Peter Thompson (Managing Director Barfoot & Thompson) 3 Feb 2023
Categories
Lifestyle Property Money Business

When it comes to evaluating just what is happening to house prices, a case can be made for being cautious about accepting current headlines claiming prices are in freefall, that sellers are in despair and that it’s a rampant buyers’ market.

Prices have definitely fallen significantly, but the extent of the fall needs to put into perspective.

The figures released by the Real Estate Institute in mid-January put the median sale price for Auckland in December at $1,050,000. This price, when compared with that for December 2021, was down a hefty 18%, or $230,000.

What this comparison does not highlight is that December 2021’s price was a rogue figure achieved during a three-month period when the prices being paid for property were out of context with those for most of 2021.

Based on Barfoot & Thompson’s trading data, the average median price for property sold across the full 12 months of 2021 was $1,102,000. The rogue prices paid in November and December were 11% higher than for the year as a whole.

And only 2700 properties* changed hands during that extraordinary two months of trading in Auckland.

Putting a figure on what is the ‘real’ fall in prices when comparing 2022 prices with 2021 is hard to pinpoint.

For example, the average median price for property sold across the full 12 months of 2022 was $1,117,000**. This is $15,000 more than that for the 2021 year.

Based on this, it can be argued that taken from a yearly perspective, vendors in 2022 received slightly more for property than vendors in 2021.

Another aspect of recent sales that has fallen under the radar is that in the last quarter of 2022 the sales data** shows that the median monthly sales price varied between a low of $1,065,000 and $1,090,000 – a variance of 2% and were close to the median sales price for the full 2021 year.

I feel it’s important to reiterate the point that I am not saying house prices have not fallen. I just want to raise a cautionary flag as to the extent of the decline.

The aspect of the housing market which has plunged to depths not seen since 2019 is in the number of homes being sold.

There are three broad reasons for this. New tougher lending rules banks are required to apply are playing their part, but the two main reasons are vendor and buyer reluctance.

Rather than vendors accepting a price they consider undervalues their property they are taking their property off the market and waiting for the good times to return. Meanwhile, many buyers are anticipating ever greater falls in prices and putting off committing.

Both parties are making calculated calls, which is their prerogative, but in making that decision they are attempting to predict when the market reaches bottom. And for buyers, that carries a greater risk than for vendors.

When it comes to house prices, it’s a disquieting fact that over the past few years the majority of economists’ forecasts have proved wrong in their predictions and certainly few if any saw the surge that occurred in house prices in 2021. 

While there is almost universal acceptance that at some future point the downward cycle of prices will come to an end, no crystal ball exists that can predict just when that will happen – only that it will.

The one comforting factor for those who are buying a house as their home now is that if they own that home for 7 years or longer, past trends says that the house will be worth more than they paid for it.

 

*Real Estate Institute data. ** Barfoot & Thompson data

Categories
Lifestyle Property Money Business