Data crunch: An update on Auckland's housing market

There are many statistics which get thrown around regarding the Auckland housing market. Personally speaking, as a macroeconomist, I ignore the data broken down by suburb though for many people that is the most important information. Instead I look at numbers for the city as a whole. My preference is the REINZ dataset which is more up to date than the Core Logic/QVNZ information.

Looking at the REINZ numbers we can clearly see the way the market cooled from October last year, undoubtedly because of the commencement then of a requirement for all buyers to have an IRD number.

Just ahead of October, in September on average it took 29 days to sell a dwelling. This was 3.5 days faster than usual. August was 4.2 days faster than the average, July 5.1 days and so on with numbers like that going back many months. Come October however the number of days taken to sell a dwelling was only 0.9 days faster than average. November was 0.4 days slower, December 0.4 days faster, and January only 0.1 days faster. Turnover slowed quite a bit.

Prices also reacted to the withdrawal of so many eager buyers. The median dwelling sales price when adjusted for changes in the mix of places sold rose by 3.3% in September after rising 2.6% in August and 0.8% in July. But in October this price measure fell by 4% then was flat in November, fell 2.3% in December and another 2.3% also in January.

But what about February? That is where things get interesting. The average days to sell measure came in 3.7 days faster than average - stronger than in September. And prices jumped by 5.5%. These monthly changes have to be treated with a grain of salt as they are usually quite volatile. But the fact that both measures improved sharply in the same month after both had weak streaks leads us to conclude that there is a growing case for saying the pause in Auckland’s housing market might have come to an end – might have. We need more data before being able to say this conclusively.

Why might things be turning around again? Partly it is simply the passage of time allowing people, foreigners, to get their IRD numbers. There are rumours that since late-February foreign buyers have been showing up again in slightly greater numbers than since the start of October.

Additionally, as noted previously, as each day goes more people realise that they are not going to be making as much return on their savings as previously thought in a world environment of low and generally still falling interest rates. The Reserve Bank in fact eased monetary policy yet again in mid-March. Every day a few more people start looking at property as an investment which might allow them to boost yield.

And underlying everything also there is the still rising net migration inflow into New Zealand of which 60% goes to Auckland. That meant an extra 40,000 people in Auckland in the past 12 months – on top of natural population growth derived from births less deaths and migration to elsewhere in New Zealand.

Housing an extra 45,000 or so Aucklanders last year to achieve the average occupancy rate of three people per house means 15,000 extra houses were needed. Given that only about 80% of dwelling consents issued actually add to the housing stock (some are for replacements to demolished houses and others don’t get acted on), that means 19,000 consents needed to be issued for new Auckland dwellings in the past 12 months. But fewer than half that at 9,300 were issued.

Auckland’s housing shortage, by whatever gauge you use to measure it, is still getting worse. The price implications are obvious and have been since 2009.

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