Property update

“However, those properties sold at prices not far below those in March, which were at their highest levels for more than two years, and for higher prices than they were 12 months previously.

“The average price at $962,136, was down 3.2 percent on that for March, but still well in excess of the average prices for February and January, and 3.6 percent higher than the average price in April last year.

“The median price at $900,000 was down 2.7 percent on that for March, but again well in excess of the median prices for February and January, and 8.4 percent higher than in April last year.

“While some of these sales were made in April under the lockdown regulations, many were sales completed in April but agreed in March, and therefore do not give a complete picture of the state of the market.

“The tail of properties working their way through the sales system is now modest, and it will not be till May’s trading results are available in early June that a true indication of where benchmark prices are at post Covid-19.

“What April’s data does underline, is that before Covid-19 the Auckland property market was experiencing a solid upturn in sales and prices, and that upturn has been stopped in its tracks with a drastic fall in sales and a modest reduction in prices.

“In a normal month, the level of downturn in April prices might be passed over as no more than a monthly variation.

“In the few days of trading possible in April under Level 3 there was a positive level of activity in new listings, viewings and sales.

“In April we listed 239 properties for sale, less than a quarter of the number we would anticipate listing at this time of the year.

“The low number is also a positive sign for market stability as it does not suggest there is a large number of people who are looking to exit the housing market quickly.

“Vendors appear to be taking a cautious wait-and-see approach, which is the same trend that occurred in past economic downturns.

“A stand out feature of April’s sales was that 40 percent of all sales were for properties in the under $500,000 price category while property that sold for $1 million and above accounted for a quarter of sales. Normally, they account for a third of sales.

“This change in sales mix will have had some influence in reducing the average and median sales values for the month.

“At month end we had 3,849 properties on our books. This is a higher number than the average for the previous three months but down 17.8 percent on the number at the end of April last year.

“The Level 4 lockdown significantly affected the rural and lifestyle markets with sales numbers for the month only a quarter of what would be expected for this time of the year.

“Interest in far north dairy farms remained steady while lifestyle blocks, particularly those to the north of the Auckland urban area such as Waimauku, Woodhill and the Ararimu Valley, retained the interest of buyers.”

Confidence Returns To Auckland Housing Market As It Enters A New Growth Cycle

 The Auckland housing market started the new year with strong sales numbers and rising prices. ”It was an extremely confident start to the year,” said Peter Thompson, Managing Director of Barfoot & Thompson. “In terms of sale numbers, we sold our highest number of properties in a January in four years. The average price and median prices were up on those for December last year, and new listings were up over the 1,000 mark. “Buyers were active across all price segments and were prepared to pay near record prices. 

“January’s trading confirmed the signs seen in November and December trading, which pointed to the Auckland housing market entering a new growth cycle. “The average price for the month at $951,631 was in line with prices for the past three months but was 2.6 percent ahead of that for January last year. “The biggest price movement was seen in the median price of $885,000, which increased by 2.3 percent on that for last December but was up 6.9 percent on that for January 2019.

“The rise in the median price can be traced back to property which sold for in excess of $1 million. In January we sold 261 homes in this price segment, more than a third higher than the number in the same month last year. “Although new listings for the month at 1,080 were sound, and up 58 percent on those for December and 11.1 percent ahead of those in January last year, the market is still tight in terms of choice. “At month’s end we had 3,537 properties on our books, down 18.4 percent on the number in January last year and only on a par with the average number of listings for the previous three months. “This number of listings at the end of January is the lowest they have been at the start of a year in four years and given the level of interest being shown by buyers, now represents an excellent time for owners to list. 

“Our rural and lifestyle markets experienced their best start to the year in three years, with strong sales numbers and excellent prices in January. “The active markets led to a renewed interest in development land from those buyers unable to find an existing property that met their demands. “Growing numbers attended auctions and open homes during the month. “As with the metropolitan market, new listings, while increasing over those in late 2019, were insufficient to meet demand.”

NOV REPORT  – Committed Buyers Drive Increased Competition For Auckland Property

Committed buyers have returned to the Auckland residential property market.“It was a result foreshadowed by strong sales in October, and the lift the market received then has flowed into significantly higher prices in November,” said Kiri Barfoot, Director, Barfoot & Thompson.“ Activity has not returned to the heydays experienced at the height of the previous price cycle but Auckland sales have certainly shrugged off the modest turnover and price movements experienced over the past two years. 

“The median price for the month at $891,000 is up 5.8 percent on the average for the past three months while the average price at $963,671 is up 3.5 percent.“Monthly price increases of this size were last seen when the market was at its strongest in 2016 through to the early part of 2017.“Sales numbers for the month at 960 were the highest in a month since March this year and the highest they have been in a November since 2015.“A contributing factor to the price increases is the declining pool of properties on the market.“In November we listed 1,517 new properties, and although this is one of our higher monthly numbers this year, it is our lowest in a November for 11 years. “At month end we had only 3,703 properties on our books, close to a quarter lower than we had at the same time last year.“End result is that when high quality properties reach the market there is determined competition among committed buyers which is driving prices higher. “Price is proving no barrier to property sales at the top end of the market, and in November we sold 44 properties valued at more than $2 million and a further 322 valued between $1 million and $2 million. “At the same time we sold 103 properties valued at under $500,000.“Based on the high number of signed up and conditional sales in the pipeline the prospects of November being a rogue month is unlikely and we see an active market remaining through to year end and continuing into the first quarter of 2020. “The rural and lifestyle markets experienced one of the better month’s trading this year, but prices did not reflect the gains made in the urban Auckland market.Lifestyle listings were up with good attendances at open homes. One hectare lifestyle blocks close to the northern boundary of Auckland are starting to reach the market as a result of transferable lot subdivisions, and these are proving popular.”

AUGUST UPDATE. Auckland Property Market Looking For More Listings to Revive Momentum

The Auckland housing market has emerged from the three months of winter in a stable position but it is one which needs more listings to revive lost momentum according to Peter Thompson, Managing Director of Barfoot & Thompson.“Trading in the three months of winter and in August followed the same steady pattern of last year,” said Mr Thompson.“A pattern of modest sales numbers, prices at near record levels and new vendors hesitant to enter the market.   

 “Spring just may be the trigger required to revive the market.   “In August we sold 746 properties, down 15.1 percent on those for July, but not too far out of line with our trading numbers for August over the past two years.
“The prices paid for those properties were excellent, with the average price being $930,090 and the median price being $830,000. The average is higher than that achieved for the previous three months while the median price is right in line with that for the previous three months.“Auction remains the most popular sales method, and while sales under the hammer at auctions are down on what they were two to three years ago, post auction negotiation are leading to a good level of settlements.  “What is lacking in the market at present is listings.“In August new listings were 1,052, the lowest in an August for more than a decade, and at month end we had 3,818 properties on our books, the lowest number in 20 months. “Given the near record prices being achieved, and market choice being at its lowest for nearly two years, the incentive to list in the current market has to be strong.“Sales are being achieved across all price segments of the market, with a third of August sales being for under $750,000, a third between $750,000 and $1 million, and the final third above $1 million.“The rural and lifestyle markets also experienced low listings during winter, and while sales numbers for lifestyle properties were modest, those sales have led to choice being even further restricted. “In the rural sector kiwi fruit properties remain in demand while lots of 20 ha and more, which had attracted limited interest in the first half of the year, are back in favour.” 

“The modest fall in both average and median prices in the month was enough to unlock sales numbers, with July sales being their highest in the month of July for three years,” said Peter Thompson, Managing Director of Barfoot & Thompson. “For the previous three months sales numbers were more subdued with prices tending to edge higher.  “In July the fall in prices compared to the average for the previous three months was relatively small in the case of the average price at $919,648 (down $12,000) but more significant in the case of the median price at $800,500 (down $41,000). “The fall in prices has contributed to a greater number of sales conditional on buyers selling their own property going ahead.  “In July it resulted in sales numbers at 879 being 11.8 percent ahead of those in June, 16 percent ahead of the average for the previous three months and 5.9 percent ahead of those for July last year.

“It is a positive sign that the Auckland market is getting through the traditional winter downturn in better shape that in the previous two years. “Another positive sign was new listings for the month at 1,154 being well ahead of those for June (up 14 percent) and those for July last year (up 9.2 percent). “A feature of July’s sales was the relatively high number of sales of property in the under $500,000 price category, which at 15.9 percent of sales was significantly higher than we normally see.  “It points to the higher number of apartment and terrace housing sales showing in the monthly statistics, and the growing acceptance in Auckland of this form of housing. “It can be anticipated that this growing sector of the market will continue to impact on the average and median sales prices being achieved. “Sales of property in the $1 million plus and $2 million plus sales category combined made up 28 percent of all sales in the month. These price categories regularly make up a third of all sales.

“At month end we had 3,864 properties on our books, the lowest number for sale in the past 17 months.“With buyers re-entering the market, now represents a good time for those considering to sell their property to list.

“The rural and lifestyle markets experienced a second consecutive positive month, particularly to the south of Auckland. “Sales of rural and lifestyle property in the under $1.5 million price category were solid, with a number of properties that had been on the market for some months changing hands. In this area it has led to a shortage of available listings. “To the north of Auckland while rural and lifestyle sales were positive sales activity was being restricted with listings not matching buyer interest.”

While there has definitely been a shortfall of available housing stock – thanks to sellers going into winter hibernation – there has been no shortage of red-hot buyers over the past month, resulting in a recipe for high demand and generating a swirl of multiple offers. This has been a reassuring time for vendors that they are gaining the best out of the market.  (Source and Copyright- Barfoot Auckland)

“In the current environment, generating deposit growth may be difficult – although banks can tap non-deposit funding, this has its limits. Closing the gap is likely to result in a tightening in credit conditions, at least to some degree, at a time when credit demand is strong. A significant economic headwind could be in the pipeline,” the economists say. 

They say the explanation for the slowdown in deposits is “not as obvious as you might think”. 

“Overall, we think movement away from foreign ownership of New Zealand housing, the rise of popularity of managed funds and the like in response to lower interest rates, and greater use of cash as a store of value could all be contributing to the recent divergence between credit and deposit growth. However, ascertaining the contributions of these factors is difficult and would require quite a bit more digging.” 

But they say whatever the reasons for the slowdown in deposits, closing the bank funding gap could be a significant headwind for economic activity going forward, as was seen in 2017 when a similar gap developed. “It’s possible that banks could tap wholesale funding markets to bridge the gap, but there are limitations to this strategy. That’s not only because of Reserve Bank rules. The ratio of loans to deposits is also a key metric used by investors and in ratings assessments to assess a bank’s liquidity. This means that increased funding via wholesale markets (even at a long duration) can weigh on perceptions of risk and thereby increase funding costs.”

It is possible that banks could lift deposit growth to fund the gap, but scope to do this through higher interest rates is limited, the economists say. “This would also increase funding costs and squeeze margins. “Alternatively, banks can bridge the gap by rationing lending, either by increasing its price (higher lending rates) or directly reducing its availability. “Either way, given the extent of the gap, we expect that lending will need to be reined in to some degree.”

The economists say the tightening in financial conditions due to the funding gap doesn’t bode well for economic activity, “and indeed it already looks to be putting a dampener on things”. “Survey data of both businesses and banks show that credit has become harder to get. And while not all of this is owing to slowing deposits growth (eg recent changes to bank capital requirements and re-pricing of risk are also factors), there’s little to suggest conditions are about to improve. 

“The potential economic implications of closing the funding gap are significant. Both the availability of credit and its cost could become less favourable for households and businesses. In addition to households and businesses facing higher-than-otherwise debt servicing costs, credit could become more difficult to obtain (as banks attempt to align the pace of credit growth with resident deposits).”

The economists say that because banks need to strike a balance between deposits and lending, should the Official Cash Rate go lower, the ‘pass-through’ to deposit rates (and therefore lending rates) is “likely to diminish”.

“But that’s assuming households’ appetite to put their money on deposit in the bank is unchanged. A change in sentiment could make bank deposits, which are at the less risky end of the spectrum, more attractive. And if the Reserve Bank is cutting the OCR, it won’t be because things are going swimmingly.”

It’s an unfortunate time for credit availability to be squeezed, the economists say.

“The bulk of current credit growth is because people are wanting to take on debt to buy and build houses, invest in commercial property, expand capacity and the like. But parts of the economy are also being hit by massive disruption in the form of the tragic COVID-19 outbreak. Global shipping routes are seriously disrupted. Farmers can’t send their cull stock to the works because China’s cool chain is congested, and feed in some areas is running very short. Retailers are struggling to get hold of consumer goods to sell. Producers are worried about supply of intermediate goods (building materials, steel, plastics… you name it) and what that might mean down the line. Tourist operators are looking at significant cancellations.

“It is unclear how long these disruptions will last. Let’s hope it’s brief. But many businesses will be needing credit to tide them over. Not a good time for the system to run short.”  Full article here from www.interest.co.nz