There has been a rise in Aucklanders choosing to sell their home by price by negotiation rather auction, according to the latest QV analysis of the city's property market.
But leading real estate experts say the sales method could lead to lower prices and put sellers at a disadvantage.
QV reports that the number of properties coming to market as price by negotiation had grown in the 12 months to August this year, while REINZ figures showed that auctions in Auckland slipped from 24 percent in July 2017 to 21 percent in July this year.
The latest QV figures show property values in the city have softened over the last 12 months, growing just 0.7 percent to an average of $1,048,956, but dropping 0.4 percent in the last quarter.
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QV Auckland Senior Consultant James Steele said the drop in buyer activity over winter had forced sellers to adjust their price expectations and negotiate in order to get a sale.
“Price by negotiation is strongest in less desirable properties or those with irregular features,” he said.
Properties that were poorly presented or had other issues experienced the biggest drop since market peak, he said.
“Well-presented properties which offer a good family living environment or those which have straightforward development potential are still transacting at reasonable levels, however demand is patchy.”
Auctions were previously the dominant sales method in Auckland – accounting for 50 to 60 percent of the market during market peak - but this has dropped to below 25 percent, with “offers” picking up the slack. However, they are viewed by the industry as a key indicator of market activity in the city.
Harcourts auctioneer Aaron Davis said a shift away from auctions could put sellers at a disadvantage. "Vendors looking to achieve a good price have a four to five-week window in which to sell their property. The longer their property is on the market, the more likely it is to come down in price. It also puts power in the hands of the buyer," he said.
"Properties that have problems will still have those problems no matter the method of sale. You can't dodge those issues by choosing price by negotiation over auction."
Although clearance rates have been down in the city, Davis said the figures did not tell the full story. "Clearance rates show what happened on auction day. However, a large percentage of properties passed in do sell within a few days of the auction date - and usually to those who have attended the auction. An auction shows vendors where the market is and can help them on price," he said.
Bayleys national residential manager Daniel Coulson said the methodof sale chosen by vendors typically reflected their circumstances. "Generally, owners would like as much certainty as possible when they sell theirproperty and that is often in the form of an unconditional sale. More buoyant times have seen auction producing results in excess of perceived marketvalue. While this is still possible in the current environment, in a marketthat harnesses less urgency, owners are choosing auction to create a deadlinewhich buyers must take action by as well as ensuring that any offer they arepresented with is clean, cash and unconditional.
"Withbuyers also lacking a little confidence, the transparent format of the auctionprocess allows them to clearly understand where a property may sit in themarket and take assurance from seeing other buyers active in themarket."
OneRoof editor Owen Vaughan agreed: “That the market has changed in Auckland will be apparent to the majority of buyers and sellers in the city. Buyers in certain segments of the market can afford to be more selective, and the 'FOMO' factor that drove purchases during market peak no longer applies.
“Smart vendors will know that they will have to work harder to get their property sold and that any issues that may have been overlooked by buyers two years ago will have to be addressed.
"Auctions don't work for everyone but they are a good gauge of market demand. They are also more transparent than other methods of sale and tend to focus the minds of both buyers and sellers by introducing a deadline date.”
QV said nationwide residential property values had increased steadily over the past year by 4.8 percent although dropped by 1.6 percent in the three months to August.
QV general manager David Nagel said: “It appears to be very much business-as-usual across the national property market, as low levels of supply coupled with a record low interest rate environment drive modest value growth across most regions.
“Affordability constraints continue to change buyer behaviour. We’re seeing an increase in demand for more affordable two-bedroom semi-detached units as well as apartments, particularly in our main centres. With population growth projected to continue to rise, I’d anticipate these types of properties will attract even more demand in future years, particularly in Auckland and Wellington."
Growth was highest in smaller provincial towns, particularly in the lower North Island. "Regions such as Rangitikei, Tararua, Masterton and South Taranaki are at the top of the list in terms of quarterly value growth," Mr Nagel said.
“The southern part of New Zealand, including Dunedin and Invercargill, are also seeing values steadily increasing. Overall, we’re anticipating value growth to remain flat or steadily grow across most regions.
"The market is currently experiencing polarising forces with key market drivers such as low interest rates, population growth and lack of supply, being countered by tightening credit conditions and a range of Government policy initiatives aimed at cooling the market."
In Auckland, there was a variety in performance. Property values in North Shore suburbs rose 1.1 percent, to $1,213,982, although dropped 1.1 percent in last three months. Values in Auckland Central rose 0.7 percent year on year but were 0.2 percent down over the past three months, with an average value of $1,240,833.
Waitakere values were relatively flat year on year but dipped 0.4 percent over the past three months. Manukau decreased by 0.1 percent year on year and by the same amount over the past three months; Papakura values rose 5.5 percent year on year and by 0.1 percent over the last quarter and the average value there is now $703,125; Franklin values increased 1.9 percent year on year and Rodney values were up slightly 0.4 percent year on year.
Mr Steele said the fall in investor activity had "opened up space for first home buyers in the entry-level market, with properties readily available under $650,000 in previously investor-driven areas".
"As we enter spring, those who have been waiting out winter before putting their properties to market are starting to appear. However, given that there are still few external pressures on buyers to sell, it is unlikely that we are going to see an oversupply of listings,” he says.
“As expected, we have seen minor fluctuations in price with some downward pressure through the winter months coming from those who needed to sell. At this stage, any larger downward pressure on property prices is likely to come from regulatory change or wider economic risks.”
Data released by Barfoot and Thompson pointed to a lift in the Auckland market. The median sale price for the city hit $840,000 last month, up 3.7 percent on August 2017, while the number of sales rose 2.3 per cent to 795.
Barfoot and Thompson managing director Peter Thompson says new listings climbed 5.6 percent to 1,331 from a year earlier - "a positive sign the market is gearing up for a positive spring."
Thirteen percent of houses sold in August were for less than $500,000, compared to 9.8 per cent in July, he says. "The number of sales in this price category has been climbing in the past six months and is affected by the higher number of apartment sales now taking place."
The top end of the market - $1 million-plus - accounted for a third of Barfoot's sales, largely unchanged from 32 per cent in July, and of that, 13 per cent went for more than $2 million, Thompson said. Just 4.1 per cent went for $2 million or more in July.
