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Auckland average house price falls in January reflecting seasonal lull, Barfoot says

Auckland's average house price slipped in January, reflecting a seasonal slowdown following the Christmas and New Year holiday period.

The average sale price fell 7.6 percent to $647,207 from a record in December, although it is 7.7 percent ahead of January last year, according to realtor Barfoot & Thompson. The median price fell 7.8 percent to $580,000 from December.

"This is part of the normal seasonal trading pattern," managing director Peter Thompson said in a statement. "All indications are that the market is building to being extremely active during the first quarter of the year."

The agency sold 854 properties during the month, its highest January for six years. Some 39 percent of homes sold were under $500,000, the highest level since the Reserve Bank in October imposed limits on high-debt lending. That indicated banks were being more flexible towards low deposit borrowers, the realtor said.

Barfoot & Thompson had 3,371 properties listed at the end of the month, the lowest number for January in more than 11 years, suggesting prices may rise over the next three to four months, it said.

(BusinessDesk)

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Comments and questions
9

It's so laughable. If you read the Header and first paragraph of the B&T release you would think the market was booming. The substance of the data is this:
- Jan sales the highest in 6 years
- Jan Listings up >4% year on year
- Jan Listings up >4% over December ("exceptionally high for the first month of the year" according to Barfoot)
- Prices down (7.8%) on December
To me it's clear that the market has turned and is beginning to tank. Also anecdotal datapoints - anyone who has been tracking listings since mid last year will know for example that nearly 30% of the "new" January listings are actually failed auctions from late last year. Buyers: beware snake oil agents selling you over-ripe lemons.
The party is over, and with interest rates rising, vendors need to adjust their price expectations massively if they want a sale (people asking 100% over 2011 CVs are obviously smoking something really interesting; +30% is about the right number vs 2011).
A house price correction is great for NZ as a whole, and hopefully we will see prices fall (like previous Auckland corrections over the past decade) by 8-10%.
Rising house prices are poison for an economy - they only result in higher mortgages and the interest on these mortgages is paid offshore to overseas investors, and boom bust cycles for the economy as a whole. People who think high house prices make them wealthy are kidding themselves - you end up heavily indebted and much poorer (lower disposable income). Drive around Herne Bay, Epsom, Mt Eden, Devonport and see how many "premium house" owners have old rusting cars in the driveway as they don't have the disposable income for a decent car. Decile 9 & 10 schools where parents can't afford to pay their donations. It's a joke.
I'd rather see lower house prices, and therefore have NZ households with more disposable income to save for retirement and spend on NZ goods and services, therefore leading to more/stable economic growth, higher earnings (ie your boss can pay you more as she isn't as worried about her rising mortgage interest and her business is doing more sales) and a more prosperous life. Look at Germany - low ownership%, low house price growth, extremely wealthy as their private sector income is invested into their real economy, not spent on servicing debt.

.. some good points and I agree completely about servicing ridiculous levels of debt and the result is has on disposable income/ lifestyle. However your german comparison is not a fair one as the supply of rental properties there is much higher meaning rents are a lot lower. In Auckland rents are relatively high so the decision on paying off a mortgage and building an asset base is more attractive than paying high rent and being in the same situation in 30 years time...
I still think demand and supply will continue to play a part in Aucklands RE industry and with migration and overseas investment prices will continue to rise beyond wage increases unofortunately

Agree with a lot of points there. The media in general tend to have too much faith in commentary from companies and institutes vested in the industry.

I'm a highly qualified expat who is yearning to move back home. However, I am completely discouraged because of the hyper inflated housing market.

In my view, there is little social value to property speculation, and it should be regulated to discourage the 'investment property' culture in NZ. Obviously this regulation would not impact primary dwellings.

Sam, the day of reckoning for house owenrs is coming. Those most at risk are a) those that bought in the past 18 months with large mortgages, and b) property investors who over-levered to build a portfolio in the mistaken belief that property is a one way bet.
Informed commentators understand what has been going on in the markets globally for the past 5 years. Central banks have deliberately run easy monetary policies specifically to pump up asset prices. Why? Because there was a crisis of global confidence combined with needed deleveraging that threatened to cause global deflation - a true risk of "depression" like in the 30s. Central Bankers recognised that there was alternative material risk from printing money/low rates but considered it the lesser of 2 evils.
What resulted? Surprise surprise, low interest rates led to asset prices rising, markets stabilising and people feeling confident enough to start spending again (net savings rates, after spiking post GFC, are now in decline including in NZ). This has stimulated economic growth, but at the expense of massive asset bubbles.
Now comes the tricky part. All central bankers know that assets prices are in bubbles, particularly property. And now that growth has returned they are turning their attention to unwinding their unprecedented stimulus and normalising monetary conditions - let's be clear, they fully intend to deflate the asset bubbles. It will be a very bumpy road but the one absolute certainty is that asset prices will correct, in particular property. You cannot "magic up" additional income to cover higher mortgage payments and this is what Kiwis face over the next 2 years. Even buy-to-let investors will face difficulty raising rents if they want to keep their properties occupied. Because there is no housing shortage here, just a credit-fuelled asset bubble waitign to pop.
Unfortunately Kiwis are naive about these things and the media is complicit with very poor reporting and a heavy bias to interest groups like real estate agents.
The only data in the market is controlled, manipulated and selectively released by real estate agents. I would actually like to see one of the political parties step up and impose greater transparency regulations on the market given it is our single biggest investment, both as a country and individually (e.g. force disclosure of sales/price, auction clearance rates, re-listings data etc. Can you imagine investing in the stock market if the NZX didn't have to tell you what price shares were trading at?).

The Auckland market will not tank as long as unfetterred Asian immigration and foreign money is allowed to come in.

Analysis of Auckland without taking this into account is simply pointless.

And this is where Wheeler has lost the plot - he does not understand the causes.

Foreign or Chinese monies have been flooding to Hong Kong and Singapore as well, but their property prices have fallen as much as 10 to 20 %. What are they doing and perhaps NZ should start learning.

We have now got ourselves a new Financial Markets Authority to educate and protect buyers of financial products with regulatory teeth. Where is the Property Markets Authority to reign in the cowboys selling myths and fables? By analogy: Who discloses the risks? Where is the transparency? Who is accountable? The role of government is first and foremost to regulate to protect. So far, with regard to residential property investment, government fails on its most fundamental role.

What to do to bring house affordability down.

Reduce costs of bringing sections to market
Reduce time that developer have to have money tied up waiting on consents
Allow developers to create housing projects where they decide on width of berms, number of footpaths, quantum of street lighting, and are responsible for on going maintenance.
Reduce incentive to own and rent out property.
Reduce incentive to buy and resell property and take your chance on beating the IRD on tax game of chance.

As for capital gains tax, never worked anywhere, if you wish to tilt the playing field in favour of ownership for personal dwellings, look at two things (one or other or both)

1) interest on first home is tax deductible (perhaps some limit) .
2) fair or deemed dividend tax charged on 3% capital value of all rentals. So rental has capital value of $500,000 then tax is calculated on $15,000, at marginal rate of 30% that is $4500 per year. Of course there could be debate over the deemed rate.

Yes rent will go up but buying first home becomes more affordable so value of owning rentals diminishes.

There is one other item that would tilt towards private owners, and that is enforce a WOF on all rentals, this is starting to occur in South Island where the cold climates can have devastating effect on occupiers health and well being.

What nonsense B & T report.
Record volume with slipping prices should have been their truthful header, nothing to do with "seasonal LULL? "
The analysis of B&T's data is the Auckland market shows evidence of having peaked. Lets see if Feb vol/$ figures confirm the turndown If so, Wheeler may have to consider his options to raising interest rates he has signalled as needed to quell any heat in the Auckland residential property market.