“Price drop”, “massive price reduction”, “price slashed”, “bags packed”, “call today”, “act fast”. As successive interest rate rises take their toll on the housing market, sellers are coming under increasing pressure to drop their price expectations in order to secure a sale.
New research from OneRoof shows the asking price has been discounted in more than one in 10 properties brought to market in the last seven months.
Of the more than 62,000 residential properties listed on OneRoof since October 2022, 15% have dropped their asking price by at least $10,000.
The average price drop over the period was 4.82% ($43,000) but sellers in some regions were offering sharper discounts. In West Coast and Manawatu-Whanganui, the average asking price was dropped by more than 7%.
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Auckland region’s average asking price dropped by $51,144 (4.59%) over the period, while Wellington’s and Canterbury’s fell $41,994 (5.28%) and $33,294 (4.28%) respectively.
The research identified 3396 discounted properties that are still available for sale – almost 10% of total residential listings on OneRoof.co.nz.
Discounting is most prevalent in Waikato, with the asking price dropped in almost 30% of all properties in the region that have been listed since October 2022. Bay of Plenty had the next highest share of discounting, at 29%, followed by Southland (23%) and Northland (21%).
Just 14% of Auckland listings were discounted over the period, while the percentage of total listings that were discounted in Canterbury and Wellington sat at a low 7%.
Taranaki sellers are least likely to resort to price-slashing, with just 2.7% of the region's listings discounted over the period.
However, the research does suggest sellers are becoming more desperate, with most regions recording a spike in price drops in recent months.
Between April 1 and May 15, one in five listings nationwide was discounted, up from just 13% in the last quarter of 2022. In the Bay of Plenty, 42% of listings dropped in price, up from 25% in Q4 2022, and in Waikato, the share percentage of discounted listings hit 39%. The spikes in both regions were fuelled by widespread discounting in Tauranga (37% of all listings) and Hamilton (40%).
At a major metro level, the biggest price discounts were in Queenstown-Lakes, with sellers there knocking an average $77,000 off the price of their homes.
The average reduction in the asking price of a home in Auckland City, where the average property value is $1.461m, was $56,205, while the drop in North Shore suburbs was $56,039.
Some sellers, though, were prepared to take bigger hits in order to shift their properties. The research identified 837 listings where the asking price was dropped by $100,000 or more, with the seller of one property in Ohauiti, in Western Bay of Plenty, slashing the price by $800,000 to $3.65 million.
The research also found that discounting was most prevalent in Auckland Central. Almost 200 listings in the apartment-heavy suburb have been discounted since October 2022 (half of which are still on the market), with the average drop in the asking price at 6.99%.
Agents interviewed by OneRoof reported that vendors had a better understanding of where the market was, and were factoring in changes to credit conditions and less competition.
Sometimes price reductions helped spur buyer interest. Professionals agent Steve Moyes told OneRoof that enquiries for 86 Myres Street, in Otumoetai, Tauranga, jumped after the vendor dropped the asking price to $1.595m.
Moyes said the three-bedroom house had attracted interest from just three potential buyers in the 90 days prior to the price drop. Each had wanted to buy but couldn’t until they had sold their own home first. This left the vendor, who had already bought in Australia, unsure as to what to do next.
The asking price of 86 Myres Street, in Otumoetai, Tauranga, has been dropped to just below $1.6m. Photo / Supplied
“When we first went to market, properties were selling around or just under the RV here.” The home went to auction, but that didn’t draw out sufficient bidders, said Moyes. “In the meantime, the market just died.”
It was only when the vendor agreed to a price reduction in mid-May that buyer enquiry took off again. “We needed to give buyers a jolt,” Moyes he said. “I had an enquiry from a gentleman in Auckland, who’s going to come down next week with a view to looking at it. He has been watching the property for some time. This is the advantage that buyers have got at the moment. They can keep tabs on the property pretty closely.
“We’ve now come down $350,000. That’s a big chunk. Even then, the vendor is probably still a little bit flexible,” he said.
Another property where the vendor is banking on a price drop is 12 Champion Place, in Pauanui.
The home has been on the market since October last year and the vendor is now ready to meet the market, listing agent Kate Fielding, from Harcourts Pauanui, told OneRoof. “When we initially listed the property, the vendor had had a previous verbal offer, which set expectations high and the market at the time was going into the busy summer selling season.
“Motivations have since changed and the vendor would like to relocate closer to family. The price is now reflecting this motivation and the current slower moving market.”
The marketing ad for 12 Champion Place, in Pauanui, makes it clear that the property is being sold at a discount. Photo / Supplied
The price has been reduced to $1.599m and the listing screams: "HUGE $100K Price Reduction”.
Fielding said Pauanui homes were still selling on average 39% above RV, but “the main difference is that properties are just taking longer to sell than in the Covid market”.
She warned buyers who were “waiting for the bottom of the market” that they might miss out. “The problem with that is the bottom can only be determined in hindsight when the prices start climbing again, and once all those purchasers have missed the bottom and all rush into an upward market it will push the prices even higher. Now is the time to buy.”
Ray White Manukau co-owner Tom Rawson said tweaking the price often brought properties within the search parameters of a new set of potential buyers. “It happens all the time when agents move the needle around with online pricing. That’s quite critical," he said.
“The algorithms work in a way that if you had the guide as $705,000, but a buyer had an upper limit of $700,000, it just wouldn't show. All of a sudden you drop the price by $5,000 to $700,000 then all these buyers come out of the woodwork.”
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