The number of houses sold by auction in Christchurch has almost doubled since the 2010 and 2011 earthquakes, University of Canterbury (UC) research has found.
A new study by visiting Erskine Professor Michael LaCour-Little has been studying the changing Christchurch housing market. The Erskine fellowship programme was established in 1963 following a generous bequest by former distinguished UC student John Erskine.
Professor LaCour-Little, who is from the faculty at California State University-Fullerton, conducted the analysis using data on real estate transactions occurring between 2010 and 2012.
The use of auctions to sell properties has increased during this period. During the first quarter of 2010, just 11.1 percent of houses were sold by auction while by the fourth quarter of 2012, 20.7 percent were sold by auction. During the quarter immediately following the February 2011 earthquake, an even greater percentage (22.7 percent) were sold by auction.
Housing prices have been increasing rapidly in Christchurch. During the six quarters after February 2011, prices increased by two percent, four percent, five percent, seven percent, nine percent and again by nine percent respectively.
Prices were relatively stable prior to that time. A reduction in the supply of available for-sale housing provided the classic recipe for an increase in prices. The cost of rental housing undoubtedly increased also; however, the study did not look at the rental segment of the market.
In general, auctions tend to produce higher prices compared to other sales methods. The study shows that properties sold by auction sell for about 15 percent more than other sales methods, after accounting for the size, condition, and age of the property, as well as when it was sold.
This pattern does not apply, however, to mortgagee auctions, where properties sell for 21 percent less than similar properties sold using other means. There were only a small number of such sales during the time period studied, however,’’ Professor LaCour-Little says.
The premium associated with properties sold by auction may be related to their location and or condition, as well. It may be the case, for example, that only the very best properties in premium neighbourhoods are offered for sale by auction.
There is some evidence that larger properties and properties with more valuable land are more likely to be sold by auction than other methods. Accounting for the location of the property, as well as its size, condition and age reduces the estimate of the auction premium to 8.2 percent.
The method used to develop the estimates reported is a statistical procedure somewhat different than that used by others who report trends in house prices.
Hence, the figures reported are not directly comparable to others’ estimates. My research analysis relied upon data obtained from PropertyIQ, a Wellington-based company that combines public record information with data from realtor listings.
The study used data on approximately 18,000 single family residential sales occurring during 2010, 2011 and 2012 to reach its conclusions,’’ Professor LaCour-Little says.