Peter Thompson: January no reliable guide to 2016 Auckland housing prices

Peter Thompson, Managing Director, Barfoot & Thompson
Peter Thompson: January no reliable guide to 2016 Auckland housing prices

It will be another six weeks before we have reliable data as to the direction Auckland residential housing prices are likely to take in the first part of this year.

By then information from our February sales will be available and you will be able to look at the information on our website

In the next few weeks we will release our sales data for January residential property sales – both in terms of the values achieved and the number sold. While it will be the first snapshot of what has happened to real estate prices and demand since the city headed off for Christmas and the New Year, it would not be wise to read too much into the results.

SEE ALSO: Peter Thompson: Status quo not among Auckland’s options

From experience I know that January’ sales data is not a reliable indicator of year-on year prices. For example, for the past 3 years the average sales price achieved in January was lower than in the previous December, yet by year end in all cases the average price had increased significantly over that for the previous year.

The January number I will take most interest in is that for new listings.


December 2015 listings lowest for past 20 years

A figure few commentators picked up in in terms of December’s data was that the number of listings on our books at the end of December 2015 was our lowest in any month for the past 20 years. Across all of Auckland we had only 2431 properties to sell. Given the geographical size of our city it meant for buyers choice was incredibly tight.

Traditionally, new listings surge in January, and it is to be hoped that this occurs again this year.

A high level of new listings will be a good early indicator that the market is likely to be active in the first quarter of the year.

Auckland city


Auckland ranked fourth ‘least affordable’

A report released in January by an Australian research group, Demographia, looked at housing affordability in the world’s major metropolitan areas. In the survey Auckland was rated equal fourth ‘least affordable’ along with Melbourne and San Jose (all on 10.7 points). Heading the list was Hong Kong (on 19) followed by Sydney (on 12.2) Vancouver (10.8).

A quick scan of the survey gives a far more balanced understanding of what the report is saying than could be picked up from the media headlines that summarised the survey.

The high equal fourth ‘least affordable’ ranking achieved by Auckland is not good news, but when taken in context with cities such as Sydney and Melbourne we are not as out of step with what is happening in our part of the world as some would have us believe.

The report notes that while the median house price in Auckland at $748,000* was higher than in Melbourne ($730,000) our median household income at $77,500 was higher than Melbourne’s at $75,600. *REINZ data

Also of note was that in the latest survey, Sydney’s unaffordability number has climbed 2.4 points in the past 12 months, the highest ever one year movement recorded in the 12-year history of the survey.

The claim is also made that the Chief Economist of the Auckland Council has “recommended a program [sic] to cut the price to income ratio in Auckland by nearly half to 5 by 2030”.

Achieving such a reverse within 14 years would be an incredible achievement, as based on the existing median household income of $77,500, to achieve a rating of 5 the median house price in today’s terms would have to be $387,500.


No easy solution

What many commentators have picked up on as a result of the survey being published is the implications high unaffordability has for first time home buyers and those employed in essential services such as teaching, emergency services and public transportation. The further essential workers have to live from their place of work, the harder it will be to fill these positions.

There is no easy solution to the city’s unaffordability rating, or the challenges ahead for first time buyers or essential workers.

One that is worthy of consideration for first time buyers and essential workers might be easing the loan to valuation ratios (LVRs) banks are required to apply to mortgage approvals. This will not reduce prices, but might just be the leg up needed to get these groups on to the first step of the home ownership ladder.

Peter Thompson

Managing Director, Barfoot & Thompson

SEE ALSO: Peter Thompson: Status quo not among Auckland’s options

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