House sales falling: Or are they?

Thursday, 11 October 2018

Why are Kiwi houses so pricey?

Reports of house sales falling away may be overstating the market slowdown, bank economists say.

Real Estate Institute data shows outside Auckland, turnover was down 3.3 per cent last month compared to the same time the year before. In Auckland, it dropped 2.1 per cent, year-on-year.

The 5506 properties sold was the lowest number for any September since 2011.

Northland's turnover dropped 21.9 per cent, Gisborne 21.7 per cent, and West Coast 18.9 per cent. All of those regions recorded sales rates usually seen during the Christmas and January break.

* Why are New Zealand homes so pricey? It has nothing to do with avocados**

'Traditionally there is a lag of about 6 weeks between significant movements in listings and sales results. With July's listings down by 5.4 per cent year-on-year and an all-time low level of listings in seven regions, it's little wonder that September's sales volumes were so low. There simply weren't as many properties for sale resulting in a very quiet start to spring,' chief executive Bindi Norwell said.

Bindi Norwell expects the housing market to pick up again soon.

'However, with August and September's listing numbers up 0.1 per cent and 11.7 per cent respectively, it is expected that October and November's sales volumes will be much stronger – particularly as people want to sell ahead of Christmas.'

But Westpac chief economist Dominick Stephens said the Real Estate Institute data systematically understated the number of sales each month, because not all sales were immediately recorded.

'Late-reported sales are added to the historical record after the data is initially released. For example, a month ago the REINZ reported that there had been 6216 house sales in August. Today that figure was revised to 6324. Today's report of low sales in September will similarly be revised upwards.'

Dominick Stephens says the slowdown might not be as sharp as reported.

He said, after adjusting for that, and seasonally adjusting, the drop was more like 1.4 per cent compared to August and 1.8 per cent compared to September 2017. 'Nothing to get excited about, really.'

He said he had predicted two months ago that a drop in fixed mortgage rates, and predicted loosening of loan-to-value restrictions, would lead to an improvement in the housing market and a period of rising prices later this year. It would then return to a negative trend.

Fixed rates had already dropped.

'It is early days yet, but we are now turning our eye to whether the drop in fixed mortgage rates is stimulating the housing market. On a nationwide basis there are no real signs of a reaction yet. There was an eclectic mix across the provinces, with some regions seeing rising prices and others seeing falling prices for September. But Auckland is the region that seems to react most acutely to mortgage rate changes, and in that region there was perhaps a straw in the wind suggesting a market improvement.'

Gisborne, Nelson, Manawatu/Wanganui and Northland recorded record median prices in the month.

'There are now seven regions across New Zealand that have median prices in excess of the half a million-dollar mark with Northland the newest region to go over this level. Additionally, there are already three regions that have exceeded the $600,000 median mark and with Nelson's median sitting at $592,000 it may not be too far away until we have a fourth region edging over the $600,000 mark,' Norwell said.

'With our population growth and demand for properties continuing to exceed the supply of housing stock, prices are likely to continue increasing in the short to medium term. In fact, new research issued by AUT earlier this week suggested that at our current rate of supply we won't reach demand until the mid-to-late 2020s. This means that price pressure could well be an issue for some time – particularly in our more densely populated cities.'