Confused over whether Auckland prices are going up, down or sideways? Bruce Morris tries to get a handle on things with a trip to the auction rooms.
Real estate companies love nothing more than a "sold!" label stretched across the "for sale" sign stuck in front lawns across the country. If they can, they'll leave it there for a week or two - to reinforce the image of a successful agency looking for more local listings.
But
a "sold" sign here and there is no accurate indicator of how the market is going - and neither is "someone who knows someone" who's missed out on five houses in a row because they weren't quick enough.
Vague anecdotes on soaring property prices owe more to the enthusiasm of home-owners looking for bright news (and eager to give it currency) than any link to across-theboard reality. Bad news, on the other hand, travels slowly in the residential property market because it is in no one's interests to spread bad tidings.
In the past, when the property bulls charged - as they did from 2002-2007, and back in the early-to-mid 70s - the booms signs were quickly clear. Houses changed hands in two or three weeks, 95 per cent of auction offerings ended up in deals, many well above reserve, and "sold" signs were everywhere.
By 2007 it had all added up to surging prices, but it couldn't go on. The world economic crisis and a squeeze on credit brought sales to a grinding halt. In a few short months the market turned from a seller's to a buyer's.
So where are we now? Four years on, are we at last heading toward the stage where buyers and sellers will soon be in balance, creating a stable market in which prices can, over time, begin to edge up?
It's an impossible question to answer for the whole country because what's happening in Auckland certainly isn't happening in the rural towns or provincial cities. In fact, what's happening in parts of Auckland may not be happening elsewhere in the city.
But ignore the "sold" sign on the house around the corner, and don't pay much attention to the news from your neighbour that prices are taking off in the suburb over the hill.
The easiest place to get a reasonable indication of how things are going is at a decent-sized auction covering a range of properties, and Property Report spent a late-April day in Barfoot & Thompson's Auckland rooms where 48 homes were on sale.
The overall impression: still fairly flat and patchy. However there were signs the buyers may be drifting back and, in some parts of Auckland at least, we may soon have something like supply-and-demand equilibrium, especially for lower-to-average priced homes. But we're talking here about a quiet market with stable prices - not an environment that's ready to fuel anything like a boom.
The auction offering gave a good cross-section of east, central and west Auckland but there were no listings for the North Shore and beyond and South Auckland.
Of the 48 lots, 22 sold on the day (a contrast to the earlier mortgagee auction the same day where 11 of the 12 lots sold under the hammer). Some may have sold in the week or so after the auction as sellers lowered their sights, but the Property Report exercise was about testing the true auction day demand. A total of 26 lots were passed in, six with no bid or just one low "try-on" opening bid miles away from the vendor's expectations.
When the market was really humming between 2002 and 2007, agencies would often sell all offerings under the hammer, though they would be in more modest bundles of perhaps 10 or 15 homes. Back then, prices would often charge through reserves as several bidders chased the prize.
But in the April auction, 15 of the 22 sales seemed to fall short of reserve even with the spur of multiple bidding, forcing vendors to drop their bottom-lines under negotiation. That's simply meeting the market, but the volume of sales in that category indicates some sellers are still aiming too high, and some are taking a bath after buying at the top of the market. Some examples:
A Glendowie home sold at $1.75 million after the reserve was dropped to meet demand. It has a CV of $1.4 million, but sold in September 2007 - the peak of the boom - for $1.92 million. Take in the selling costs and that's a loss of more than $200,000 in less than four years.
An Onehunga home sold at $493,500 at a reduced reserve. It has a CV of $520,000 and sold in April 2008 - just as the slide was gathering momentum - for $560,000. In a little over three years, that's a loss of around $85,000.
An Orakei home sold at $935,000 when the vendor was forced to drop the reserve. The house has a CV of $1.22 million, with a QV E-Valuer range of $953,000 to $1.341 million, and estimated value of $1.147 million.
The strongest bidding came for a double-storey block of eight one-bedroom units in Sandringham returning $1800 aweek gross, the sole investor lot of the day.
It drew interest from mainly Asian investors and surged through the $1.15 million reserve to sell at $1.44 million after 64 separate bids - producing a gross yield of spot on 6.5 per cent (and perhaps some rent rises to come).
The auction was a useful guide to how east, central and west Auckland are going and reinforced the feeling the city market is still patchy. There weren't many properties in the first-home buyer category, but they tended to go well; in some of the higher-priced eastern and central suburbs, vendors would have been disappointed.
But for those who wonder about auctions, the value of the process was shown in the Sandringham investor property, a Blockhouse Bay house which sold $61,000 above reserve at $562,000, and a Te Atatu Peninsula home that went for $440,000, $25,000 above reserve.
Most interesting of all was the Greenlane home brought to auction a week early after drawing an offer the vendors were happy to accept, with other interested buyers circling. The $630,000 offer became the publicly-disclosed reserve - and the property eventually sold under the hammer for $653,000 to another party.
The power of the auction is in the marketing that brings would-be buyers to the table. They're not arriving in droves at the moment in Auckland, but the picture does look to Well-planned marketing ensures buyers know of appealing properties coming to auction - such as be improving.
* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.
