world would witness the collapse of Lehman Brothers, but back in September 2007 the property bubble was about to burst. The run up to that point had seen property prices in many countries treble over a 15 year period. Putting together data from the main countries of interest in the chart below shows the consistency of this trebling from 1992 to 2007.

It is noticeable, the extent to which the NZ bubble outpaced the other countries, almost reaching prices 3.5 times what they were back in 1992.

From September 2007 property prices fell across all of these markets, and many other around the world. Some of the falls were more significant than others. The worst was felt in the US, falling a third from 2007 to 2009. The UK fell by 17%. NZ fell by 11%, whilst Australia hardly missed a beat before taking on a secondary spurt in prices to overtake NZ by 2010, although recent prices have eased back.

What is so clear from this comparable chart is the extent to which the NZ property market since 2007 has staged such a strong recovery, far outpacing the UK and the US to see prices now heading back to the pre-crash levels whilst both the UK and the US have experienced stagnant pricing.

Assessing the last 5 years in isolation as the chart below seeks to do shows the comparable performance across the 4 countries particularly well.

Don't confuse low inventory with a lack of listings

by Alistair Helm in ,


The September report from the Real Estate Institute showed a fall in sales between August and September this year which contrasts with a seasonal rise. Whilst not citing low listings as the cause, the report certainly spoke to the impact that the low level of listings was having on prices.

In the same week the monthly NZ Property Report published by Realestate.co.nz continues to report low levels of inventory. Both of these reports set the scene for what could be a challenging time for the property market heading into what is traditionally the busiest time of year with what many consider very low levels of available stock.

The key questions is -- Is there sufficient stock of houses to buy?

I think it is very important to look behind the headlines and look at the numbers and the source of the numbers to truly answer the question.

Inventory of unsold houses on the market and number of listings of property on the market sound much the same - however they are as different (albeit in a subtle way) as speed is from velocity (for all those that can recall their physics lessons at school!).

The number of listings on the market is very clear - its actual houses, houses you can see and check out.

Inventory on the other hand as reported through the NZ Property Report is a more complex and advanced measure. It is in its own way a vital measure. It is a measure of the available inventory measured by the current rate-of-sale of property. So to say that the current inventory in NZ represents 30.5 weeks, means that based on the rate of sales in the prior 3 months of June, July and August (1,441 sales a week) it would take (theoretically) 30.5 weeks to sell all of the available stock of listings on the market which at the end of September was 44,063 listings. 

To assist in understanding these two measures and better appreciate the true perspective of the market, have a look at this chart which tracks stock of listings and inventory across the country over the past 5 years.

The red line (tracked on the right hand axis) measures the inventory, whilst the grey bars (tracked on the left hand axis) measures actual stock of listings.

A key takeaway here is that at the height of the property crash the inventory of unsold houses on the market back in 2008/9 reached 60 weeks, today it is half that level at 30 weeks. However at that low point in market back in 2008/9 the actual stock of listings was just over 50,000 whereas today it is just over 40,000. That is the point; inventory has halved but there is still a lot of choice in the market with only 20% fewer listings.

Now I know there will be those who will say that the national figures are not relevant and what matters is how many houses there are in this suburb or that suburb. Those comments are both right and wrong. People do buy houses in an area and there are certainly less available property in certain suburbs than there were 3 years ago - but in someways there are always a limited pool of available properties as properties are not homogenous - we are all looking for that unique combination of features in a certain location. So to say that there is an acute shortage is alarmist.

As for those in Auckland or interested in Auckland here is the chart:

In the Auckland region the inventory at the worst of the property crash the inventory peaked at 60 weeks, today it is hovering below 20 weeks, that's a massive decline - however available stock of listings at the peak was around 15,000 whilst today it is around 9,000. Now that is a significantly lower level of available stock, but to call it a shortage?

The trend for Auckland property prices is clear

by Alistair Helm in


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.