Conditions continue to cool in the Auckland property market, with prices down despite a recent softening in house building activity and dwelling consent numbers. Slight drops in value and sales volumes have not changed the long-term picture, however, with widespread unaffordability likely to remain. While the heat is off Auckland for the time being, tight conditions are expected to endure due to ongoing supply problems and high net migration.
According to Barfoot & Thompson, Auckland's largest real estate agency, both sales and prices in August were down from previous highs. While the median selling price in Auckland was $820,000 compared to $810,000 in July, it was well below the peak of $900,000 in March and $30,000 below the August 2016 peak of $850,000. This was the second month in a row that the median selling price was lower than it was 12 months earlier, representing ongoing downward pressure and long-term cooling that is stretching into other New Zealand markets.
Sales volumes were also down in August, with 777 homes sold during the month through Barfoot & Thompson. While this was up from the 747 homes sold in July, it was way down from the 1003 homes sold in August last year. This 23% drop is very significant, representing the lowest number of homes the agency has sold during August since 2011. Despite low sales, there was a short-term increase in the number of new listings on the market, with Barfoot & Thompson listing 1260 new properties in August compared to 1173 in July. While this was a large drop from the 1706 new listings from August last year, overall inventory levels remain high.
Despite a short-term bump in listings, supply levels in Auckland are likely to remain an issue for some time. The shortage of housing in Auckland is going to get worse before it gets better according to CoreLogic and Westpac economists, with a drop in building numbers and consent activity likely to stop the market from cooling too far. While tighter credit conditions and falling demand will continue to put downward pressure on valuations, “Slight drops in value have not changed the picture of widespread unaffordability in Auckland" according to a new report from CoreLogic.
A recent commentary by Westpac economists released by Statistics New Zealand agrees with this position, with the Auckland market squeezed between dropping prices and ongoing supply problems. "Looking at the longer-term trend, annual dwelling consent numbers have essentially flat-lined at just over 10,000 since the start of this year, " the economists said, adding "And the most recent figures actually point to some softening in building activity over the coming months. Importantly, dwelling consents numbers have plateaued at levels that are still well short of what's needed to keep up with population growth. Consequently, it’s likely that tightness in the Auckland housing market will get worse before it gets better."
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