Peter Thompson: Positive signs for housing and Auckland’s growing population

Peter Thompson, Managing Director, Barfoot & Thompson
Peter Thompson: Positive signs for housing and Auckland’s growing population

Auckland residential property sales prices have been nudged off their record prices. The first evidence was the release of Barfoot & Thompson sales data for June, followed by monthly data released by the Real Estate Institute of New Zealand (REINZ), which accounts for all sales. 

After nine years of rising prices, this is what many people looking to get into the property market have been waiting for, although for people looking to sell, this has created some uncertainty, especially if they were expecting to sell at the top of this market cycle. 

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Logic says that prices could not continue to rise forever, and particularly at recent rates. However, the reality is that the most recent price adjustments have been small relative to the increases leading up to this point.

Days-to-sell moves from 31 to 38 days

The cooling of the market won’t have come as a surprise to those watching turnouts at open homes, or the figures showing an increase in days-to-sell, from 31 to 38 days. This data confirms the market is experiencing more than just the slower winter period.

I view this natural slowing of house prices as a positive phase for the market. It’s apparent the progressively implemented changes by the Reserve Bank over the past few years are taking effect without need for draconian measures that could have changed the housing market for years to come. 

We should never lose sight of the fact that the majority of houses being bought and sold are people’s own homes, and a significant fall in price would have dire consequences for many recent home buyers.

For each of the past nine months, the number of properties sold has been below the previous year’s numbers, and for the year to June sales are close to a third fewer than the same period last year. This has led to a build-up in listings, leading to what I believe is the new normal where both sellers and buyers will be re-setting their buying and selling parameters. This is a natural market adjustment.

Interest rates likely to remain stable until to the end of 2018

However, the relationship between listings and prices isn’t watertight, especially when the significant shortage of housing stock for our growing population remains. Continuing to influence prices are extremely low mortgage lending rates with the Reserve Bank forecasting that they are likely to remain stable until to the end of 2018.

With the election nearing and housing high up on the agenda for our politicians, there will no doubt be discussion of a range of options to help first home buyers, speed up developments for our growing population, and manage investment activity in the property market.

1,216 new apartments will be completed in Auckland’s CBD this year

I fully support initiatives and policies that will enable more fit-for-purpose houses to be built in the shortest practical time. It is the sensible response to the market shortage. Currently the signs are positive. A record of 1216 new apartments will be completed in Auckland’s CBD this year. And there’s been the joint Government-Auckland Council announcements of $600 million to bring forward construction of 23,300 new homes, through the newly set-up Crown company, Crown Infrastructure Partners, and $300 million for 10,500 new homes from the Government's $1 billion housing infrastructure fund.

This is encouraging for Auckland as a whole, but as vendors look at the market right now, they may be wondering how to get what their house is worth. For owner-occupiers, the transaction is typically a medium-to-long term one, and they are buying and selling in the same market, meaning small market movements have little impact.

In today’s market, getting buyers through the door is critical. Marketing of the property is one important part of this. Another is how listing are managed by the real estate agency you choose. For example, are their agents free to introduce buyers to any listing within the company not just their own listings? This isn’t the case with all agencies. Fewer agents having access to your listing when sales slow down, may impact the price or result in a property taking longer to sell.

Barfoot & Thompson median sales prices consistently track at 2-3 per cent or around $15,000 above the overall Auckland median. Given the volume of sales through Barfoot & Thompson’s 1700 agents this is a significant and sure sign that our selling process gets value for sellers.

Peter Thompson

Managing Director, Barfoot & Thompson

barfoot & Thomspon

 SEE ALSO: Getting started in commercial investing

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