Auckland inventory levels plummet
It may be hard to believe but a year ago there were 11,272 properties on the market for sale across Auckland. At that time an average of 2,000 properties a month were sold across the region. Leap back to the current time - May 2103 and there are now just 7,557 properties on the market across Auckland, a drop of nearly a third in just 12 months. Over the same period sales have risen over 20% on a moving average to around 2,500 per month.
Auckland is very nearly running out of properties to sell.
Based on the seasonally adjusted sales matched to available inventory if no new property came onto the market, the Auckland property market would stall, with the very last property being sold on 23rd August, just 12 weeks away!
Now this is a hypothetical calculation but for context look at the Auckland property market over the past 5 years as seen in the chart below tracking sales on a 12 month moving average and the representation of inventory using the Property Dashboard from that time.
Five years ago in April 2008 you couldn’t give property away! – there were 18,266 properties on the market, which is virtually two and a half times as many as there are today. That total at the time represented over 60 weeks of equivalent sales. From 60 weeks to 12 weeks in 5 years, how the property market has shown its cyclical nature!
Whilst this is the current picture, the real question looking forward is – when will things improve?
By the nature of cycles they do self-correct and tend to overcompensate, so at some stage the Auckland market will move out of being a sellers’ market. However don’t wait for this flush of new building (estimated at 30,000+ over 3 years) to ease the problem, the issues are more immediate, new builds take 12 to 18 months before they appear in inventory in a best case situation.
The picture tracking new listings and sales looks pretty dire as the chart below shows – sales are growing at a year-on-year rate of 20% whilst listings are falling on a comparable year-on-year rate of over 25% and actually getting worse!
This decline in listings is actually the result of the low inventory in what is becoming in my opinion a downward spiral. Property owners, ready to sell, know full well now that property sells quickly in this sellers' market, yet at the same time they also know that such a tight market with rising prices means that they are being held back from selling because they fear not being able to buy.
This problem is also potentially being exacerbated by the focus on auctions as the predominant method of sale. Whilst auctions might well favours sellers, they do not suit buyers who themselves need to sell their house in order to complete the desire transaction.These buyer/sellers' therefore are cautious about making unconditional offers and finding the necessary 10% deposit when there own house is not sold, or even on the market.
How to unblock this log-jam?
This situation could be alleviated by agents moving away from auction as the preferred method of sale. Not a likely scenario as it is their own favoured method. What is more likely to happen is that at some point, and in my view we have reached this point within the inner ring of Auckland suburbs, auctions will start to falter, resulting on property moving to ‘sale by negotiation’ which then suits conditional offers thereby allowing those buyers to then put their house on the market and create some liquidity in the market.
What we have witnessed in the Auckland property market over the past 18 months to 2 years has been a kind of tidal wave of property activity and increasing prices which started in the top suburbs, the inner ring of city suburbs and is moving out to the outer suburbs now. This tidal wave heightens demand and sales volumes which sucks up inventory driving prices, before we see this situation self-correcting as property sales stall and inventory rebalancing.
Data for this analysis is supplied from the Realestate.co.nz NZ Property Report