Sales slowly getting back to market driven cycle

A sense of normality may have returned to the Auckland housing market with June property sales more in line with traditional pre-Covid sales patterns, says Barfoot & Thompson.

Monday, July 10th 2023, 9:16AM

by Sally Lindsay

The agency sold 711 properties last month. The number of sales is comparable with the same month pre-pandemic and 3.9% higher than June last year, following April’s record low.

“The current housing market cycle is probably one of hardest Aucklanders have been through in recent years,” says Peter Thompson, Barfoot & Thompson managing director says. “And while it is still tough, there continues to be positive signs we are now entering into a period of more stability.”

Last month’s average sales price at $1,097,896 was up 2.5% on the previous month’s average and sat 1% higher when compared to the average price of the three months preceding. The medium price at $995,000 increased by 4.2% when compared to May.

“When all recent house price rises and falls are taken out of the equation, the only period we can meaningfully compare house prices to is 2019 when we were last in a true market-driven cycle,” Thompson says. Both the average and median sales prices achieved during June are about 17% higher when compared to the same month four years ago.

“There has been an increase in multi-offer bids on properties and the auction rooms have been busy throughout the month. Although the increased activity is not driving up prices it does indicate confidence is returning, which is great news for both vendors and buyers,” he says.

New listings continue to come into the market with 1,266 during June which is in line with what expected during the winter period. Thompson says this sense of familiarity is reassuring against the current backdrop and is a further sign of cautious optimism.

At month’s the agency, had 4,277 listings on its books. The high end of the market continued to show resilience with 48 homes over $2 million sold in June, knocking May off the second highest monthly sales spot in this category.
Properties under $750,000 were also in high demand, with 180 sold during the month.

Property price falls accelerated last month

While Barfoot & Thompson may be optimistic, CoreLogic’s data show property values across the country weakened in June with the monthly rate of decline accelerating, down 1.2% compared to the 0.7% fall in May.

CoreLogic’s House Price Index (HPI) shows the monthly decline was led by weaker figures in Auckland, down 3.0% for the month with four out of six of New Zealand’s main centres recording larger falls in June.

The decline takes the national annual rate of change 10.6% below the same time last year, down from -10.2% in May.

CoreLogic head of research, Nick Goodall, says the acceleration in falls illustrates the impact of such a long and strong rate hiking cycle as stretched mortgage affordability continues to constrain demand.

Goodall says the data may be a speed bump for expectations the housing downturn may have already ended, though the variable results evident across the country are likely supportive of the argument that a housing market trough is not far away.

The nationwide average house value remains $183,000 higher than the pre-COVID level in March 2020 but the fall from peak now exceeds $130,000, illustrating just how strong the pandemic-induced growth upswing was.

“Rather than focus too much on the exact timing of the bottom of the market, we believe it’s more about assessing the key market drivers and recent changes in those drivers, when setting expectations of where the market is headed,” Goodall says.

“The flow of properties being listed for sale has been weak all year – tracking below each of the past three years. This, alongside property sales ticking higher, has meant the overall volume of properties on the market is reducing.

“Reduced supply, paired with high net migration, increased confidence, looser credit requirements (CCCFA and LVR) and near-peak mortgage interest rates, have supported demand and provided the setting for upcoming market change.

“Of course, in the same sense, we’re not expecting a flood of demand to lead to a strong bounce back in prices by any means,” Goodall says.

He says stretched affordability, due largely to still-high property values and high interest rates compared to recent history is likely to keep a lid on demand, which should lead to a much more stable and balanced market once the bottom is reached.

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