Overseas property websites report strong interest for NZ property

The leading property website for the UK Rightmove produces a very detailed report on the source of visitor traffic to their extensive selection of overseas properties. Over 3.6 million visitor sessions per month check out the more than 80,000 properties on their specialist selection of properties from around the world.  

The latest report for September highlights a seasonal trend that sees interest in warmer countries as the northern hemisphere winter approaches. One of the countries to benefit from this increase is NZ. Of all the countries profiled in the search content of listings NZ ranked at #11 rising one place with Australia in  6th place behind the leading countries visited by property seekers - Spain, France, USA. Italy and Portugal.

As ever seeing such a rich set of the data in the report got me wondering that given the sheer scale of the competing countries ranking higher up the league table, if the data was to be weighted on population for example the picture might look somewhat different.

Well the fact is when adjusted to reflect the population of each country the ranking looks somewhat different - especially when you see just how fascinated brits are for some of the smaller Mediterranean countries!

The weighted data of visitors to NZ property per million population pushes NZ to # 6 in the league of most viewed property locations - certainly reflecting the interest of potential emigrants to NZ.

Wellington property market - latest insights and analysis

I fear of late that the focus of this blog has been leaning too heavily towards Auckland – Auckland housing – a crisis in the making / The activity in the NZ property market is largely the Auckland factor  to name just two recent posts. So it was not surprising that I got an email just last week from a reader asking “Any insights on the wellington market and current trend?

So for all of you who are in the capital city or keen to better understand the trends of the Wellington property market, here are my insights and analysis.

Property Prices

The trend in Wellington property prices is pretty clear – they are flat at best, and declining in real terms at worst. Here is the chart covering the past 5 years. As ever I have used the Real Estate Institute Stratified median price, which covers the greater Wellington region.

The current price for houses in the Wellington region is $412,780 which did show a reasonable increase on the August level of  $405,125, however the price level tends to hover around a level of $400,000 to $420,000 as it has done for most of the past 5 years. The peak price nearly 3 years ago was $424,615 which means todays price is still 2.8% below that level.

As ever inflation, whilst modest in annual rate over the period has eroded what little gains have been made over the past 5 years as shown in the chart below.

With the prices adjusted to today’s dollar the peak of prices was exactly 5 years ago when prices then (adjusted by inflation) would equate to $481,447 which means that a median house bought 5 years ago would now be worth if sold at the median price 14.3% less after inflation.

Looked at the other way as to affordability adjusted for inflation, the current level of $412,780 equates to a property price of over 6 years ago in June 2006 when at the time property prices were $360,705.

Property Sales / Listings

The supply side and the demand side of the property market in Wellington are key indicators to assessing the state of the market.

The supply side is best represented by the inventory of homes on the market, the September level of 20.4 weeks of equivalent sales as reported by Realestate.co.nz in the NZ Property Report showed a continuing level of inventory below the long term average of 22.2 weeks indicating that the property market continues to favour sellers.

The level of recent sales continues to track ahead of prior years. The chart below tracks the rate of increase / decline in sales and new listings based on a 3 month period (September data being the end of Q3 for 2012.

The recent quarter has seen a 10% higher level of sales in Wellington than in the prior year period which itself was up 7% on the Q3 for 2010. At the same time listings were flat year-on-year, a year ago the Q3 for 2011 was showing listings down 5% thereby demonstrating that listings and general inventory remain low driving the sellers' market, which is represented in strong demand as shown by the rate of growth in sales. The interesting situation in Wellington is that despite this relatively active market with more demand than supply, prices do not show any signs of coming under pressure which might indicate that despite the increased level of activity in absolute terms the market is not heated, but gently turning over with demand and supply adequately balanced.

The 5th anniversary of the housing slump

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.

The data sources for these charts:

NZ: Real Estate Institute of NZ – Stratified House Price Index

UK: Halifax House Price Index

US: Case Shiller – 10 city composite index

Australia: Australian Bureau of Statistics – weighted average 8 capital city index

The activity in the NZ property market is largely the Auckland factor

I guess in someway we all intuitively knew it. We knew that the sense of another property market bubble was merely the frothy demand in the biggest city in the country.

Well now we have the data to back it up – to give us the picture that supports the assertion that the general picture of the property market outside of Auckland is a lot less frothy than we find in the metropolis of Auckland.

Let’s look at the facts. Auckland is home to 1.38 million people, that’s just over 31% of the population. It has around 480,000 dwellings which represent around 29% of all the dwellings in the country.

Now compare that to the fact that for 18 months Auckland property sales has represented more than 35% of the national sales and each month for the past 18 months, Auckland sales have represented more and more of the national sales right up until last month when on a rolling 12 month basis it hit 37% of all sales.

This chart below showcases this trend

The red line which represents the 12 month moving average share, has been growing steadily since the low point in mid 2008 when it was down at just 30%. At that time the representation of Auckland of the total national volume sales reflecting a truer representation of the city’s share of the national total of people and houses.

Looked at on the basis of comparative sales volumes on a rolling 12 month basis shows in the chart below how Auckland property sales actually fell at a faster rate through the collapse of the property market from 2007 through to 2009, however since the start of the recovery in mid 2010 in Auckland (and 6 months later in the rest of the country), Auckland sales have outpaced the rest of the country.

For clarity the chart above shows from the red line (read off the right hand axis) property sales in Auckland; whilst the grey line (read off the left hand axis) shows the total for the rest of NZ in total excluding Auckland.

What is very interesting is that if you look closely at the most recent data points of the past 2 months the total property sales for the rest of the country excluding Auckland is beginning to fall off.

This trend of a plateauing level of sales outside of Auckland is more conspicuously highlighted in this final chart which, tracks the rate of growth (or decline) for property sales in Auckland and the rest of the country over the past 5 years. That rate of growth year-on-year for the rest of the country is heading down indicating the plateauing of sales for regions outside of the powerhouse of Auckland that is driving the overall market.

Comparing median selling price and median listing price shows a very interesting fact

Whenever the median price as reported by the Real Estate Institute reaches a new high the ensuing story is always along the lines of “new high, prices buyers out of the market!”

However the median price, by its very definition is the mid point of the range of property sales during the period with 50% of all sales below this level and 50% above this level.

One would logically think that if sales follow a normal distribution then the majority of sales will cluster around the median price. However without access to the raw data from REINZ I am unable to verify this!

So being an inquisitive person I wondered if property listings as a representation of future sales might follow the logic of a clustered normal distribution around the median price for a region or city.

So to be clear the question I was looking to answer was - "are the majority of properties on the market in a specific area or region clustered around the median price?", in the case of Auckland $515,000 or Wellington $400,000 or Christchurch $350,250 (these being the median prices for September).

The short answer is no. This is where things get interesting as shown in the chart below.

The normal distribution for all listings of houses for sale in the major 3 cities is centred around the same price range $300,000 to $400,000.

Now clearly these lines on the chart do not represent normal distribution but they do reflect the distribution of listings by price range.

To carry out this analysis I used the realestate.co.nz website. I was unfortunately unable to access the raw data and therefore was restricted to using the standard price ranges as part of the search functionality. However I still find it fascinating that given the divergence of median selling price of the 3 cities from $350,250 in Christchurch to $515,000 in Auckland the largest selection (in % terms) in each region is to be found in the same price range of $300,000 to $400,000.

Having highlighted this interesting insight into the selection of property on the market I naturally was drawn to the next question "What would the distribution look like for other parts of NZ?"

At random I chose Whangarei (median price $257,750), Timaru (median price $260,000) and New Plymouth (median price $299,000).

The results speak for themselves in the chart below

So what can be deduced from this analysis?

Certainly it shows that there is choice in the market even at prices below the median price. There could be a deduction that Auckland is seeing a stalling of property sales in this bubble of the $300,000 to $400,000 range whilst the majority of sales occur at the higher range. It would be of great benefit to undertake this analysis on a more regular basis.

I do concede that this analysis would be better done with accurate raw data rather than using website search counts. Maybe the team at Realestate.co.nz could be encouraged to analyse their rich database to provide a more complete picture.

Don't confuse low inventory with a lack of listings

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?

Auckland Property Investors Association - Keynote presentation Oct 2012

I had the pleasure of addressing the October meeting of the APIA on a topic close to my passion - understanding the data behind the property market as it applies to Auckland. For the benefit of those members of APIA who attended and to those who could not make it - as well as to anyone else below is a copy of the presentation. 

I propose to take a couple of the new analysis I undertook for the presentation and write future posts in the coming weeks - these may provide clearer insight to the chart included in this presentation. I am very conscious that the presentation is created to be presented rather than read so I hope it is reasonably clear.

If you would like to download a copy of the presentation, please go to the page on Slideshare where the presentation is hosted

Property sales in Auckland starting to plateau

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

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

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

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

Property prices - Auckland

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

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

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

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

The iPhone holds a great asset for real estate marketing

The buzz is out there for the new iPhone 5 - some people are just experiencing the iPhone for the very first time without worrying what the latest phone has and how much better it is than the iPhone 4S, the iPhone 4, the iPhone 3GS, the iPhone 3G and of course lets not forget the original iPhone - how much progress has been made in this amazing piece of technology since it was launched just 5 years ago! 

However as fast as the versioning of new hardware, has come the new versions of the software; which despite the unforgivable experience with Apple maps has been welcomed as a step forward at each new release of the operating system iOS. 

The latest version of iOS6 holds a rich capability which I am sure will excite real estate agents and those involved with real estate marketing - Panorama imagining. 

I am grateful to Charles Arthur from the Guardian in the UK who brought this to my attention on the excellent Tech Weekly podcast and subsequent article in the Guardian. 

This new feature which sadly only works on the iPhone 4S and the new iPhone 5 allows the most ham-fisted individual to take beautiful panoramic images. Not the hugely distorted fisheye images or the nausia inducing virtual tour ones - no, just simple stitched continuous images that showcase up to 240 degree field of view.

So what has this to do with real estate? 

Well this could be the tool of choice for smart agents that want to be open and share the real streetscape of the property they are marketing or the inside of the rooms. 

I tried it out on my iPhone 4S and the image below is the result of a photo taken in the street of a recent sold listing. It is very much like Google Street View and could be a valuable way to update a Street View perspective of a property if the situation has changed, if for example renovations have been completed. 

Click to enlarge in a lightbox