Auckland property: Should I stay or should I go?

Peter Thompson, Managing Director, Barfoot & Thompson
Auckland property: Should I stay or should I go?

In early August, Barfoot & Thompson caused a stir in the market by saying that there were unmistakable signs that Auckland housing prices were stabilising and may even be plateauing.

The basis for our statement was our sales figures for July. They showed that the average price last month was 4.5% below that for June, and 2% below the average price for the previous three months.Peter Thompson2

The trend was not so evident when you looked at the median price. The median price for July was the same as that for June, but 2.1% higher than for the average for the previous three months.

Our statement at that time caused a stir because it was the first to go against the tide of comment around Auckland housing prices which had prices “continuing to soar” and prompted calls for ever more draconian measures to bring them “under control”.

Since then the Real Estate Institute of NZ has released its figures for July, and those for Auckland backed up the trend we had seen.

It has led to quite a level of speculation as to whether the five-year price rise of Auckland property for sale is truly starting to slow, or we are simply experiencing a temporary winter downturn that will be erased as we come into spring.


Should I do it now, or wait until things become clearer?

There will certainly be a lot of interest in August’s sales data to see whether July’s trend continued. Our August data will be the first to be released, and will be available in the first week of September.

Whenever any market, whether it is housing, stock prices or futures, is on the verge of potential change after a long period of heading in one direction, there is uncertainty.  

No doubt many who are currently thinking of selling or buying are asking themselves the question ‘should I do it now, or wait until things become clearer?’

Of all the potential scenarios as to where prices can head between now and the end of the year, the one I believe has the least chance of happening is the sudden collapse of Auckland house prices.

The theory behind this particular scenario is that if house prices start to fall it could trigger a collapse, particularly if foreign investors exit the market.

It was encouraging therefore to see NZ Herald coverage of a report by the highly respected international credit rating agency S&P Global Ratings (on risks for financial institutions operating in New Zealand) saying that if overseas investors did retreat from investing in New Zealand, its expectation was that “…the heightened economic balances in New Zealand will unwind in an orderly manner without a material rise in credit losses for the lending institutions.

“This has generally been the case over past property cycles, and the New Zealand economic outlook remains relatively benign by global standards.”

The Governor of the Reserve Bank also had encouraging words in August about the overall stability of the country’s economic position in a speech prepared for delivery to the Otago Chamber of Commerce. In it he said “in many respects the economy is performing well”.


Putting uncertainty aside

For me, those selling or buying an owner occupier property at present should put uncertainty about which direction the market might take between now and Christmas aside.  

Any seller who sells at today’s prices will be achieving an excellent price for their property.

At the same time a buyer with even a modest time horizon of five to seven years is unlikely to see their asset lose value, and given recent moves by the Reserve Bank in terms of interest rates, they can be reasonably confident they are unlikely to face rising mortgage interest costs any time soon.

Investors in property on the other hand operate to different criteria, and will no doubt make their decisions on the economics of the transaction they are considering.

For those who are buying or selling an owner-occupied house, the financial transaction is so major that it should be seen within the context of the medium-to-long term, and potential short term price movements should be left on the sideline.


Peter ThompsonBarfootAndThompsonLogo

Managing Director, Barfoot & Thompson

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