Property news kicked off the new year in a bleak fashion. Not only were there more breathless reports of tumbling house prices in Australia, but the first local data off the block announced that Auckland was looking at its first price decline in a decade.

Since then, all of December’s data has been released and the tale it tells is one of Auckland’s much quieter market which does include slight price declines. It also reveals the national market continues to slow, although various regional markets are still playing catch-up.

But commentators don’t believe that Auckland, or New Zealand, is facing a crash, or a dramatic correction. That’s because those niggling high demand, low supply drivers remain at play. Rather they think the market will be determined by uncertainty and that will mean activity is muted, but not down and out.

Sales Activity Slumps

It’s the sales data which most clearly illustrates the widespread slowing of the market. While the decline in activity is most pronounced in Auckland, the latest REINZ data shows that sales have fallen around the country.

Auckland saw 1,336 sales in December 2018 – which was a year-on-year decline of 24.3% from the same time last year. It was also the lowest number of sales recorded for the month of December in 10 years.

But it was not just Super City sales that took a hit. There were 5,330 sales nationwide in December. That was a year-on-year decrease of 12.9% and it amounted to the lowest number of sales in a December for seven years.

Further, there were big falls in sales volumes in Taranaki (down 23%), Wellington (down 16.2%), Otago (down 14.6%) and Southland (down 13.4%). Overall, 12 out of the 16 regions saw an annual decrease in the number of properties sold in December.

REINZ chief executive Bindi Norwell says that while December is usually quiet with people focused on the Christmas holidays, December 2018 was extremely quiet.

“With national listing levels down -11.3% in November and -13.3% in December, it’s not entirely surprising that it was a quiet month in terms of sales volumes. We are also hearing that part of the lower sales volumes can be attributed to some vendors’ understanding of the value of their home.”

While sales were down nationally, it was hard to go past Auckland’s sales slump, with Barfoot & Thompson’s latest data also highlighting it. The agency saw 504 sales in December, which was down by 46.4% on November and by 25.2% on December 2017.

Barfoot & Thompson managing director Peter Thompson says that, overall, 2018 was a more active year for residential sales than 2017. “But a stand out feature for me was the significant increase in the number of sales in the under $500,000 price category.”

Listings Lowdown

As Norwell points out, listings are playing their part in the behaviour of the market too. But just how they are affecting the market varies between regions.

In Auckland, Realestate.co.nz saw new property listings down by 17.7% in December 2018, as compared to the same time last year. Likewise, Barfoot & Thompson had them down – although by less year-on-year (just 2.8%). This seems to be another contributor to the muted behaviour of the region’s market.

Realestate.co.nz also has new listings nationwide taking a hit. They fell by 13.3% from December 2017. However, their spokesperson, Vanessa Taylor, says it follows higher than normal levels of new listings in the three months prior.

It was the Wellington and Otago regions which led the drop in new listings. Wellington saw its new listings down by 23.6% year-on-year, while Otago’s fell by 24.5%. But both regions also recorded all-time high average asking prices which had an influence on the national asking price. Taylor says this reflects a classic tight supply and high demand situation.

Meanwhile, four other regions also saw year-on-year falls of greater than 20.0% in their new listings. Those regions were the Bay of Plenty, Gisborne, Nelson-Bays and Southland.

Stabilisation Of Prices

There can be little doubt that sales activity is quieter and new listings are lower, but when it comes to prices, the data presents a mixed bag of results. However, as QV’s latest data shows, there are no real surprises in that bag either.

The December instalment of QV’s House Price Index has values nationwide up by 1.2% in the three months to December and by 3.2% over the past year. This left the nationwide average value at $682,938. Yet value growth in the major metropolitan centres was not consistent.

The Wellington region saw values rise by 3.2% over the past quarter and by 7.8% in the year to December, leaving the average value at $688,074. In contrast, value growth across the Auckland region decreased by 0.4% year-on-year but inched up by 0.1% over the past quarter, leaving the average value at $1,048,145.

Christchurch and Tauranga both saw values increase slightly over both the quarter and the year, but Hamilton values were down. Dunedin values saw strong year-on-year growth.

‘For now, we continue to see risks of further small price falls in Auckland as the market has shifted in favour of buyers’ KIM MUNDY

QV general manager David Nagel says a point of interest is the continued growth in many smaller regional towns. “Kawerau, Carterton, South Waikato and Ruapehu in particular continue to see very strong quarterly growth figures on top of solid annual growth.”

According to REINZ, December was a strong month from a price perspective because every region saw an annual increase in the median price. It also had the national median price up 1.5% to $560,000 in December, from $551,750 in December 2017.

Norwell says that the last time all regions saw annual price increases was back in June 2017. “Additionally, Auckland finished the year in a strong position with the highest price for the region in nine months at $862,000, which was also a 0.2% increase on December last year.”

However, Realestate.co.nz’s asking price data backed up QV’s take on the market. It shows that prices have stabilised nationally, apart from the odd hotspot. Taylor says the modest annual increases seen in December reflect a smoothing out of prices, compared to the upward trajectory of recent years.

More dramatically, decline was the name of the game for Barfoot & Thompson. Its headline grabbing new year data has Auckland’s median price of $836,792 in 2018 down by 0.8% on that for 2017.

Thompson says it’s the first time the median price has fallen below that for the previous year since 2008, the year the GFC affected house prices. “In the past few months the tide has turned towards it becoming a buyers’ market. The overriding market sentiment at present is indecision as to the direction the market is heading.”

Waiting Game

This all begs the question of what exactly is in store for the market in 2019. But it has to be said that commentators across the board are not expecting significant changes.

ASB economist Kim Mundy says the REINZ data suggests that the housing market ended 2018 on a soft note, with the Auckland market remaining muted. However, it is questionable how much the drop in sales activity reflects a slowing in regional markets, she says.

“The combination of volatile data over the Christmas period, tight provincial housing markets and possible delayed activity ahead of the relaxation in LVRs on January 1, 2019 could all have contributed to weak December sales activity.”

Mundy says that as we head further into 2019, a clearer picture of the health of the housing market will emerge. “For now, we continue to see risks of further small price falls in Auckland as the market has shifted in favour of buyers.”

Auckland’s situation is complicated by the fact that the ban on foreign buyers and tax changes are expected to further dampen demand in a housing market that is now a buyers’ market, she adds.

“However, population growth, low interest rates and the easing of the LVRs are expected to keep a floor under demand in the Auckland housing market. These fundamental supports should flow through to prices and limit the extent to which we see any price falls over the year.”

For Westpac chief economist Dominick Stephens, the impact of the foreign buyer ban is obvious in the December data and the dramatic drop in sales in particular regions, notably Auckland.

He says it is not clear yet whether the foreign buyer ban will prove a bigger deal than the drop in mortgage rates and the easing of the LVRs. “What is clear, though, is that disparities between regions in house price inflation will remain.”

When it comes to Auckland, a drop in house sales is usually a good indication that house prices are about to weaken, so there is a risk that Auckland house prices could start falling again, Stephens says.

“But prices in the lower North Island, Otago and Southland continue to roar away. The full force of the mortgage rate decline and LVR loosening has yet to come through, so in these regions where foreign buyers play almost no role, it seems more likely that prices will continue to rise strongly.”