3rd quarter 2016 sales down 21% Auck

[marklowes]

http://www.interest.co.nz/property/84174/slow-start-spring-will-have-crimped-real-estate-agency-commissions-upper-north-island

Down 21% in auckland for last quarter.

But up a massive 28% in the Manawatu region during the same period.

Wellington and central Otago also saw increased sales, although only single digit, 9.6% and 6.8% respectively.

Sales volume is a leading indicator for prices (where sales volume go prices follow some months later) - if anyone needed another reason to buy more high yielding PN real estate.

[Kbkiwi]

Deleted post

[donna]

Interesting thanks marklowes. I thought WGN would be higher - still probably better where it is so there's less change of a correction leaving homeowners short.

I wonder at what point the banks look at LVR and call in some $$ from those whose properties have dropped in value and LVR is more than 60%?

cheers,

Donna

[marklowes]

Interesting thanks marklowes. I thought WGN would be higher - still probably better where it is so there's less change of a correction leaving homeowners short.

I wonder at what point the banks look at LVR and call in some $$ from those whose properties have dropped in value and LVR is more than 60%?

cheers,

Donna

Sale volume is a leading indicator, Wellington prices already sky rocketing so sales volume won't be as high (most likely were at 20% plus levels at start of year when market was just taking off there).

Here's a short paper that has a good graph on the second page to see how sakes volume and price appreciation are linked:

https://www.google.co.nz/url?sa=t&source=web&rct=j&url=http://www.normmiller.net/%3Fedmc%3D414&ved=0ahUKEwjwq-bfqonQAhXMFpQKHf0uAm4QFggYMAA&usg=AFQjCNHGUutnWJc_6SG2oPoFoBZrGMstMA&sig2=5lMKrlx5Jk84lOYGQROjMQ

Basically the sales growth in PN means we'll likely see the 20% plus price speciation in PN show up in the stats in a few months time.

To your question on banks calling in loans where LVR is over 60%, this won't happen or will ever be a reason by itself for banks to call in a loan. The 60% rule is set by rbnz and only relates to new loans issued, the lvr ratio calculated at time of draw down only. The 60% does not apply to existing loans on the banks books.

Even people with 0 or negative equity (over 100% LVR) loans seldom get called in unless they fail to met repayment obligations. The fact that the rbnz is making banks play extra safe on all new loans will mean banks will be happy to hold a number of negative equity loans and forcing people to sell for a loss when they are still able to pay mortgage is in no one's best interest (bank loses out on income, mortgage holder losses property).

[Wayne]

Interesting thanks marklowes. I thought WGN would be higher - still probably better where it is so there's less change of a correction leaving homeowners short.

I wonder at what point the banks look at LVR and call in some $$ from those whose properties have dropped in value and LVR is more than 60%?

cheers,

Donna

Sales down Donna - not prices.
Won't make a difference to LVR.

[Don't believe the Hype]

Mr Alexander highlighted in his weekly update that the Q3 Auckland numbers from year ago will be skewed higher by investors trying to beat the Oct15 30% LVR restrictions and the Q3 16 numbers across the country skewed down due to the immediate implementation of the 40% LVR restrictions...

with that in mind the Wellington numbers being as good as they are suggest there is continuing momentum in this market.

[marklowes]

Mr Alexander highlighted in his weekly update that the Q3 Auckland numbers from year ago will be skewed higher by investors trying to beat the Oct15 30% LVR restrictions and the Q3 16 numbers across the country skewed down due to the immediate implementation of the 40% LVR restrictions...

with that in mind the Wellington numbers being as good as they are suggest there is continuing momentum in this market.

Q3 2015 the rbnz had just announced the 70% lvr restriction in auckland AND told banks to "observe the spirit of the restrictions and not seek to expand high-LVR investor lending in Auckland," in the interim period up to the Oct 1 implementation.

So investors in Q3 2015 were only able to 'beat the up coming restiction' to the same degree as Q3 2016. I don't see how this would skew Q3 2015 sales higher relative to Q3 2016 sales.

[Don't believe the Hype]

Q3 2015 the rbnz had just announced the 70% lvr restriction in auckland AND told banks to "observe the spirit of the restrictions and not seek to expand high-LVR investor lending in Auckland," in the interim period up to the Oct 1 implementation.

So investors in Q3 2015 were only able to 'beat the up coming restiction' to the same degree as Q3 2016. I don't see how this would skew Q3 2015 sales higher relative to Q3 2016 sales.

the 2015 restrictions were't effective immediately... They were announced and the 1-Oct date set. The 2016 restrictions were effective immediately and some banks took the restrictions and added their own over the top interpretation.

[marklowes]

the 2015 restrictions were't effective immediately... They were announced and the 1-Oct date set. The 2016 restrictions were effective immediately and some banks took the restrictions and added their own over the top interpretation.

Not the history as I remember it:

https://www.propertytalk.com/forum/showthread.php?38271-ASB-amp-ANZ-already-started-applying-the-70-LVR-rule

[Don't believe the Hype]

Not the history as I remember it:

https://www.propertytalk.com/forum/s...he-70-LVR-rule

The rule was in force by RBNZ from 1-Oct-15, then delayed to 1-Nov-15 as the banks pushed back arguing it would be difficult to manage...

http://www.stuff.co.nz/business/industries/71332834/new-lvr-rules-for-auckland-landlords-delayed

as always the banks could choose to implement new rules straight away... As I'm sure they did with some borrowers but this is different to the 2016 restrictions which were announced and made effective immediately by RBNZ.

[marklowes]

The rule was in force by RBNZ from 1-Oct-15, then delayed to 1-Nov-15 as the banks pushed back arguing it would be difficult to manage...

http://www.stuff.co.nz/business/industries/71332834/new-lvr-rules-for-auckland-landlords-delayed

as always the banks could choose to implement new rules straight away... As I'm sure they did with some borrowers but this is different to the 2016 restrictions which were announced and made effective immediately by RBNZ.

There is no difference between 2015 and 2016 LVR implementation.

Direct quote from 2016 from rbnz regarding being 'made effective immediately' is:

“We expect banks to observe the spirit of the new restrictions in the lead-up to the new policy taking effect.”

From 2015 announcement rbnz stated:

"Prior to the proposed introduction of the policy in October, we expect banks to observe the spirit of the restrictions and not seek to expand high-LVR investor lending in Auckland,". - in May 2015, and evidence from the PT link i posted above that by July (start of the quarter we are comparing) only pre-approvals were getting through.

So looks fairly similar to me

The ird number requirement and 2 year bright line test on the other hand may have lead to people trying to get in before October 2015. This factor not present this time. So that might be a valid point, although both these rules related to all of NZ so would have caused a sales spike nation wide not just in auckland if that was the case.

Tony Alexander has a very strong tendency to put a spin on things to maintain the positive sentiment in Auckland as much as he can.

He knows how fragile the market is up there and how it's all a confidence game. Good on him, I don't want to see auckland prices return to rational valuations, wouldn't be good for nz. But going much higher would also be very bad for NZ. A soft landing would be the best outcome for all.

[Don't believe the Hype]

Good digging mark... You might just be right.

one way to know for sure will be to review the Q4 numbers... Which should be clean (I.e free of government/RBNZ interference).

as far as where to from here...

Economy strong, bus confidence doing well, dairy rebounding, immigration (or Kiwis returning to NZ) continuing I don't think we're in for soft landing or crash... I thing slow growth (ahead of inflation) is more likely... Assuming no further government destabilization.

while not news worthy I'm sure growth of 5% yr (example not prediction) would be interpreted by the newspapers as ' Auckland boom over growth down x%'

[McDuck]

Sale volume is a leading indicator...

Sales volumes have been a leading indicator in the past.
And there's a lot to be said for long term patterns.
However, in a fluctuating economic environment, each new day brings a new set of rules.

Just applying a rule of thumb, without understanding the human motivations behind the behavior, can lead to all sorts of chimpery.

I would first try and lock down the shape of the persons who are not buying and why.
Then put myself in their shoes and see what I would do in their situation.

This is not as easy as it sounds, because while the basic response of people is the same, each group will have differing values and responses.

So, for example, a dairy owner might notice that he was selling lots of potato chips in January, but only half that in February.

Was it because he put the price up?
Was it because his delivery people were late every day and customers never saw them on shopping day?
Was it because a new more tasty brand was drawing the buyers away?
Was there a new dairy down the road taking half his customers?

Did the local school forbid the children to stop at the shops in uniform?
Was it just school holidays that month.
Did the council remove half the carparks outside his shop to make way for a cycle lane?
Did the local landlords put up the rent, or power company the power, so not much spare money left..etc

You get the idea..price dropping will only correct some of these events, and severe dropping might be needed to combat others.

[marklowes]

Sales volumes have been a leading indicator in the past.
And there's a lot to be said for long term patterns.
However, in a fluctuating economic environment, each new day brings a new set of rules.

Just applying a rule of thumb, without understanding the human motivations behind the behavior, can lead to all sorts of chimpery.

I would first try and lock down the shape of the persons who are not buying and why.
Then put myself in their shoes and see what I would do in their situation.

This is not as easy as it sounds, because while the basic response of people is the same, each group will have differing values and responses.

So, for example, a dairy owner might notice that he was selling lots of potato chips in January, but only half that in February.

Was it because he put the price up?
Was it because his delivery people were late every day and customers never saw them on shopping day?
Was it because a new more tasty brand was drawing the buyers away?
Was there a new dairy down the road taking half his customers?

Did the local school forbid the children to stop at the shops in uniform?
Was it just school holidays that month.
Did the council remove half the carparks outside his shop to make way for a cycle lane?
Did the local landlords put up the rent, or power company the power, so not much spare money left..etc

You get the idea..price dropping will only correct some of these events, and severe dropping might be needed to combat others.

More useful when looking at macro level, so in your example you wouldn't analyse sales of a single dairy, but sales of all dairies in a region of interest. This means many of those minor factors cancel each other out or are just seen as noise, with changing core trends in sales across all dairies able to be linked to changing demand for potato chips (in this example).

[McDuck]

That's the point.
The need to understand a thing at a grass root level, before assuming a rule like "volume leads price" in every situation.

So in the Dairy example,
A public holiday would alter all sales volumes of chips on average across all daries, but is not an indicator of future price change.
(There are just no buyers walking past - to and from school, etc).

But yes, I get your point, and it's a good one, group the right things, and analyze at an appropriate scale, and some interesting information pops out, while some information is cancelled out and lost.