Auckland inventory levels plummet

by Alistair Helm in ,


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

Auckland is very nearly running out of properties to sell.

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

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

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

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

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

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

 

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

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

How to unblock this log-jam? 

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

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

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


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.


Property sales pass another key milestone towards recovery

by Alistair Helm in


The month of August saw 6,035 unconditional property sales across the country as reported by the Real Estate Institute. This represented a 16% increase as compared to August last year and continues to fuel a stronger property outlook as all of the 8 months of 2012 have seen year-on-year sales up between 14% and 37%.

The chart below tracks the annualised total of sales volumes and transaction value since 1993.

This total for the 12 months to August tips the annualised total of sales past the milestone of 70,000 sales. The last time the 12 month moving total sales was at this level was way back in May 2008.

The property market did witness a rebound in 2009 and edged very close to 70,000, with an annualised total sales of 69,629 in December 2009 before falling again down to the low point of April 2011 at 54,829. Since then the growth in sales has been consistent running a 17 month unfaltering trend to see an overall increase of 28% in total annualised sales top the new level of 70,065.

It is, as ever, important to recognise the difference between the current sales levels and those heady days of 2004 when sales were exceeding 120,000 on an annualised basis, equating to 10,000 sales a month - a long way removed from the current level of still just under 6,000 a month.