The Property Dashboard

by Alistair Helm in


Dashboard guage Stock_000013690792XSmall.jpg

Understanding the property market is not complicated. It is however confusing; as it is rife with data - median price / valuation / inventory / asking price / CV / GV / stratified price / truncated price / affordability index / sales volumes?

No surprise that all I ever hear from people is - "how can I make sense of all this data?"

I have studied the property market for more than 6 years and I believe there should be a simple indicator - a simple picture that, like a dashboard indicator helps you see what the market looks like today. 

That is why I have developed The Property Dashboard which provides a visual cue as to the state of the market. The pointer reflects in which of 3 states the market is in - a balanced market, a sellers market or a buyers market.

The dashboard indicator shows a single number which is the available number of properties on the market for sale relative to the number of sales measured in number of weeks of supply. What determines the position of the indicator on the dashboard is dictated by calculations based on over 5 years of data sourced from REINZ and Realestate.co.nz. It is the relative position of the indicator to the segments in green, orange and red that are key to understanding the state of the market.

What about price I hear you ask? The market price of property is a 'backward looking indicator" which is the result of a buyers market or a sellers market.

When there are too many properties on the market relative to sales the market favours buyers, these smart buyers negotiate hard and drive prices down. The opposite situation in a sellers market is where demand from buyers is strong and the supply of properties on the market is in short supply, this situation leads to buyers aggressively competing to push up property prices.

Each month the Property Dashboard will be updated to reflect the most current data. The Property Dashboard has its own header on the Properazzi website - easy to find, easy to interpret. Data will be updated around the first week of the month and accompanied by a monthly summary. The detailed dashboard comprises an individual indicator for each of the 19 regions of the country as well as an indicator for the whole of NZ. 


Real estate in New Zealand the hard numbers for 2012

by Alistair Helm in


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In 2012 the NZ real estate industry sold exactly 74,000 properties for a total sales value of $33.954 billion. These transactions of residential property were undertaken by an average of 9,400 active agents who listed 132,494 properties in the year and shared amongst themselves and their business owners and franchise companies just over $900 million in sales commissions.

2012 was by recent year comparisons, a good year for the real estate industry – the year saw an increase of 12,731 in the number of properties sold, a 21% increase. In terms of commission an increase of $175 million a 24% increase.

In the past few years the number of agents actively involved in the industry has not change that much, which means most agents enjoyed a significant rise in salary as compared to 2011 – far above the raise most employees would enjoy. That though is the nature and challenge of real estate – you take the rough with the smooth on a commission-only salary as a self employed contractor. The years of 2008 to 2010 were lean years for many in the industry.

Now when it comes to how much an agent earns it is not possible to simply divide the commission value of the sale by the 9,437 agents to say each earned on average $96,000 – that average would likely incite hoards of people to start applying tomorrow to be an agent given that is probably 2.5 times the average salary of NZ’ers.

For the full detail of agent income in 2012 check out this analysis by region as well as the question where is the best place to be a real estate agent?

Whilst the agents themselves may not have benefited from all of this $900 million, one direct beneficiary is though the government. The GST on commissions alone amounts to $136 million plus an income tax benefit of around a further $115 million makes a tidy quarter of a billion dollars in tax benefit to the government.


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

Auckland

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

Auckland Quarterly supply & demand Q4 2012.png

Wellington

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

Wellington Quarterly supply & demand Q4 2012.png

Canterbury

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

Canterbury Quarterly supply & demand Q4 2012.png

Northland

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

Northland Quarterly supply & demand Q4 2012.png

Coromandel

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

Coromandel Quarterly supply & demand Q4 2012.png

Waikato

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

Waikato Quarterly suply & demand Q4 2012.png

Bay of Plenty

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

Bay of Plenty Quarterly supply & demand Q4 2012.png

Gisborne

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

Gisborne Quarterly supply & demand Q4 2012.png

Central North Island

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

Central North Island Quarterly supply & demand Q4 2012.png

Hawkes Bay

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

Hawkes Bay Quarterly supply & demand Q4 2012.png

Taranaki

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

Taranaki Quarterly supply & demand Q4 2012.png

Manawatu / Wanganui

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

Manawatu Wanganui Quarterly suppy & demand Q4 2012.png

Wairarapa

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

Wairarapa Quarterly supply & demand Q4 2012.png

Nelson

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

Nelson Quarterly supply & demand Q4 2012.png

Marlborough

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

Marlborough Quarterly supply & demand Q4 2012.png

West Coast

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

West Coast Quarterly supply & demand Q4 2012.png

Central Otago / Queenstown Lakes

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

Queenstown Lakes Quarterly supply & demand Q4 2012.png

Otago

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

Otago Quarterly supply & demand Q4 2012.png

Southland

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

Southland Quarterly supply & demand Q4 2012.png

Canterbury property market - latest insights and analysis

by Alistair Helm in


Transient

It’s not possible to write a summation of the Canterbury property market without reference to the significant impact of the earthquake of 2010 and 2011

Not surprisingly the impact of these events and especially the Feb 2011 quake have continued to have an ongoing impact on the market across the region but especially in Christchurch itself.

Property Sales

Seen from the perspective of property sales, the two immediately affected months of September 2010 and February 2011 (shown in the red bars in the chart below) saw a significant decline in sales. The following months also witnessed impacted reduction in sales. The best measure of this is shown by the thin red line which represents the share of national property sales as represented by Canterbury each month as measured by the right hand axis.

The share dropped massively by around five percentage points in each of those months, however what is interesting is to the extent that by August of last year sales in Canterbury were back to the normal level of representing around 13% of the national total.

What is quite interesting is the most recent 3 months when sales have fallen off and have begun to represent less than 12% of the national sales level. This could be a function of the strength of the Auckland market diluting the regional sales or it could be a function of lower activity as the sheer scale of the property market has been significantly adjusted by the after effects of the earthquake and net outbound migration.

Property prices

Turning to property prices, for this analysis I have used the REINZ Stratified median house priced data for just Christchurch city rather than for the whole of the Canterbury region.

The picture here is of strong property price growth over the past 12 months as prices have risen over 9% in this time. The current stratified price at $368,140 in September fell from the August level of $379,534, that level was a new peak in selling price taking the level to 4.7% above the peak of October 2007.

As can be seen from the chart the property market decline from late 2007 resulted in a 14.6% decline in prices in the 15 months from October 2007 to January 2011, from that point prices began to recover with no visible impact of the earthquake on property prices.

As I have done with other such reports I am interested to factor inflation impact into property prices. The chart below takes the past 5 years and adjust all property prices to the equivalent of todays $ value adjusted for inflation. The picture as ever changes the story somewhat.

Allowing for the impact of inflation property prices in Christchurch have not recovered from the peak of the market in 2007. Prices remain just under 10% below the October 2007 level adjusted for inflation. The overall fall in property prices was of the order of 18.5% decline, and it is only since April of last year that prices have begun to recover.

Taking the picture back to the past 20 years the property price appreciation in Christchurch can be seen in the chart below.

Prices rocketed from $204,308 in June 2002 to more than double that level (inflation adjusted) by the peak in October 2007 at $406,867.

Property supply / demand balance

The supply side and the demand side of the property market in Canterbury 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 October level of 22.8 weeks of equivalent sales as reported by Realestate.co.nz in the NZ Property Report shows a steady improvement of availability of property for sale based on the recent level of sales. This level though does continue to trend below the long term average of 31.1 weeks indicating that the property market continues to favour sellers.

The balance between new listings and sales is perfectly represented in the chart below which 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, as commented early a significant slowing in the rate of sales growth at just 3% down from the 47% in Q2. At the same time listings fell by 7% both indicators of a slowing property market.

Summation

The property market in Canterbury in general has been experiencing turbulent times as has the general population and the economy over the past 2 years. There is a sense that the market is returning to a more stable level of activity, although it is clear that levels of activity are slowing. It could be hypothesised that the level of sales activity and consequential price rises over the past year were the direct result of the earthquake. People choosing or having to make decisions to move creating supply and demand factors; those factors may now be washed through the system leaving a quieter market which appears to be less impacted by the pressure from any shortage of listing. This easing of such pressure on the demand side may well result in prices leveling off from the recent rapid rises of the past 12 months.          


Wellington property market - latest insights and analysis

by Alistair Helm in


Transient

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

by Alistair Helm in , ,


Transient

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 ,


Transient

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

by Alistair Helm in


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