KEY POINTS:
The property downturn is not a blip and Auckland's top suburbs are suffering, with the desirable suburbs of Kohimarama, Greenlane, Westmere, Point Chevalier and Epsom declining more than any other.
The best-performing suburbs in Auckland are Ellerslie, Mt Wellington, St Johns, Otahuhu and Waiheke Island, according to information released to the Herald on Sunday.
But sales are so low across the board that it is inaccurate to judge trends by median sale prices. Some suburbs had fewer than 10 sales in the past quarter.
The Quotable Value analysis uses three levels to read data - median sales price, average sales price and the number of sales from the end of the past quarter until now.
Kohimarama median and average sales prices have fallen by more than $300,000 and Epsom prices have fallen by more than $100,000. Greenlane prices have declined by more than $150,000 and Pt Chevalier prices have decreased by about $100,000.
But the Kohimarama and Epsom declines in average and median sales prices reflect cheaper properties selling rather than a major fall in value, says QV's Jonno Ingerson.
The downturn is also hitting provincial areas across the North Island and the property market has already gone backwards in Gisborne, New Plymouth and Palmerston North. Other towns are expected to follow.
Property investor Kieran Trass, of suburbwatch.co.nz, says the real estate industry needs to stop waving around the median house-price figures and accept the market is crashing.
Trass says that emotional buyers - those who pay a high price for their dream home or to live in a desirable area - have been holding up the market until now.
An increasing number of homeowners will suffer negative equity by the end of the year and not as a result of people "talking down the market".
He says the statistics that show average property sales are not falling in value are flawed and they are convincing homeowners or prospective buyers to make devastating decisions. He has lost $1 million in equity on his own portfolio in a year.
"If you bought a property a year ago and put in a 20 per cent deposit I'm convinced you've lost it," he says.
Trass says Mt Roskill is suffering, based on the data that's coming out in suburbwatch.
In the first three months of this year, values there dropped by more than 6 per cent - meaning a $400,000 property would have dropped by $25,000 in three months.
"That's a lot of money and a lot of value disappearing, and that trend doesn't look like it's going to change in a hurry. It's just a matter of time as it filters through the market."
Trass says people need to come to terms with the fact that property is more unaffordable than it has ever been before and the market needs to go through a correction.
"The reality is, to buy an average house in Auckland you need to have a household income of more than $150,000. We're not talking about a luxury home here, we're talking about an average property priced at $350,000, and that's assuming you put in a $35,000 deposit - 10 per cent. "That's looking pretty difficult, I would think, for the average person in Auckland." Trass says investors need to prepare for many years more of "difficult times".
Contrary to rumours, the downturn will not be over by spring. "People must realise this is not a quick fix - that property values will plummet overnight and [then] suddenly everything [will] be sweet. That's not the case. This is going to be a long slog."
As the market turns, there are many investors who are finding themselves in negative equity - and Trass predicts this will get worse as the year progresses.
David McEwen, from Investment Research Group, told the Herald on Sunday negative equity was already on the rise and the most vulnerable people were those who entered the property market in the past two to three years to take advantage of banks' aggressive lending.
"The market has been very bullish. People have seen property as an automatic way to make money, so their risk tolerance increased and they felt comfortable about buying property having virtually no equity or security."
McEwen says statistics don't reflect the extent of pain of that is being felt in some areas, especially by owners of apartments and townhouses. His advice to investors experiencing negative equity is to overcome their natural desire to walk away from the property.
"If you are trying to service a mortgage and are barely getting by, and the size of the mortgage is larger than the value of the house, the temptation is to stop trying to pay the mortgage," he says.
"Unfortunately, what people don't realise is if you hand back the keys of the property to the bank, the bank will sell the property and if there's any shortfall, they'll still come after you for the remaining amount."
He recommends waiting for the downward trend to correct itself, and talking to the bank about options for changing the mortgage.
Wayne Besant, managing director of ANZ Retail, says negative equity becomes an issue only when owners need to sell the asset and consolidate their losses.
"The property market is certainly softening as part of the current cyclical downturn," says Besant.
"Investors who have bought in a high-price environment may be in a situation where the current market value of that asset has now dropped, and we are seeing a small number of clients in that situation."
But he points to the recent ANZ Property Investor survey, in which 90 per cent of residential property investors say they are adopting a buy- and-hold strategy.
"Taking this long-term view, any short-term negative equity is, in effect, immaterial," he says.
The survey also indicates almost half of investors have more than 50 per cent equity across their portfolios.
"If a client wishes to relieve a specific cash-flow situation on a property, we have a number of options available - including extending the term, restructuring the loan or adopting an interest-only position for a period," says Besant.
"Each client situation is different - the size and complexity of property portfolios, locations of the properties and tenancy rates all have a bearing on how we can help."
On the other side of the transaction, buyers can make the most of low values but need to think outside the square.
John May, director of property investors association thetraders.co.nz, says: "You can go in and offer crunch prices but you are still only going to get a small proportion of them, because it comes down to the individual vendor's finances. If they are desperate to get out, great, but others may not be, so all that will happen is they will withdraw their property from the market."
He says it's often not so much the money as the rest of the deal that clinches it. Some of his ideas for buyers include offering a more reasonable price if the vendor is prepared to leave money in the property, paying a higher sum for a subdividable property, and looking for opportunities to create extra bedrooms or add features.
Trass says the reality of the loss in property values has plunged New Zealand into grief and, like any grieving process, there are different stages to work through.
"My suggestion to people is this: the first stage is denial - and it appears some in the industry are still in denial. Some people have got to the blame phase, where they are pointing the finger at people and saying, 'stop talking the market down'. The sooner we can get to the third stage, acceptance, the better."
