Thursday, 3 September 2015

That house price "fall"

Barfoot & Thompson have just come out with their latest sales report on the Auckland housing market. Early media commentary has tended to latch onto the fall in median price in August - as in 'First Auckland house price fall in six months' (Herald) and 'Have Auckland's house prices turned?' (NBR). Here are the B&T results, for the median price.

But hang on.

First of all, these numbers aren't seasonally adjusted, and there's always a drop in August. This year, though, the fall was minute (-0.3%) and noticeably smaller than previous years' (2011: -1.7%, 2012: -2.5%, 2013: -4.1%, 2014: -2.3%). On its face, the smaller than usual fall in a winter month is more compatible with a strengthening market than a weakening one.

And secondly there isn't much sign of a slowdown in the year on year rate of increase, which I've graphed below.

B&T say that you need to be careful with these year on year comparisons:
August’s average price [they're using the average rather than the median here] is 15.4 percent higher than the average price at the same time last year, but making this year-on-year comparison is misleading as it infers prices are continuing to rise, when they are not. Most of the increase that has occurred year-on-year did so in the first four months of the year.
In applying year-on-year price comparisons over the next quarter also requires care, as last year sales patterns were interrupted by the run in to the 2014 general election
Fair enough, but even if the underlying increase is only 15%, or even 10%, you struggle to see a clear break with the trend of the past year and a half.

B&T's own conclusion is that "The most likely scenario is that prices will increase modestly in coming months from where they are at present", and I'm perfectly happy to go with their judgement call. All I'm saying here is that people may be leaping to premature conclusions that the August data don't properly support.

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