REINZ puts positive spin on July data, while mainstream media puts a more alarmist slant on the latest NZ and Auckland house prices. Who do you believe?
Oh how the news can be twisted! It brings to mind the famous phrase popularised by Mark Twain, who attributed it to the British prime minister Benjamin Disraeli… “There are three kinds of lies: lies, damn lies, and statistics.”
The headline of the Real Estate Institute of New Zealand (REINZ) latest property report for July shouted hugely positive news in ALL CAPS, while mainstream media reported recent data with a more alarmist slant…
- REINZ: HIGHEST NUMBER OF PROPERTIES SOLD ACROSS NZ IN MONTH OF JULY FOR 3 YEARS
- NZ Herald: Mid-winter hits house prices: Auckland down 2.4%, NZ down 1.7%
- Stuff: Auckland house prices drop as malaise spreads, more centres’ values slide
Malaise or zombie?
The casual reader could accuse us of being alarmist ourselves in reporting a “zombie house market” in Auckland, but what we mean by that is a market that is sliding sideways, like the walking dead. No house price growth, but no house price crashes either. Just plodding slowly along like a zombie.
CoreLogic NZ head of research Nick Goodall has a similar view, although his language is admittedly less colourful. He says, “The relatively neutral performance [in July] reflects a market which has been gradually slowing since the beginning of 2018, but remains supported by low inventory and mortgage interest rates.
CoreLogic uses a different data set, and the headline for their QV July House Price Index reads, “Property market holds firm in July.”
Ignoring REINZ’s spin doctoring, their underlying house price index (HPI) data doesn’t lie. A quick glance at the New Zealand and Auckland house prices graph for 2016 to 2019 (see above) reveals the truth…
Auckland house prices peaked in August 2016 and eased back right through to April 2019. Since then they’ve been sliding sideways.
The rest of New Zealand, meanwhile, continues to grow but at a much slower rate than before. Some areas may even have topped out and entered zombie mode already, but it’s too early to call.
The New Zealand house sales graph above shows that July 2019 sale volumes were indeed slightly higher than July 2018 and July 2017, giving some factual basis to the REINZ headline, “HIGHEST NUMBER OF PROPERTIES SOLD ACROSS NZ IN MONTH OF JULY FOR 3 YEARS”.
I’d call that putting lipstick on a pig. The chart above clearly shows that current sales volumes are running at less than two-thirds of March 2016 levels.
The Auckland house sales graph above paints a similar picture. Sales volumes in the current market are down 40% since March 2016.
In short, Auckland house sale volumes are way down from the peak and have stabilised around current levels for 2 years now. Auckland house prices have also stabilised after easing back over a 3-year period.
Our NZ interest rates forecast shows further downward pressure on mortgage rates, which will further prop up the property market.
Thanks to low interest rates and new buyers entering the Auckland market, we’re unlikely to see prices crash.
Some first home buyers may be holding off hoping prices will crash, but home owners will just sit on their hands rather than sell for less than they think their home is worth. This is one of the reasons sales volumes are so low.
All this all adds weight to Olly’s prediction of a 7-10 year zombie house market. And bear in mind that Auckland is already a good 2 years into it in in terms of sales volume, and 3 years in terms of prices.