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Brakes go on - big dive in house sales

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  • Brakes go on - big dive in house sales

    Brakes go on - big dive in house sales
    5:00AM Friday October 05, 2007
    By Anne Gibson
    According to last months figures, the number of unsold houses are rising, yet sale prices are in decline.

    According to last months figures, the number of unsold houses are rising, yet sale prices are in decline.

    New Zealand's biggest housing market is in the grip of a slowdown.

    Figures from Auckland's largest real estate agency show a big turnaround in sales.

    Barfoot & Thompson, Auckland's biggest agency, said the average house sale price fell more than $14,000 last month, the number of unsold homes was rising, people were slower to buy and the number of sales was declining.

    Another agency, Harcourts, said prices in its northern region - which included Auckland - had fallen.

    Sales in the northern area were down 25 per cent in the 12 months, it reported.

    BNZ chief economist Tony Alexander said the market had slowed considerably, and the latest figures were unequivocally weak.

    "Properties aren't selling and prices are not rising, so the housing market is going through a period of adjustment," he said.

    The slowdown was orderly but the weaker market could last for quite some time.

    "It looks like the housing market is going to be relatively flat for perhaps a couple of years and then if there is an upturn further down the track it is unlikely to be a particularly large one," he said.

    Goldman Sachs JBWere economist Shamubeel Eaqub said the housing slowdown was becoming more evident.

    The market had been hit by high interest rates and falling migration.

    "The Reserve Bank will be relieved to see the housing market finally slowing because it has been a significant source of inflation, directly through higher construction costs and indirectly in terms of the wealth impact on consumption."

    An orderly correction would be best for the country, but the accumulation of over-valuation in house prices meant this could not be taken for granted.

    Barfoot's figures were an important bellwether, because they covered 34 per cent of Auckland sales and 12 per cent of New Zealand sales.

    Auckland University property department head Professor Larry Murphy said the Barfoot figures were only one sample, but showed all the signs of a gradual slowdown.

    The market could pick up again in the traditionally busy lead-up to Christmas and early next year, he said.

    Barfoot and Thompson agents reported selling houses for an average of $552,480 in August and $538,247 last month, a trend the agency said was clear evidence of the property market slowing.

    Average sale prices set a record in March when they reached $564,162.

    Harcourts chief Bryan Thomson said his agency's northern area average sale price fell slightly last month but this was probably influenced by a high number of low-priced houses and sections selling.

    He had a different view of the market: "It's a good solid market, not falling in our opinion at all. In the last four months, price rises have stabilised."

    But Barfoot's director Peter Thompson said last month was the quietest September since 2000.

    High interest rates, school holidays - which started late last month - and people travelling to the Rugby World Cup were all to blame.

    "At the upper end of the market, many potential vendors are overseas following the World Cup action and have avoided placing their properties on the market while they are away," he said.

    Homes were taking much longer to sell, and vendors should be more realistic about prices they could expect, he warned.

    Auckland houses now take 33 to 37 days to sell, up on 31 to 35 days two months ago.

    Last month's Real Estate Institute figures showed house sales at a seven-year low.

    The figures slumped to the lowest July and August levels since 2001, when the real estate boom started. About 10,000 houses were sold every month during this boom; 6660 and 6394 were sold in July and August.

    But prices still rose marginally.

    New Zealand's 20,000 real estate agents reported a national median of $345,000 in July which crept back up in September to $350,000, the same as May's record high.

    Institute figures for last month are due out within the next fortnight.

    Barfoot's property management division reported a quiet September, with just under 600 new tenancies.

    Average Auckland weekly rents rose from $368 in August to $371 last month. The rent average record this year was $375 in May.

    Barfoots said rents had risen from an average $266 a week in 1998 to $347 last year.

    Latest breaking news articles, photos, video, blogs, reviews, analysis, opinion and reader comment from New Zealand and around the World - NZ Herald
    "There's one way to find out if a man is honest-ask him. If he says 'yes,' you know he is a crook." Groucho Marx

  • #2
    The enevitable is happening...

    Comment


    • #3
      I thought the Herald headline was a bit dramatic, I am sure the arrival of Spring could help soften the landing.

      Rob

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      • #4
        Well, we will all know soon enough if this is a definite trend. There have been a few nice spells on the weekends in Auckland recently and "spring in the air" for the last couple of weeks in my opinion.

        I enjoyed this advice from "Rich" who posted his opinion on house prices recently to the Herald.

        Sell your property, get long guns, gold and horses and head for the hills!
        Not advice I would take, but it gave me a (nervous) giggle.

        Comment


        • #5
          I know I am quite new to this however I am a little old in the tooth. I don't see the market dropping too far back as I have heard so much in so many forms of media about people not buying because they are waiting for a price drop. Many of these people have been saying this for a few years, therefore I am quite sure that when there is a drop in price this 'surplus' is going to be taken up by these people who want to get into the market. I know of a lot of migrants quite new to NZ who have not bought, but are renting waiting for the drop.

          Only time will tell.

          Comment


          • #6
            With average Auckland prices sitting around half a mil, the question is how far will they have to drop before people will jump in.

            I have recently changed views and are joining those who say "it is always a good time to buy". (I am prepared to put a lot of time into research however and the quality of any deal will have to be exceptional).

            Comment


            • #7
              Originally posted by Cadmium View Post
              I have recently changed views and are joining those who say "it is always a good time to buy". (I am prepared to put a lot of time into research however and the quality of any deal will have to be exceptional).
              Thats right, good property is always good property (although they're fewer and further between). Needless to say there's gonna be a lot of people mortgaged up pretty high that might get hurt.

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              • #8
                Hmm, it's going to be an interesting time. I was talking to our mortgage broker today and they said their other investors had gone quite quiet. Seems like many different groups are waiting to see what will happen.

                Do you guys read this as the bottom of the cycle or that we've not reached that point yet?

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                • #9
                  Do you guys read this as the bottom of the cycle or that we've not reached that point yet?

                  Wow! Reached the bottom probably wishful thinking - aren't we just over the peak and on the slippery slope down to the bottom?
                  Cheers,

                  Donna
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                  Comment


                  • #10
                    I thought the peak was 2003 and with a 7-10 year cycle would mean we've hit the bottom which does not seem the case. What about a double up?

                    Comment


                    • #11
                      The boom moves slowly through the country.
                      In my town we've just gone up 20% in the last 12 months.
                      So we're still in the boom and may be just cresting the brow. I'd guess only a 10% increase over the next 12 months.

                      Regarding the peak being in 2003 - there was no downside after 2003 so we didn't peak back then.
                      And there is some argument that this time it's different in that the boom-bust will be more of a boom-flat.
                      My mate Tony seems be on the money with this and he's got a good track record.

                      Comment


                      • #12
                        The fundamentals or drivers as Trass calls them are still strong in some parts of the cycle. And other parts are weakening. The market in the past does not normally react this fast to economy changes. Many long term investors from there experience point out it all takes time to flow into marketplace.

                        I suspect the stats in first post may just be a broad picture of fewer higher price property selling across AKL. This gives the impression market is sliding. When in reality many sectors of market may in fact still be positive.
                        Spring is just around the corner too. Traditionally this creates more sales volume.

                        We have had a few rates move up in last couple of weeks already. Now there is even talks of more rate rises in the next six months by some economists. ( I tend to agree there is a high chance of this occuring).


                        Summary:
                        What does all this mean. Stick to the basics and by well and safely. By this I mean avoid high LVR, poor cash-flow, The one bank trap ( As labeled by Hybrid). And most of all don't try and be greedy. Property investing wisely is not a race.

                        Comment


                        • #13
                          I think this is why real and accurate data is so important in this day and age.

                          Olly got his prediction timing slightly wrong and so did Tony.

                          Looks like Kieran Trass was right. Why ?

                          From what I can tell it is very hard to tell unless you can see accurately the true data that forms property price movement.

                          The media and REINZ can report things what ever way they like and give there own impression to the public who will simply believe what they are told. Data that is accurate is unable to manipulated. If it says market is strong, then it is.

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                          • #14
                            Originally posted by whitt View Post
                            I think this is why real and accurate data is so important in this day and age.

                            Olly got his prediction timing slightly wrong and so did Tony.

                            Looks like Kieran Trass was right. Why ?

                            From what I can tell it is very hard to tell unless you can see accurately the true data that forms property price movement.
                            I agree, but it irks me when someone carries on like he is some 'guru' which he clearly is not and he got it way wrong in this case. Further to my point, economists are usually wrong, do the opposite and you come a lot closer than they do.

                            Comment


                            • #15
                              Originally posted by Commercial Dan View Post
                              I agree, but it irks me when someone carries on like he is some 'guru' which he clearly is not and he got it way wrong in this case. Further to my point, economists are usually wrong, do the opposite and you come a lot closer than they do.
                              I agree and so does Tony. He actually told an APIA meet once that his daughter has better luck at predicting future than him.

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