Real estate prices in Auckland have been stagnant since the start of the year says ASB economist Kim Mundy. She writes this week that prices in the SuperCity have “stopped dead in the water”. I wonder why.
Looking at the country as a whole, average prices for real estate rose 0.8 per cent in the June quarter according to Quotable Value — the strongest three-month increase since September last year. But Auckland prices dipped.
The underlying trend seems to be that though prices in the SuperCity were down 3 per cent in June (according to realtor Barfoot & Thompson), the rest of the country has seen price increases. So let’s not get ahead of ourselves here.
As real estate sales slow, they are down 30 per cent compared to the heady days of a year ago, and homes continue to be taken to market, the table has turned on sellers. It is now a buyers’ market.
Unfortunately, home buyers may find getting the mortgage they need more difficult than six months ago which means the days of people racing to buy a property at any price are over (at least for now).
Mundy says: “Prices will remain flat or edge down slightly, the number of new listings coming onto the market will eventually slow.”
I don’t buy it, because people with property to sell will take it to market. But any drop in sales activity will be because banks refuse to fund much-needed housing developments, decline loan applications, call in loans, and raise interest rates.
Any dampening of the real estate market will be down to the banks; the same banks that fuelled it with cheap loans that were handed out to almost anyone who walked in off the street. The same banks that showered customers with gifts of cash inducements.
The bottom line is that the underlying picture has not changed, particularly in Auckland.
We are still short of 35,000 homes. Apartment blocks are going up across Auckland, and plenty of property investors may decide to sell their investments, having made a killing from buying two years ago.
And there are still more than 1000 people arriving to live in New Zealand every week — the vast majority hoping to settle in Auckland. Any boom, bust or soft landing, starts and ends with the banks.
But right now, cash buyers reign supreme.
The real Estate institute has issued a press release this week. The organisation is funded by major estate agencies, and so has a vested interest in the market.
The organisation’s CEO Bindo Norwell says New Zealand’s property market is showing all the signs of being a two-tier market with Auckland median house price increasing 2.5% year-on-year, while the rest of the country (excluding Auckland) shows growth of 11.4% year-on-year according.
According to the institute Auckland’s median price increased to $850,500 (up from $830,000 in June 2016) and the national median excluding Auckland increased to $431,000 (up from $387,000).
Norwell says: “The June figures show us that a number of things are happening across the residential real estate market – inventory levels are impacting pricing, LVRs are having a significant impact in terms of buyers’ ability to purchase properties (particularly for first time buyers) and that the major trading banks are being more cautious with their approach to lending particularly their view of how highly leveraged Kiwis are when it comes to properties.
“Talk of a decline in prices may be premature with the seasonally adjusted median price trends still rising across many regions in New Zealand. The Auckland market is the most mature in terms of the property cycle, however, at worst, prices in the Auckland region are steady at present. The data also shows an emerging trend of section sales in Auckland occurring more quickly than dwelling sales, highlighting that demand for sections is still rising in Auckland while demand for dwellings is easing,” continues Norwell.
“With the looming election, Auckland prices are showing all the signs of stabilising that we would normally expect and we anticipate this being a similar trend over the coming months until the election is over,” concludes Norwell.