Barfoot & Thompson average price drops 4.5%; 'a definite change' seen in the market

By David Hargreaves

Auckland’s biggest real estate firm Barfoot & Thompson is reporting that the Auckland market could be plateauing, after witnessing a sharp fall in average price achieved during July.

“There has been a definite change in the market in the last month,” chief executive Wendy Alexander said.

The results for Barfoots contrast markedly with the figures released just yesterday by QV.

However, the Barfoots data would be seen as more up to date information, as the QV figures are viewed as having a greater time lag.

The Real Estate Institute of New Zealand figures for July, likely to be released next week, will give the most timely information on the current market. But it is worth noting that Barfoots sales normally make up about 40% of Auckland’s total.

Alexander said the average price in July was $867,681, which was a fall of 4.5% on that for June, “but more significantly 2% below the average price for the previous three months”.

The median price, however, held up better and at $840,000 was pretty much unchanged from June, and 2.1% higher than the median price for the previous three months.

In July, Barfoot & Thompson sold 1034 properties, which was down 11.5% on the number in June and down some 25.5% on those for the same month last year.

However, new listings were also a lot lower.  At 1426 these were down 19.4% on those in June and down 19.6% for those in July last year.

At month end the firm had 3012 properties on its books, which was 2.6% higher than in June and 7.5% higher than in July last year.

During July the company sold 383 properties, or 37% of all sales, for more than $1 million. It sold 94 properties, or 9.1% of sales, for under $500,000.

The ‘under $500,000′ category was rather more active in the past month. In June such sales accounted for less than 6% of Barfoots’ sales, while in the previous month the ‘over one million’ category accounted for 38%.

‘A shifting tide’

ASB economist Kim Mundy said the new figures and comparisons with a year ago should be treated with some caution as July 2015 was an incredibly strong month, as both buyers and sellers leapt into the market ahead of the RBNZ LVR lending restrictions and the Government’s tax changes.

“Despite this, the data could indicate a shifting tide where both buyers and sellers are beginning to act more cautiously. For buyers in particular, price resistance may be slowing sales,” she said.

July was the third month in a row that total inventory levels in Auckland rose “and this suggests that demand is not as strong as it has been previously”, Mundy said.

“We have been warning for some time now that price resistance will begin to impact on activity, and we could be seeing the start of this.” ASB’s Mundy said the next few months will be an interesting time in the Auckland, and wider, housing market.

“With the impending additional investor LVR restrictions due in September, we will be watching to see whether activity picks up again ahead of this. On the whole though, listings remain low, population growth remains strong and interest rates are near or at historical lows. Auckland building activity is also some time from matching population growth. All of the above factors will keep a floor under Auckland house prices.”

‘Buyer determination tempered’

Barfoots’ Alexander said that the winter months, school holidays and a slowing in the number of new listings all contributed to the slow-down in July, “but buyer determination to pay whatever is necessary to achieve a property was tempered”.

“Buyers remain prepared to pay a fair price, and under the hammer sales at auctions of 70% were still high, but sales activity is slower than it was at the same time last year.”

Alexander said that in the three months from May to July this year, Barfoots sold 3508 properties, which is 7.8% fewer than in the same period a year ago, when 3780 were sold.

“The year-on year increase in prices is still occurring, but at a much slower rate than we have seen in the past four years,” Alexander said.

“The average price has increased by 5.3% over the past seven months compared with 2015’s full year average price increase of 14%. The median price increase over the past seven months has been 6% compared with 17.4% for 2015.”

‘Unclear what prices will do’

Alexander said it was “unclear” whether prices would  continue in the remaining months of the year.

“Normally, prices rise as we enter the spring/summer months, but the Reserve Bank’s new regulations affecting investors will start to have an impact from August on.”

ASB’s Mundy said the next few months will be an interesting time in the Auckland, and wider, housing market.

“With the impending additional investor LVR restrictions due in September, we will be watching to see whether activity picks up again ahead of this. On the whole though, listings remain low, population growth remains strong and interest rates are near or at historical lows. Auckland building activity is also some time from matching population growth. All of the above factors will keep a floor under Auckland house prices.”

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