Q: At the end of last year, you had expected there to be Covid-driven stop and starts in the markets, but that the number of properties selling would hold and price increases would slow. Three months in, do you think prices are holding or dropping?
The major changes that have occurred since I made that comment is that mortgage interest rates have started to increase, and the banks have introduced tougher lending criteria following new legislation around lending.
March sales data, which will not be available until early April, will show us just what effect these changes are causing to market activity, but the consensus is that we are approaching a period of stable pricing earlier than might otherwise have occurred.
Our average sales price in February at $1.196 million was the highest ever for a February, as was the median price at $1.122 million. It means across the board prices are holding up.
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Year-on-year they are up, but compared to the last quarter prices have edged lower.
Sales numbers are down compared to last year, but last year’s sales were abnormally high as we were coming off the back of an extended lockdown period. When compared to sales numbers for the first two months of 2020 and 2019, they are similar.
Overall, I think vendors that are basing their price expectations on prices houses were selling for in the last quarter of 2021, and are not prepared to trim their expectations, will have greater difficulty selling than those that read the market as heading for a more stable position.
Q: With genuine buyers and genuine sellers - as opposed to speculators - still in the market, do you see first home buyers getting more of a look in?
There are a few factors starting to move in first time buyers’ favour. A more stable pricing environment will be of great assistance by keeping deposit requirements reasonably constant; new builds hitting the market are starting to give buyers more options; and several developers/builders/financiers are starting to focus their attention on this sector of the market.
Barfoot & Thompson managing director Peter Thompson: “2021 will go down as one of the golden years for home-owners." Photo / Supplied
At present, we have more properties on our books than at any time in the past three years, and in February more than 20% of the homes we sold were valued at under $750,000.
One bit of advice I would give to first home buyers is don’t restrict your search to just internet sites. While these sites are fantastic and extensive, add to it the old-fashioned way of getting to know and keeping in touch with local agents and be prepared to look at long shots.
Our profession abounds with stories of potential buyers rejecting a property when viewing it online, only to completely change their mind when viewing it in person.
Getting your first home has always been, and is always likely to be, a daunting challenge for most people. But every day it is being achieved by people. It can be done.
Q: At the end of last year, buyers were hit hard by new bank lending rules, such as the CCCFA. How have buyers and sellers (and prices) adjusted to reflect that?
The new lending rules have certainly affected the ability of some buyers to obtain a mortgage, or the level of mortgage they want. There have even been reports of existing mortgage holders being unable to renew their mortgage. This is unlikely to affect prices or sales volumes overall. It will be more a case of more individuals finding their home ownership dreams frustrated.
It would not surprise me if there were modifications made to the lending rules to eliminate some of the unintended consequences that appear to have emerged.
I hold to the view that, in the main, the best people to make a decision as to whether a person can adequately handle home mortgage repayments are the main trading banks.
Q: How did this summer compare to previous summers?
2021 will go down as one of the golden years for home-owners in terms of property value gains but there are few who do not see that it is inevitable the rate of price increases will decline.
Based on our yearly average price for the 2021 year, the price gain was $162,000, or 16%. For the period 2021 over 2011, the gain was $610,000 or 112%.
These are averages across all the sales we made, and within those individual properties would have fared far better, and others not as well.
My mantra, which I quote often, is that if you hold a property for seven years (the Real Estate Institutes’ average time for home ownership) time will take care of price. The real issue home owners need to focus on is their ability to meet mortgage repayments over a seven-year period.
Q: What would your advice be to sellers now? Is auction still the strongest sales method with fewer buyers, or buyers with lower budgets?
Auction is normally the best way to maximise the price you will receive for your property - regardless of price category - and achieve a quick sale. The marketing period is compressed, it reaches the maximum number of potential buyers and if you are fortunate in that your property appeals to two or more buyers, competition can add to the price paid.
Even if your property does not sell at auction, the opportunity exists to sell at a negotiated price post auction, and you also open up the sale to those who are not in a position to make an unconditional auction bid but can make a conditional offer.
Vendors should keep a close watch on prices in the coming months by watching auctions (available online) and get a feel as to whether the reserve prices are being met. When prices stabalise, vendors who are prepared to trim their price expectations are more successful than those who hold fast to their predetermined expectation.
- This content was supplied by Barfoot & Thompson
