House prices ease in July

by Alistair Helm in

In my opinion the most accurate measure of house prices in NZ is the Stratified House Price Index published monthly by the Real Estate Institute. The index was developed in 2009 in cooperation with the Reserve Bank to provide a measure of real price movement by removing the influence of individual regions, districts or suburbs skewing the data by excess demand as could be occurring in today's market influenced by the Auckland market.

The July figures released this week saw a noticeable easing of price across the National picture as well as in Auckland and the other key cities. Whilst not as yet a trend, there is a sense of the market beginning to push its natural limit especially as we are in Winter. Another component of this sense of easing in the pace of growth in house price inflation was the increase in inventory reported earlier this month pushing more regions into a balance market and out of a sellers' market. 

Below are the charts for Stratified price index for the 3 cities and the national picture comparing the current price to the past 6 years covering the prior peak of the market and crash in property prices in 2008. 


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Auckland Stratified Jul 13.png

Wellington Stratified Jul 13.png

Christchurch Stratified Jul 13.png

Long term property investing reduces volatility

by Alistair Helm in , ,

House prices.jpg

The headline may be a case of deliberately stating the obvious, after all, economists will always tell you that investments of any shape or form; whether shares or property perform well in the long term, their advice is be patient, stick with it.

No; my interest was not in a catchy headline. I wanted to examine the data behind the claim that longer term investing in property from a rental business perspective is less volatile, especially when compared to shorter term investing. To be clear I judge short term to be 3 to 5 years with long term being 10 years. 

The ability to undertake a detailed analysis of the investment returns of rental property has been greatly assisted by the Ministry of Business, Innovation and Employment who have released online the full data set of rents by Territorial Local Authority (TLA) by month going back to 1993. The data set identifies the mean rents and the lower quartile rents.

I have used this data set and mashed it together with the REINZ median house price data going back to 1992 and the Reserve Bank of New Zealand data on mortgage interest rates for the same period. This collection of data has allowed me to build a model that shows the real rate of return based on the median house purchased and rented with a notional 100% mortgage paying the monthly variable rate of interest on the mortgage. The rate of return is based on the selling price at the end of an investment period being the median price at that month, plus the monthly rental income, less the mortgage payments, less the original purchase price at the start of the investment period based on the median price at that month. Note that mortgage payments are only the interest component.

Before detailing the presentation of this data I thought a couple of preliminary charts might be of interest. The first is the indexed growth of property prices and rents over the period since 1993. 

House prices have far outstripped rents.png

Not surprising here. Property prices have soared ahead of rents. Given the often quoted economists view that property prices need to reflect fundamentals of the comparable cost of renting, the message clearly have not got through. The massive divergence of the indicies from 2003 onwards is so clearly seen in the chart. There was some adjustment as property prices eased back in 2008 but the recent resurgent property market now sees property prices at an index of 350% of where they were in 1993 with rents at 232%.

Looking at the financial performance of rental investment, a simple judgement of the investment is to see how much of the monthly mortgage repayments is covered by monthly rents. The chart below details this as a trend line by month from 1993 to date.  


Rents as a of mortgage.png

As can be seen the fact is that at only two occasions over the past 20 years has the the mean rent actually come close to covered the monthly mortgage. Towards the end of the 90's when property prices stagnated and interest rates fell as a function of the Asian Crisis and then again in 2002 jus before the massive surge in property prices again at a time of low interest rates. However in today's world when interest rates have never been lower for longer the rental income barely covers 80% of the mortgage repayments as property prices continue to grow. 

So having provided some contextual data for the mean rents, property prices and mortgage rates here are the charts which show the actual financial return in dollar terms for rental property invested over a 3 year / 5 year / 10 year period for each month right up to June 2013.


3 year investing.png

Over the 3 year horizon the significant returns achieved by buying in the early 2000's are not even close to being achieved again at this time and clearly the worst outcome would have come from the net losses attained in the period of 2009 to 2011.

5 year investing.png

The 5 year horizon resembles very much the 3 year investing picture, with slightly higher returns for those exiting in the perfect position of the peak of the market in 2007 - again recent returns based on a 5 year investment come nowhere close to those levels.

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The 10 year investment horizon demonstrates the value of long term investment which is always around $70,000 for the 10 year period. What is interesting is despite the recent low interest rates and rising prices the recent level of return is declining and is likely to continue to show lower returns on a 10 year horizon as the purchase period slips into that period that saw the greatest rise in property prices. So the guidance would be - hang on in their for the long term.

The short term investment of 3 or 5 years can achieve excellent returns but as ever you have to time the market perfectly and this is only ever really seen in hindsight. The current return on all 3 periods shows a level lower than the peak and the average. 

Potential impact of policies to address the 'hot' property market

by Alistair Helm in , ,

Real estate agents might be urging the government to "be careful what you wish for" in regard to any government or fiscal intervention  in the NZ property market -  especially if they have read about their colleagues in Hong Kong!

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With further evidence that the NZ property market is building up a significant pressure bubble – the ever-present question is whether that bubble will see the pressure released slowly or just simply burst with negative repercussions. 

Measured on a 5 year basis the REINZ Stratified house price index shows a 17% increase, with over half of that gain in the past 12 months! This has prompted extensive calls for some form of non-monetarist intervention via the Reserve Bank to focus on LVR and also calls for controls on overseas buyers.

With this as a backdrop it is worthwhile to compare and contrast the NZ market with the Hong Kong market given its topicality. Accepting the Hong Kong market is a very different market; the choice is a result of the fact that the local government has recently introduced far-reaching controls to bring some reigning in of a super hot market that has seen property prices rise 120% since 2008.

These new measures coupled with the tightened of existing policies is an attempt to make property, especially apartments more affordable – now where have we heard that cry before?

However to begin with there is an important perspective that needs to be seen when comparing the Hong Kong market with the NZ market. We are so often told that NZ and again particularly Auckland has some of the most unaffordable property in the world when comparing house prices to salary. The NZ ratio has house prices close to 5 time the average salary – that pails into insignificance as Hong Kong sits at a whopping 12.6 times average income!

The measures brought in include a doubling of stamp duty to 8.5% for property over HK$2 million (NZ$330,000) . I was interested to read in the South China Morning Post article of what I would consider as the most appropriate measure, being the requirement for banks to assess the ability of borrowers to manage a three percentage point increase in mortgage rates, up from the prior test at two percentage points. Additionally a stamp duty has been introduced to curb speculation payable by sellers if properties are sold within 3 years – the duty is now between 10% and 20% of the selling price. Lastly the measures also include (which will be of interest to NZ) a 15% levy on non-local property buyers!

All in all some very stringent measures, which from the data published in the article shows the policies appear to be making an impact as property sales collapse.

agents march in protest at moves to control sky high Hong Kong property prices  



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 Estate agents march in protest at moves to control sky high Hong Kong property prices

This collapse is having its effect on the industry of over 40,000 real estate agents in Hong Kong  which interestingly equate to 1 agent per 175 of population, compare that to NZ with 1 agent per 440 of population. These agents are up in arms as the slowing sales cuts their income – so much so that these agents association are marching on Government headquarters to have these policies reversed – could this end up being the case in NZ if proposed government and Reserve Bank measures cool the NZ market ending it backwards and jeapodising the income of 10,000 agents? – it will be interesting to see!


Property market interview - TV9 Finance Weekly

by Alistair Helm in , ,

I was recently interviewed by TV9 for their Finance Weekly spot with Brenda Lee. In this interview I cover a wide raft of property market related issues: 

  • Property prices, are prices becoming unaffordable?
  • International property trends vs NZ  
  • Forecast for the next 6 months - will the market continue to see prices rise?
  • Houses not unaffordable - we don't pay ourselves enough
  • Struggle for first home owners - plea for baby boomers to release equity to assist first home buyers
  • The auction selling process

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 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 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.

Auctions causing buyer frustrations – I blame technology!

by Alistair Helm in , ,


As someone who has spent over 7 years advocating the adoption of technology by the real estate industry in NZ, I must now adjust my position and state that I believe that it is technology that is frustrating buyers in the stressed Auckland property market.

The stories have become so commonplace that I sense we feel like we have almost been with these buyers in some vicarious way at their endless frustrating auction.

The young couple with the necessary deposit and pre-approved mortgage eagerly awaits the auction of their chosen dream home. The research tells them that the property is within their means with a maximum budget of $475,000, the property has a CV of $410,000 and the agents tells them that at their budget they should certainly be bidding. However the bidding exceeds their budget with the property selling for $585,000.

So what’s going wrong and why blame technology?


Simply put the web is the first and only place people look for property. It’s logical, buyers love the ability to search around their chosen parameters of location, size and price. However the greatest attribute of the search process turns out to be its greatest downfall – the search range of price.

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Take this scenario of our hypothetical couple – they have a budget with a max of $475,000 so on Trade Me and they search within their chosen suburbs with the range of $400,000 to $500,00. Website have price bands of $100,000 increments (Trade Me does have $50,00 increments up to $450,000). Their dream home came up in this search because the agent had included in the property details sent to Trade Me and a 'Non-Display" search price of $500,000. The property was being marketed as an auction and therefore the agent did not want to display a price on the website, but it is mandatory for all listings on property websites to have a search price which is not published to power the search function.

It is my view that these wide price ranges are creating a false expectation amongst buyers and potentially misleading the public. To back up this view I have done some research to test my thinking.

I took a random sample of 10 properties on the market today, all marketed as auctions in Auckland City. These properties were in suburbs such as Onehunga, Mt Wellington, Mt Roskill, Blockhouse Bay and One Tree Hill. All properties were identified through the search price range of $500,000 to $600,000 being the average property price in Auckland today. I then went about undertaking a process to identify the exact search price or search price range for each property as inputted by the listing agent. To do this you need to use the Advanced Search feature on which allows you to specify your own chosen price range in increments of a dollar; by doing this I was able to see at what price these properties appear or disappear from results. Also for reference and a sense of benchmarking (despite my dislike for CV’s) I got the Auckland City Capital Value for each property.

The results of this analysis were very interesting. Eight of the ten properties had a single search price inputted by the agent. The search price as compared to the current CV varied widely from 3% below the CV to 47% above the CV. The average was 23% above the CV.


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However the thing that was most interesting to me, and what could potentially be construed as misleading, was the way these property appeared in a wide range of search results based on price ranges. Remember all of these properties appeared in the search range $500,000 to $600,000.

Property #1 with a CV of $470,000 appeared in all 3 searches from $400,000 to $700,000 as the agent had specified a search range of $500,000 to $600,000.

Three properties (#4, #5, #7) with CV’s from $410,000 to $440,000 appeared in the range $400,000 to $500,000 – all had a search price by the agent of $500,000 so clearly the agent was indicating a sales price of over $500,000 yet if you had a budget of say $425,000 these 3 properties would appear to be within your range.

Property #6 with a CV of $620,000 appeared in the price range of $500,000 to $600,000 as the agent had chosen a search price of $600,000, yet clearly the expectation was a selling price of over $600,000.

It is clear that the current wide price range search parameters could be leading to misinterpretation by buyers. To fix it the websites concerned could offer more options with smaller price ranges, as noted in their advanced search function does allow for individual discrete price ranges to be entered. However there is a simpler solution.

Real estate websites could make a slight adjustment to the underlying code of search results so that search increments become $99,999 instead of $100,000. This would mean that when a search is made in the range $400,000 to $500,000 it only returns property with search prices between $400,000 and $499,999, thereby ensuring that a property for which the agent has selected the search price of $500,000 will not be found in such a search. In that way technology could help home shoppers match expectation to realistic budget better.


Have we reached a new normal with property prices?

by Alistair Helm in

House prices.jpg

I was attracted to an article today posted by entitled “Expect slow house price rises, says RBA” – now given the fact that Australia seemed to have skipped the last property price crash allied to the GFC I thought this was a very interesting headline and article, certainly worth reading and sharing.

The article referenced a speech by Luci Ellis, the head of The Reserve Bank of Australia’s financial stability department delivered this week in Sydney.

Now I am not an economist. I have an interest in the subject and with an eye for statistics and trends I was fascinated to delve a little deeper into this hypothesis presented by Ms Ellis that we are at, or at least close to, a new normal that may well see slower increases in house prices and more occasions when prices are  falling.

The full text of her speech and contextual charts are available to read and I would encourage a review as they are very enlightening. I hope someone may be motivated at Statistics NZ or the Reserve Bank here in NZ to produce similar charts to see how paralleled our markets and economies are in this regard.

To summarise the hypothesis. The view is that the move to lower inflation through the 80’s and 90’s lead to lower interest rates. As this occurred, lenders were more comfortable to increase the scale of lending without driving up loan-to-income ratios. In the view of the presenter, this resulted in almost a doubling of the amount households could borrow. This rise in borrowing capacity almost had to result in higher property prices which eventuated in the past decade or so.

Reserve Bank of Australia, Financial Stability Dept: April 23 2013

Reserve Bank of Australia, Financial Stability Dept: April 23 2013

After this adjustment worked through the system the household debt-to-income has in Australia remained largely flat. The capacity to repay debt grew in the same period in someways replacing ‘old fashioned’ savings which in total edged down to zero although has crept back up as house prices have stabilized.

Reserve Bank of Australia, Financial Stability
Dept: April 23 2013 



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Reserve Bank of Australia, Financial Stability Dept: April 23 2013

The view is that these adjustments, having now worked through the system, have created a less volatile environment where house prices are less likely to experience significant rises and may self correct with price falls.

What is very interesting in studying the charts within the presentation is the similarity between Australia and NZ on issues such as scale of new construction, urbanization, immigration and land availability. These similarities whilst no guarantee that this hypothesis will be experienced in NZ, certainly give pause for thought around the much discussed and often debated view as to the future of house prices here in NZ.

Where are NZ house prices? – hitting new highs?

by Alistair Helm in

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I thought it was about time to examine the latest house price data from REINZ. My favoured set of data is the Stratified house price index which as I have stated before is a more accurate reflection of true house prices across the country than the pure median.

The latest figure for March showed that house prices in NZ hit a new high of $409,080. This is the first time this measure has broken through the $400,00 level and represents an 8.6% rise over the past 12 months.

Interestingly the rise in the past year represents only just more than the rise since the peak of the market, now over 5 years ago in November 2007. Price today are just 7.4% ahead than that peak. As the chart shows the market fell by 11.4% over the first 14 months to a low of $337,400 before initially rebounding in 2009 and then slipping sideways through 2010 and starting to recover in early 2011 before starting the ascendancy to climb through the prior peak which was passed in May 2012.

The rate of increase in appreciation of property prices as shows in the chart above has been growing significantly over this last 18 months edging ever closer to 10% on an annualized basis. No signs yet, of the heady days of 2002/2003!

However when assessing the appreciation of any asset over time it is an oversight not to factor in the impact of inflation. A basket of goods valued at $100 in 2007 at the very peak of property prices would now cost $114.54. Sure the recent years have seen low relative inflation, but the compound impact of inflation cannot be ignored.

Property prices adjusted for inflation shows a very different story for the past 6 years as the chart above details. In today’s $ terms the peak of the market price in September 2007 actually equates in todays $ terms to $436,508. That compares to today’s price of $409,080 – so in fact we have not as yet broken the peak of the property market pricing. We have not hit a new high. Property prices are still 6.3% below the peak.

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

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 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 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?

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

by Alistair Helm in

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

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

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

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

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

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

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

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

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

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

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.

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

by Alistair Helm in

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 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 could be encouraged to analyse their rich database to provide a more complete picture.

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.

We are not alone when it comes to property prices

by Alistair Helm in ,

Election night crowd, Wellington, 1931 -   Photographic Archive, Alexander Turnbull Library, National Library of NZ

Election night crowd, Wellington, 1931 - 

Photographic Archive, Alexander Turnbull Library, National Library of NZ

Have a read, if you will of this article which was published last Saturday, the 15th September regarding the trend in house prices over the past 5 years.

"House prices have become so dull that it is tempting to think they are no longer the mainstay topic of conversation at dinner parties.

Since 2009, the two major yardsticks of house prices – QV and the Real Estate Institute indices – have been broadly flat, rising in mid-single digits in 2009, then seeing either small falls or rises in 2010 and 2011.

The lack of direction in the market has surprised many, not least the real estate industry and the banks.

At the start of 2009, there were those who predicted a 15 per cent fall in prices.

The REINZ Stratified Price index ended the year six per cent up. While market predictions proved closer to the mark in 2010, in 2011 the commentators expected a fall of more than six per cent. The index rose by 3 per cent.

But many commentators still predict dire falls. Sceptics say prices remain above long-term trends for affordability. The average house price on REINZ 2011 numbers was 4.7 times the average salary, against a long-term average of four.

The flat market also disguises two trends. Stripping out inflation, house prices have fallen. And there has been a well-understood divergence between prices in Auckland and elsewhere.

So where next? Analysts foresee a flat market followed by slow growth. This still means falls in real terms, but it is a lot better for homeowners than the nightmare predictions.

Mortgage availability is improving, though slowly, with lenders offering higher multiples of salaries and higher percentages of buying prices.

Meanwhile, with rents rising significantly, buy-to-let opportunities have become more attractive, bringing other buyers into the market."

Now having read this piece, let me tell you firstly that I did not write it.

This article was published in the UK last Saturday - it was not an article about the NZ property market. (I have ammended the article by inserting NZ stats and references).

The fact is that the original UK article which I have pasted in full below for comparison, was written about the UK property market. What is so striking is the similarity - line by line, fact by fact the parallels are uncanny. The UK property market would from this comparison appear to have gone through a near identical rollercoaster ride as the NZ market over the past 5 years. To be clear the article above has been changed by me to include the references to data sources (with links) and to the actual NZstatistics.

Now here is the UK original article.....

TAKING STOCK: Slow growth coming but house prices are set for real-terms fall


House prices have become so dull that it is tempting to think they are no longer the mainstay topic of conversation at dinner parties.

Since 2009, the two major yardsticks of house prices – the Halifax and Nationwide indices – have been broadly flat, rising in mid-single digits in 2009, then seeing either small falls or rises in 2010 and 2011.

The lack of direction in the market has surprised many, not least the City.

A report by niche broking firm Redburn this year highlighted the fact that the futures markets, set up to enable people to bet on the direction of house prices, had got things badly wrong.

At the start of 2009, futures traders predicted a 15 per cent fall in prices.

The Halifax index ended the year five per cent up. While market predictions proved closer to the mark in 2010, in 2011 the City expected a fall of more than six per cent. Halifax’s index fell just two per cent.

But many commentators still predict dire falls. Sceptics say prices remain above long-term trends for affordability. The average house price on Halifax’s 2011 numbers was 4.4 times the average salary, against a long-term average of four.

The flat market also disguises two trends. Stripping out inflation, house prices have fallen. And there has been a well-understood divergence between prices in the South East, particularly central London, and elsewhere.

So where next? The Redburn analysts foresee a flat market followed by slow growth. This still means falls in real terms, but it is a lot better for homeowners than the nightmare predictions.

Mortgage availability is improving, though slowly, with lenders offering higher multiples of salaries and higher percentages of buying prices.

Meanwhile, with rents rising significantly, buy-to-let opportunities have become more attractive, bringing other buyers into the market.

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.