Gap between asking price and sales price narrows further

It is interesting to compare the expectation of property prices to that of actual sales prices, as in theory it provides a guide as to the state of the market. The closer aligned they are the more realistic are seller expectations, a situation more common in a rising property market. Conversely the more divergent, the more out-of-touch are the sellers’ expectations, usually as a consequence of a falling market.   

Today’s market is certainly not falling (well not at the moment) and presented below is the trending chart of asking prices and sales prices for the past 6 years covering this important period from just before the property crash, right up to date – May 2013.

NZ asking price to sales price gap May 2013.png

It is only in the past 6 months that the divergence between asking price and sales price when seen on a 6 month moving average basis has reduced to below 10%, a level it passed through in 2008 on the way down to a gap of 15%.

Across New Zealand the stratified median sales price for property rose again in May to $415,325. That places the median price of property across the country some 9% above the peak of the property market pre-global financial crisis back 6 years ago in Nov 2007. These figures are taken from the REINZ stratified house price index, in my opinion the most reliable indicator of house prices. However when viewed against the bottom of the market in January 2009 the market is up 23%.

 

REINZ NZ strat price May 2013.png

At the same time the asking price for NZ property has risen in May to a new record level of $454,795 based on the data collected by Realestate.co.nz in their NZ Property Report. This record high is up 7% from the peak of the market pre-global financial crisis back in January 2008. When measured against the bottom of the market in November 2008 the asking price expectation has risen a more modest 14% over the period.

 

NZ asking price May.png

Auckland Property Market

In the Auckland market the gap between asking price and sales price is much closer than across the whole of NZ. It is now back with sales price within 5% of the asking price on a 6 month moving average basis. A significant tightening as compared to the 15% gap back in early 2009.

 

Akl asking price to sales price gap May 2013.png

The stratified median sales price for property in Auckland rose again in May breaking through the ceiling of $600,000 for only the second time. That places the median price of Auckland property some 19% above the peak of the property market pre-global financial crisis back 6 years ago in July 2007. However what is somewhat more alarming is the fact that since the bottom of the property market in Auckland in November 2008 the stratified median sales price has risen by 39%. 

 

Akl strat price May 2013.png

At the same time the asking price for Auckland homes has risen to see in May a new record level of $631,656 based on the data collected by Realestate.co.nz in their NZ Property Report. This record high is up 16.5% from the peak of the market pre-global financial crisis back in January 2008. Since the low point in asking price of October 2008 the mean asking price has risen by 26% to the new high of $607,600.

Akl asking price at May 2013.png

As to the future, the analysis of the past shows that on the way down as we can see in 2008 the asking price lead the change to reverse the decline as vendors started to establish a base of asking price expectation which at the bottom of the market was met by demand and that began to fuel a rise in sales price. This time around we will need to watch for a turn in sales price as this will lead the asking price trend by at least 3 months.