Demand finally outstripping supply: Should homeowners sell now?

A sharp drop in new listings volumes in some of the country’s biggest housing markets could be an opportunity for vendors.

New OneRoof figures show that while total listings nationwide for June were up 6.5% year-on-year, new listings were down almost 10% over the same period.

New listings for June were down year-on-year in all but four of the country’s regions, with the biggest shortages in cyclone-hit Gisborne and Hawke’s Bay, down 62% and 24% respectively.

New listings were also down 21% year-on-year in Wellington and down 17% in Auckland, with the drought having an impact on total listings in both regions.

However, the listings drought comes at a time when sales activity is picking up and auction rooms in Auckland and Christchurch are busier. OneRoof is also increasingly hearing from agents that buyer demand is currently outstripping supply.

The feeling is that tightness in listing volumes will tilt the market in favour of sellers in many locations. The question facing homeowners now is: should we list in winter, traditionally real estate’s quietest season, to take advantage of the increased competition in the market?

Extreme weather conditions in particular have made 2023 one of the hardest winters in years for real estate agents. “Listings in 11 of the 15 regions have decreased by more than 15% year-on-year,” Rachel Dovey, general manager sales for Bayleys in Christchurch, told OneRoof.

The flipside for sellers is less competition. “Winter buyers are more often serious, highly-motivated, buyers,” Dovey said.

“At the moment there are good buyers in our market, lower levels of choice so more competitive bidding at auction and an increase in multiple offers. This is positive for vendors as it ensures that they generate the best offer in the market.”

What’s more, heading out in the cold and rain to attend open homes shows that the buyer was serious, Dovey said. “Less is often more.”

Warm homes that get a lot of sun can be standout during winter, LJ Hooker Dunedin managing director Jason Hynes said. “In Dunedin, there are a lot of properties that are situated behind hills. [In winter] they can be sun compromised, and that can be perceived as a negative from buyers,” Hynes told OneRoof.

“If it's a warm, well-insulated, dry home, that's actually a really big drawcard for people. You don't necessarily get that same benefit if you're selling a house like that in the middle of summer.”

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Anne Duncan, of Ray White Mt Albert, in Auckland, said the bad weather the city experienced earlier this year had made homeowners more cautious about listing. “A lot of people have decided not to sell. They will wait till the market picks up,” she said.

“The big topic is flooding. Floodplains have never really meant anything in Auckland. Now they really do. So many houses have been flooded. We’ve had [sales] that have fallen over because the bank would not lend because they’re too close to a cliff, or have floodplain issues,” she said.

Like other agents OneRoof talked to, Duncan had noticed the pick-up in demand, especially for standalone houses. She said the advantage of buying in winter “is that you see what it’s like to live in a house on a gloomy day. I’ve had friends buy in Titirangi [in West Auckland] in the middle of summer, and in winter, it’s stressful because there’s no sun. If you see a house on a gloomy day, and it looks great, it’s only going to look better in summertime. So personally, I think it’s a great time to buy a house.”

The pros and cons of buying in winter change depending on current market conditions, said Gareth Robins, business owner at Collective First National real estate in Wellington.

“Timing the market to achieve the best possible price is simply about supply and demand. In winter there are often many [fewer] properties on the market, and this flips supply slightly in seller’s favour,” he said.

CoreLogic chief economist Kelvin Davidson says the trade-up premium has shrunk as a result of falling prices. Photo / Peter Meecham

Robins is seeing pent-up demand in the market because there are so few properties available.

“With prices bouncing, combined with a clear indication from the Reserve Bank [of New Zealand] that interest rates have plateaued, [this] is likely to lead to an excellent winter for sellers compared to last winter,“ he said.

“Although prices are increasing again, the market still offers good value for buyers, who along with some good buys should find some more choice as sellers that have been holding back rush to the market to secure a more attractive sale price and move on with the next stage in their life.”

Another reason to buy now is that property prices have most likely hit bottom and turned, but as the market rises, the trade-up premium will grow.

When CoreLogic chief Property economist Kelvin Davidson looked into trade-up premiums recently, he found that they had shrunk as property prices fell in the last year.

The largest trade-up drops were in Upper Hutt (24%), Lower Hutt (16%), Wellington City and Tauranga (both 15%). In dollar terms, however, trade-up premiums are still quite large and range from around $150,000 in Upper Hutt and Dunedin up to about $530,000 in Auckland City.

“It’s still a challenge to upsize in dollar terms, and ‘movers’ have been fairly quiet in the market lately, perhaps driven by uncertainty about the length of time a sale would take, what price would be achieved, and the hurdle of trying to sell before they buy, as well as the higher cost of debt.”

Duncan said buyers looking to trade up were struggling to buy once they’ve sold thanks to the lack of stock currently. “We've had people sell thinking they'll be a cash buyer wanting to trade up from maybe $1.6 to $2m or $1.8m to $2.2m, and there is nothing much to buy,” she said.

Movers were the group to watch, said Davidson, with pent-up demand from potential movers likely to emerge in the remainder of 2023.

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