Restrained Summer Selling

clouds-967287_960_720A windy cool summer this year has been the backdrop to the summer selling season in the Auckland property market. Overall the market has been very restrained with auction success rates in Auckland dropping below 50% in late December 2015. Slowly seller expectations are starting to change. Are house prices heading lower?

Many are expecting a cool start to the 2016 including Westpac Chief Economist Dominic Stephens. Stephens believes Auckland house prices could be heading lower in the first quarter of this year, while the outlook for the rest of the country is mixed. Read the full article at Interest.co.nz

“Our view for some time has been that the Auckland market would slow sharply as a consequence of the recent change in the 1LVR restrictions, which were tighter for Auckland investors, and the tax changes because Auckland is more sensitive to investor activity than other markets. Possibly the turmoil on China’s financial markets may affect Auckland more than elsewhere, and the slow down in the economy because the Auckland housing market is somewhat more speculative, in our view, than other markets.”

Slowly seller expectations are starting to change as the Chinese capital restrictions have also slowed down housing markets in Australia and USA at the same time, and local measures have helped reign in a foaming market including IRD requirements and the new CGT (Capital Gains Tax). The IRD requirement is a small hurdle in comparison to CGT. Its introduction the property market has taken continued to soften in volume but with still little movement on prices. Certainly the softening is reflected in the auction numbers and the slowdown that occurred in Auckland in the fourth quarter of last year may continue at a brisker pace. In fact a flurry of press reports document the softening of prices and volumes and predict a range of views from shallow correction and consolidation to stagnation and or crash. Some commentators say Auckland house prices will significantly soften over 2016, as the rest of the country ramps up. Bank of New Zealand chief economist Tony Alexander said outside Auckland, the rest of New Zealand could be in for house price rises of 15 per cent to 20 per cent over 2016 due to low interest rates, population growth and the effect of Aucklanders moving out of the city. If you want house to live in buy. If you want decent return on investment with limited risk and comfortable retirement life invest in property with good legal advice from our property team. 

The big elephant in the room which has put off investors, is CGT (Capital Gains Tax), which was introduced in October. Looking around the world; there are countries that don’t charge any CGT on property sales. NZ tax rates are now some of the highest rates in the world up to 33% on rental property gains, However good operators like the Super fund have started to invest in Auckland property and they are astute operators. The QV stats for December have been up on the website since yesterday:https://www.qv.co.nz/n/monthly-residential-price-movement/phoenix-54

Nov to Dec shows Auckland going nowhere (0.0) but Wellington up quite dramatically (2.0). Mid-2014 is the last time Auckland failed to increase month on month in these stats. Most months it has been increasing by about 1.5-2%. Wellington is often countercyclical as in downturns the Capital outperforms as its close to the stimulus. Wellington house values increased by 5.2 per cent during 2015, with the average house price now sitting at $569,370.

At auctions held by the region’s biggest agency, Barfoot & Thompson, in the week ending December 11, clearance rates ranged from 31% to 65%, with most auctions achieving clearance rates below 50% (see table below). The most successful auctions were those held on site of which 65% were sold, with the remainder either passed in, postponed or withdrawn from sale. An auction of mainly west Auckland properties located in suburbs traditionally popular with investors such as Massey and Glen Eden, also achieved a 65% clearance rate.
On the North Shore, where auctions have been particularly subdued over the last few weeks, Barfoots achieved a 36% success rate at their auction at the Bruce Mason Centre, while Harcourts Cooper & Co who are major players on the North Shore, achieved a 45% sales rate at their auction last week, following a 47% success rate the previous week.


Barfoot & Thompson Auctions Week ending December 11
Venue Date  Number sold Passed-in,
withdrawn or
postponed
Clearance rate
On site 7-13 Dec 19 10 65%
Manukau Sports Bowl 8 Dec 13 17 43%
Shortland St, CBD 9 Dec 18 31 37%
Whangarei 9 Dec 3 2 60%
Bruce Mason Centre North Shore 10 Dec 16 29 36%
Shortland St, CBD 10 Dec 4 9 31%
Pukekohe Raceway 10 Dec 4 6 40%
Shortland St, CBD 11 Dec 11 6 65%
Harcourts Cooper & Co. North Shore Auctions –  December 1-13
Venue Date  Number sold Passed-in,
withdrawn or postponed
Clearance rate
North Shore Dec 1-6 22 25 47%
North Shore Dec 7-13 14 17 45%

If you want house to live in buy. If you want decent return on investment with limited risk and comfortable retirement life invest in property with good legal advice from our property team.