October Property Report: house prices, LVR restrictions, Ireland, and proclamations galore

The Proclaimers

A couple of commentators take a close up look at our property market.

The fact that everybody has an opinion about the property market is both a blessing and a curse. It’s mostly a pain in the neck for me, who spends my days searching through the experts’ pronouncements for some common ground.

Here’s what these proclaimers are saying about October:


Home buyers: from misery to… more misery

Realestate.co.nz is reporting a record high mean asking price of $482,063 – up 8% on October 2012. This was driven by three of the main centres – Auckland, Wellington and Christchurch – who all reached regional records.

Plenty of new listings to choose from also – 13,978 of them in fact, 27% up on September and, more significantly, 10% above October 2012. People must be snapping them up fast though; inventory levels remained constant at 24.2 weeks.

Meanwhile, QV figures show an 8.9% increase in property value over the past year. The main culprits, again, are Auckland and Canterbury – up 14.5% and 11.8% respectively. Other main centres are slower to rise, while “many of the provincial and rural areas have declined in value.”

Just yesterday, REINZ announced some more record-breaking data: their median house price jumped to $407,525, driven by regional highs in (surprise surprise) Auckland, Canterbury/Westland and Waikato/Bay of Plenty. Their Stratified Housing Price Index, which adjusts for outliers in the market, shows a 9.9% price rise over October 2012.

Looking just at Auckland, Barfoot & Thompson’s data, showing an average price rise of more than $5000, was “totally expected” in their view. Their 1203 properties sold in October was 8.9% above figures from October 2012.

More interesting is the drop in median price, down $10,000 to $590,000. This is, in part, due to the extra sales of properties worth under $500,000 – up 20.6% on September. But why? As Peter Thompson explains, this “may be an indication that a large number of first time home buyers committed to entering the housing market before the new rules took full effect.”


Lending restrictions: uh-huh, uh-huh, uh-huh, yeah-nah

Mr Thompson is referring, of course, to the loan to value ratio (LVR) restrictions that kicked in on 1 October. How have other commentators assessed its impact?

The most interesting findings come from First National Real Estate, whose research shows a 27% drop in first timers at open homes since 1 October.

REINZ also reckons we’re seeing its effects already, though their sales and price data shows little sign of a slowdown there.

Tony Alexander’s findings, from the fortnight ending 1 November, indicate a sharp downturn in home loan approvals from the previous year. He is unsure “how much is shock, and how quickly might things revert to a new normal?”

Westpac reports similar findings, but points out that this doesn’t count pre-approvals or those resorting to second-tier borrowers. We might, they say, see a slowdown in housing turnover and credit growth next month.

Meanwhile, the New Zealand Herald reported a noticeable absence of first home buyers in Auckland’s under $600,000 market. Perhaps they’re looking at different data than Barfoot & Thompson.

Conversely, QV thinks it’s too early to address the impact of LVR caps, as evidenced by their press release titled “Too early to assess the impact of LVR caps.”

Overall, the evidence suggests the signs of a slowdown are already emerging. What the ‘new normal’ will look like still remains to be seen.


Ireland: We’re gonna be (if we’re not careful)

Last decade, for various reasons, Ireland went from roaring tiger to neutered Shorthair in the blink of a smiling eye. (Ooh, poetic.)

The New Zealand Initiative is studying the role housing played in this, and what lessons it holds for our own property market.

Their findings should serve as a warning to governments, central and local, who are planning to build more houses: don’t just build them all at the lower end of the affordability scale.

Ireland’s problems started when the dotcom boom brought a similar growth spurt in population. Then, all this stuff happened (emphasis added):

That influx met a housing supply that had hardly expanded at all in the low-growth decades.

The state’s response was slow in coming, but when it did it came in the form of “build, build, build”, with central government putting pressure on local government to ensure the delivery of thousands of housing units (does this sound familiar?) in short order.

The net effect was to fragment the market. On the low end there was surge in supply, which brought prices within reach of first home buyers, but it also sated demand for these units.

Homeowners in these low-end housing units, when they were ready to trade up, found it hard to sell. And the houses they wanted to buy in the next tier up were even more expensive than ever because development activity had only focused on the type of homes that could be constructed as quickly, and as easily, as possible.

The Irish were left with a simple choice: stay in the small housing they were in but didn’t like, or borrow more to buy the housing they wanted, a situation that has many parallels with New Zealand.

It all sounds eerily familiar indeed. We hope policy makers have studied the Emerald Isle and thought about how to avoid a similar doom.


Your line here

What do you make of all these findings? Will fewer first home buyers in the market have a long term effect on prices? Are we about to repeat the mistakes of our Celtic brethren? Share your thoughts below or over on our Facebook page.

One thought on “October Property Report: house prices, LVR restrictions, Ireland, and proclamations galore

  1. Pingback: Dec NZ Property Report: Record highs to record lows, but yes, it’s still a sellers market… | Open2view

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