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17 Oct 2018

The Real State of House Sales

Property sales activity is down across New Zealand, with low listings and stagnant prices also pointing towards a market slowdown. According to data from the Real Estate Institute of New Zealand (REINZ), September saw the fewest number of sales recorded nationally since January. Over the last 12 months, sales activity has dropped 3.3 percent outside Auckland and 2.1 percent in Auckland, bringing the nationwide decrease to 3.0 percent over the year.

According to REINZ figures, 5,506 sales were recorded in September this year, compared to 5,674 in September 2017. The decline was nationwide, with 12 out of 16 regions seeing a drop in sales volumes and six regions recording double-digit declines. Northland saw the biggest decline at -21.9 percent, with Gisborne down 21.7 percent, and the West Coast down 18.9 percent. In addition to declining annual sales, September recorded the lowest monthly sales since September 2011.  

While these figures look bad, according to REINZ chief executive Bindi Norwell, the sharp decline is due to the low number of listings in July: “Traditionally there is a lag of about six weeks between significant movements in listings and sales results... With July’s listings down by 5.4% 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.”

According to Westpac chief economist Dominick Stephens, REINZ data understates the number of sales each month, which leads to inaccurate reporting: "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... 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."

A decline in listings earlier this year did have an effect, however, with a lack of supply in key markets allowing property prices to stabilise despite downward pressure. While listings have now increased, values in Auckland have settled into a holding pattern and values nationally continue to rise. According to REINZ, median house prices across New Zealand increased by 5.9 percent to $556,000 in September, growing from $525,000 in September 2017. While the median price of $850,000 in Auckland is exactly the same as it was 12 months ago, population growth will continue to create some demand in the months ahead. 

According to separate figures from the Quotable Value (QV) House Price Index, national values rose by 3.1 percent over the year and fell by 0.6 percent over the quarter to $676,427. It's important to note that QV use average home prices and REINZ use median prices. QV general manager David Nagel said “While listings have increased significantly across most areas, quarterly value growth remains modest due to a lack of new market drivers... Supply has been constrained which, on top of stable interest rates, is keeping values at their current levels.”


Image source: Alex_Po/Shutterstock