Housing: It's a buyer's market

[muppet]

Housing: It's a buyer's market
5:00AM Monday December 10, 2007
By Bernard Orsman

The property market has hit the brakes for the third month in a row, with the latest official figures showing the average sale price of a home falling below $400,000.

Quotable Value figures out today confirm the impact of higher interest rates and a shift favouring buyers over sellers.

Growth in property values fell to 11.4 per cent in the year to November. That is down from October's 12.7 per cent and September's 13.3 per cent. The average sale price fell to $393,198 in November, from $406,176 in October.

Quotable Value spokesman Blue Hancock said the market was continuing to favour buyers over sellers, a view shared by one Auckland home seller, who did not want to be named.

He has dropped the price of his three-bedroom home in Howick from $559,000 to $519,000 after having it on the market for three months.

The seller said he would not consider buying a new house until he had sold his property.

"With mortgage interest rates sky-rocketing it would be crazy to fall into that trap," he said.

Robin Clements, a senior economist with UBS New Zealand, said the slowdown was being reflected in fewer sales, properties taking longer to sell and lower immigration.

It all pointed to growth rates being "5 per cent or less very shortly", he said.

Gareth Kiernan, senior economist at consultants and forecasters Infometrics, has recently predicted Auckland's residential property market is about to enter a "full-blown downturn" in sales activity over the next 12 months and won't recover for at least two years.

His report, prepared for PMI Mortgage Insurance, analysed the housing market up to 2010 and said the city was becoming less popular, with an oversupply of apartments and shakier housing demand.

Higher interest rates and slowing population growth had caused a big drop already but would bite even harder next year, he wrote.

Bank of New Zealand chief economist Tony Alexander has also reported overwhelmingly negative sentiment in the real estate sector.

Quotable Value's Glenda Whitehead said Auckland was seeing a greater divergence between asking prices and actual sale prices, and an increasing time to sell.

"In recent weeks our valuers covering the Waitakere area have noted a pick-up in activity in the marketplace and prices appear to be holding their own in most areas."

Within Auckland City, older well-built family homes were being favoured over modern monolithic-type townhouses. Relatively good prices were being achieved for quality properties, Ms Whitehead said.

Of the larger urban centres, Tauranga property price growth has fallen from 7.7 per cent in September to 5.4 per cent last month.

Hamilton, Christchurch and Wellington have also eased.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10481391

[dasphinxter]

If its already getting hard to sell, next winter will be a great time to go investment shopping if your in position to do so.
Also i think its one of the best times to idenify any faults in your potential purchase that can normally be overlooked in summer.

If the OCR increases anymore its going to be salt on the wound for anyone strugling to cover individual mortgage or too highly geared on their portfolio.

[OllyN]

Confusing Story

The Herald report today could be confusing for many.
It muddles together annual house price movements with month to month movements.
The latter is by far the most important. To the casual reader the market is still growing at a healthy 11.4% p.a.
Yet from September to October average prices fell from $406,126 to $393,118
($13,000 neg) or about 3.3%
If this were to continue for next 12 months we will have a property market
40% less in value than today.
Not for one minute do I believe this to be the case but the point is that 12 months trends are of little but academic interest.

[muppet]

House price growth slows 10%
Monday 10 December 2007
The latest house price statistics show that the market has slowed by more than 10% in the past year. Statistics from QV show that national property values fell 10% when comparing the three month period ending November 30 to the corresponding period last year.

QV says that while house prices rose, the increase in the three month period to November this year was 11.4% compared to 12.7% the previous year.

However it also shows there are some wide disparities in prices. For instance in Christchurch, Tauranga and Wellington experienced much larger falls in prices than Auckland, Hamilton and Dunedin.
Some regions experienced falls while others, like Queenstown, Rotorua, Nelson and Taupo showed increases.

QV says the average sale price for residential properties has decreased from $406,176 to $393,198 this month.

"The market continues to slow down as the number of property sales decline, the time to sell increases, and the impact of pricing pressures are felt," QV spokesperson Blue Hancock says.

“The market continues to favour buyers over sellers. Buyers seem content to take their time before committing themselves to purchase and sellers are considering reducing asking prices accordingly," he says.
Of the larger urban centres Christchurch was down from 12.3% to 9.9%, Tauranga was down from 7.7% to 5.4% and Wellington fell from 13.7% to 11.6%.

Most of the provincial centres also reported easing growth in property values. Invercargill dropped to 34.8% this month (from 36.4% last month), Palmerston North decreased to 9.6% (12.4% last month), Napier slowed to 7.1% (7.2% last month) and Gisborne eased to 14.4% (20.4% last month).

In contrast, growth in property values increased in some provincial centres. Rotorua and Queenstown climbed to 11.5% and 15.3% this month (from 9.4% and 13.7% last month), Nelson increased to 13.2% (12.9% last month) and Taupo went up to 3.4% (3.2% last month).

Main Urban Areas Commentary:
Auckland:
Property values in the Auckland region increased by 11.8% over the past year . The average sale price for the region was $508,974.

"Within the Auckland region the annual growth rates are slipping back. The average sale prices are also easing back with many of these now reflecting values similar to those experienced in the June to September period of this year" said Glenda Whitehead of QV Valuations.

"The market seems to be consolidating with buyers and sellers acting more rationally. Although, we are noting in many areas a greater divergence between asking prices and actual sale prices, and an increasing time to sell," Whitehead says.

"In recent weeks our valuers covering the Waitakere area have noted a pick-up in activity in the market place, prices still appear to be holding their own in most areas. Agents report that vendors are reluctant to accept market negativity and buyers are being very stubborn and aren't willing to negotiate. The average sale price for Waitakere of $401,479 now reflects similar levels to August with the annual growth rate of 12.8% very similar to 12.7% reported last month."

"Within Auckland City we have reports of the market being more discerning in its choice of property. Older well-built family homes are being favoured over modern monolithic type town houses. Relatively good prices are still being achieved for quality properties. Agents continue to report an expectation gap between vendors and purchasers. Our valuers have received comments that developers are withdrawing from the market," Whitehead says.

Hamilton:
Hamilton’s property values increased by 14.5% over the past year . The average sale price increased to $367,660.

"Declining sales volumes, increasing interest rates, and slowing population growth have finally impacted on Hamilton’s residential market with property value growth decreasing to 14.5% from 15.8% reported last month," said Richard Allen of QV Valuations.

"The Central City/North West area of Hamilton eased from 15.4% last month to 13.5% this month. The South West decreased from 15.4% to 12.9%, and Hamilton North East dropped from 16.6% to 15.3%. The only area to buck this trend was South East Hamilton, which increased from 12.3% to 15.1%."

"Although demand continued to soften in most areas this has not had a significant influence on the average sale price in Hamilton, which decreased slightly from $368,194 to $367,660," Allen says.

Tauranga:
Tauranga's property values increased by 5.4% , down on the 7.7% reported for October. The average sale price for the city was $439,084.

"The Tauranga property market continues to show a lack of spark with modest increases over the 2007 year" said Christopher Boyd of QV Valuations. "Growth rates have improved from a low of 2% in February to a peak of 8.2% in September, but the November figures may confirm a downward trend".

"These changes are all relatively minor in what is a very different market from two years ago. The average sale price for November dropped from $450,122 to $439,084, which represents the first drop we have seen this year,” Boyd says.

"Anecdotal evidence suggests continuing difficulty for the real estate industry in terms of closing deals with a moderate level of inquiry, but few reasonable offers. The upper levels of the suburban apartment market have failed to attract buyer interest for some time, and there are many examples of unsold and unoccupied properties in this sector" Boyd says.

Wellington:
Property values in the Wellington region increased by 13.6% over the past year , down from 15.9% reported last month. The average sale price for the region recorded a decrease of $12,800 from last month to $425,429.

"The feedback from our valuers who have been talking with buyers, sellers, and real estate agents is that the market is clearly coming off a strong period of growth" said Max Meyers of QV Valuations.

"Most areas in Wellington showed easing in annual price growth and a decline in the average sale price, which suggests the whole of the market is slowing down," Meyers says.

"Upper Hutt showed the greatest increase across the region of 17.5%. However, this is a large drop from the 19.8% reported last month and a good indication of an easing property market. Lower Hutt dropped 3.8% from last month to 16.1%. The Northern Suburbs recorded the lowest increase across the region of 11%, while the Eastern Suburbs eased slightly to 11.3% (12.9% last month), and the Western Suburbs decreased to 14.7% (17% last month)," Meyers says. "Reversing the trend, Kapiti Coast and Porirua actually went up this month to 15.3% and 15.8% (from 14.7% and 15.6% last month).

"Expectations are that the softening market will continue into next year as there is clearly a marked reduction in the number of transactions taking place and significant shift in demand and negotiability of vendors," Meyers says.

Christchurch:
Property values in Christchurch increased by 9.9% over the past year down from 12.3% reported last month and 13.1% recorded in September. The average sale price for the city was $359,891, down from $365,152 reported in October.

"The annual price movements came back fairly sharply over the last month, with the average sale price also reducing. The market continues to soften with lower sale volumes, lengthening sale periods and pricing pressures evident. This is especially noticeable in the upper price brackets" said Mark Dow of QV Valuations.

"The caution in the market continues with purchasers taking their time to make an offer on properties. The residential market continues to be patchy and has swung firmly towards a buyers market. We are yet to see the traditional upturn in the market coming into summer,” Dow says.

"The market in the provincial centres had mixed results, with Selwyn, Hurunui, and Timaru all recording lower annual growth rates from last month, while Ashburton, Waimakariri, and Banks Peninsula had improving annual growth."

Dunedin:
Dunedin’s residential property values increased by 8.5% over the past year , down from 9.4 % reported last month, continuing a trend seen over the last three months. The average sale price in Dunedin was $280,024.

"The impact of interest rate increases earlier in the year coupled with the general increase in the cost of living has really put the pressure on home affordability, especially for first home buyers. Interest rate increases have also put pressure on the investment market with significantly less inquiry in this area" said David Paterson of QV Valuations.

"It is clear now that the market is experiencing a slow down with increases in property values and volume. Indications are that value growth will continue to level off over the next few months, however there is no indication at this stage that we will see a drop in value levels," Paterson says.

"Queenstown continues to show strong growth with property value growth rising to 15.3% (up from 13.7% last month). The average residential sale price increased to $738,049 (up from $662,539 last month) driven up by eight sales over the value of $2 million recorded in the period.”

http://www.landlords.co.nz/read-article.php?article_id=3094

[Bodmin]

Stuff reports it more accurately

The Stuff article this morning highlights the 3% drop and does not focus on the annual averages.

[essence]

Housing boom has turned

Average house sale prices fell 3 per cent in November, heralding the end of a meteoric rise for residential property values, according to Quotable Value's latest figures.

"For the first time we've had a drop in the average sale price, and quite a marked one too," QV spokesman Blue Hancock said.

It was clear the booming property market, which has slowed for three consecutive months, had turned.

The national average sales price dropped by $13,000 from October to $393,198, and nearly every region in the country recorded a slowdown in house price growth.

With the crest of the property boom behind us, it was hard to know how slippery and steep the coming slide would be, Mr Hancock said.

If the magnitude and duration of the recent growth in property values was anything to go by, any backward movement could come hard and fast.

"The pace of this boom has not been matched at any time before. The longevity of it has been incredible," he said.

Property values in Christchurch, Wellington and Tauranga recorded the harshest slowdown last month.

Wellington QV spokesman Max Meyers said most areas within the region were slowing and dropping in sale prices as vendors had to become more negotiable to secure a sale.

Conversely, Nelson, Rotorua, Queenstown, Taupo and Hastings showed some mild strengthening in price growth.

Massey University property expert Bob Hargreaves said the market had become much harder with a huge number of houses on the market and few eager buyers. "The market has turned."

But the downside might not be as bad as some were suggesting.

Historic property downturns had often coincided with economic lulls, but the current one came as things were looking good for New Zealand. A correction was inevitable as overseas markets had shown, but whether it got to 5 per cent, such as the US had seen, was guesswork.

Property investments in fringe areas would suffer, while good investments in growth towns would survive and retain their value, Professor Hargreaves said.

"The people in trouble will be the ones that have borrowed too much, or rental properties where interest rates are starting to chew into them. But most people will just sit tight," he said.

Mr Hancock said the Reserve Bank's efforts to quell the property market had worked, and how the market fared after the typically quiet Christmas period would show the true extent of the downturn.

Property investment would be the first to die, with 2 per cent capital gains not much for an 8 per cent mortgage, he said.

An increase in investors looking to offload property could be the result of the shift in potential for property.

"People may have to rationalise their portfolios, there's no doubt. We have already seen mortgagee sales, and there will be more of those," he said.

Whether or not investors could ride out the downturn depended a lot on how long and severe it was, and how well off they were, Mr Hancock said.

[Commercial Dan]

The signs were very clear in the middle of the year, I think some have been caught off guard, particularly the 'this time its different proponents' and traders/developers who are the ultimate optimists. I have never met a trader or developer who does not think that the current economic conditions are carved in stone...have to admire their optimistic outlook though, without that it is almost not worth carrying on I suppose

[OllyN]

Baby Boomers to the Rescue

Click here :

http://weblogs.newsday.com/news/opinion/walthandelsman/blog/2007/11/animation_baby_boomers.html

[Snookie]

Very Funny...

... and very sad at the same time

I would like to know how one 'analyses the market up to 2010' though....

"...things turned to crap a while ago - but it didn't make good reading then... but we will report on it now... and say it will continue for a while..."

[Davo36]

Funny Olly, the guy sorta looks like you...

[Tucker]

REINZ figures for November show a slight rise not a 3% drop although market is cooling they say

[Commercial Dan]

Saw that, it all seems a bit strange...guess it shows things are flattening though.

[Tucker]

You've got to wonder how they can get the stats mixed up that much

[Commercial Dan]

I agree, it seems ridiculous to me how there can be that much discrepancy, guess the reinz do theirs on unconditional sales, whereas QV do it on settlement.

I suspect the reinz have more reason for theirs to be tweaked if that is the case.

[Tucker]

Yeah if QV is on settlement then it may mean Dec or Jan stats may come up a bit.