As winter’s chill has settled over the country, so too it has over the national property market. Sales activity is down, listings are down and price growth is muted. But while some put it all down to the traditional seasonal slow down, there is more to the situation than a drop in temperatures.

June’s property data serves to highlight that the softer market is here to stay. Auckland may have been the first market to acclimatise to the new normal, but it has been followed by the other main centres and now those runaway regional markets are dropping off the pace.

Yet this should not make for doom and gloom. Commentators say there are still strong market drivers at play and the downside is likely to be limited.

Sales Slump

There can be no escaping the fact that sales activity has been trending down for some time. But all the latest data shows that sales around the country slumped even further in June.

According to REINZ, national sales activity was subdued, with sales volumes down by 5.4%, once seasonally adjusted, on May. Further, property sales nationwide were down by 1.5%, once seasonally adjusted, to 6,034 as compared to June 2017 which saw 6,131 sales.

REINZ chief executive Bindi Norwell says there were significant decreases in sales volumes in eight out of the 16 regions, alongside a 9.9% decrease in new property listings year-on-year.

“Sales volumes fell significantly yearon- year on the West Coast which had its lowest sales count for 14 months, Waikato which also had its lowest sales count for 14 months, and Otago which had its lowest sales count for 11 months.”

The trend was evident in the main centres too. In Auckland, sales activity was down by 6.9% from May and by 3.8% year-on-year. In Wellington, sales activity fell by 4.9% from May and by 7.6% year-on-year.

It’s worth noting that despite the widespread fall in sales activity, some regions did see a strong increase in sales including Hawke’s Bay (+23.0%), Tasman (+22.8%) and Manawatu/ Wanganui (+14.1%).

In the case of Auckland, Barfoot & Thompson’s data actually provides a glimmer of sales hope. It shows that while sales dropped with the onset of winter, they are higher than the low levels recorded at the same time last year.

‘Sellers can sometimes have an inflated – even unrealistic – view of the value of their property. This is resulting in slower than usual average time to sell properties across some areas’ DAVID NAGEL

The agency saw 903 sales in June, which is down on the 1,027 seen in May. It is also down on the average of 941 seen over the past three months, but it is up by a solid 5.6% on the 855 sales seen in June 2017.

Barfoot & Thompson managing director Peter Thompson says that for the first six months of 2018 sales numbers were 6% higher than they were for the first six months of 2017. “This shows market activity is potentially slowly re-emerging.”

But the number of new listings in June was modest and down nearly a quarter on the same time last year, he adds. “This is a market environment that is likely to remain constant to the start of spring.”

The less buoyant sales climate is not one that has been universally recognised. QV’s general manager, David Nagel, says they are observing challenges around seller expectations on sales prices.

“After a sustained period of national value growth, sellers can sometimes have an inflated – even unrealistic – view of the value of their property. This is resulting in slower than usual average time to sell properties across some areas.”

Off The Pace

When it comes to prices, the news was a little better – although not by much.

The June data from both Realestate. co.nz and Trade Me Property has the national average asking price declining slightly from May. Both sets of data also have asking prices in Auckland and Wellington easing further.

In a similar vein, the latest QV House Price Index, shows that property values are flat-lining around the country. It shows that nationwide values in June actually dropped by 0.3% over the past three months, leaving the average value at $675,680.

Nationwide values still turned in an annual increase of 4.6%, once adjusted for inflation. Yet the rate of annual growth is on the decline too: in May it was 5.8%, in April it was 6.4%.

At the same time, value growth in the main centres has also continued to either drop or flat-line. The Auckland region, the Wellington region and Christchurch all saw their values fall over the past quarter. Auckland also saw a year-on-year drop in values.

Nagel says the data confirms that values are continuing to moderate or drop after a sustained period of growth leading into winter. “We don’t anticipate any significant changes to current market conditions. That means values are likely to remain fairly constant across most of New Zealand throughout winter.”

In contrast, the REINZ data offered a more upbeat picture. It has the national median price hitting a record equal median of $560,000 in June. This was the same as last month, but up by 5.2% year-on-year, once seasonally adjusted.

‘Prices have fallen around the fringes of the market, but there hasn’t been a full blown retreat. My view is we won’t see one, but sales volumes will stay low’ JOHN BOLTON

Further, it shows that three regions – Waikato, Wellington and Marlborough – saw record median prices and solid year-on-year increases in June. But Auckland’s median price bucked this trend: it was down by 1.6% year-on-year to $850,000 from $856,000 last year.

Norwell says that while the winter chill impacted on sales volumes across the country in June, it did little to halt price rises in most regions.

“The lack of housing supply continues to put pressure on prices in the majority of regions across New Zealand, with 12 out of 16 regions seeing a price increase since June last year. Until we solve the supply issue, house prices are likely to continue rising, particularly as the OCR remains low and the banks continue dropping interest rates.”

Market Slumbers

Most commentators agree the market has softened recently, as characterised by the subdued sales activity and flat prices.

For Westpac senior economist Satish Ranchhod, the June REINZ data highlights this, along with the fact that price growth has taken a notable step down through the first half of 2018. Underlying the national softness has been Auckland where, despite their elevated level, prices have been tracking sideways for nearly two years and had another fall in June, he says.

“Outside of Auckland, we’re continuing to see prices rising – but noticeably slower than in previous years. There’s been notable softness in Canterbury as the housing market there continues its postearthquake adjustment.”

Ranchhod says housing market conditions have been dampened by policy changes targeting property speculation.

These include the extension of the bright-line test, foreign buyer restrictions and, from early next year, the phasing out of negative gearing. “We expect that these measures will weigh on price growth over the coming year and are also likely to dampen people’s willingness to spend.”

Squirrel managing director John Bolton thinks the market has now entered a steady state, albeit with low sales activity. “Outside of Auckland was going gangbusters last year with record median house prices across the country. But, from my perspective, that’s run its course and the whole market will follow Auckland into a semi-comatose slumber.”

Prices have fallen around the fringes of the market, but there hasn’t been a full blown retreat, he adds. “My view is we won’t see one, but sales volumes will stay low. Anyone in a forced-sale situation is likely to get burned as will builders and developers who will struggle with turnover.”