ANALYSIS: In last week’s column I wrote about the net 24% of mortgage brokers in my monthly survey now saying that they are seeing more investors and that this is the highest reading since January 2021. Now, the preliminary results from my monthly survey of real estate agents show that they also are seeing investors re-engage with the housing market. Again, emphasising that these are the early results as the survey is not completed yet, a net 12% of agents have just said that they are seeing more investors. This is the strongest result since February 2021 and well away from the net 46% six months ago this year who said they were seeing fewer investors.
The first home buyers are still strongly in the market with a net 66% - same as last month – seeing young people out looking to make a purchase if possible. In other words – demand for real estate has increased and unless this is accompanied by a rise in supply (nope, fresh construction is falling) then prices gain extra upward pressure.
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What about foreigners? While we might run the argument that the political opinion polls suggest a more investor-friendly government after October 14 and that some investors are acting on this expectation, are foreigners putting in extra calls?
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In this month’s survey a net 16% of agents have reported that they are receiving fewer enquiries from people located overseas. This was a net 41% six months ago, so the extent of this negative result has eased. But it is still negative and being based on contact being made rather than analysis of IP addresses to gauge offshore website clicks suggests that we are some way off foreigners having much of an impact in the market as yet.
In fact, we can take a look at this from another angle. I ask agents to indicate which third of the market people are doing most looking in their location. On average for the past three and a half years 18% of agents have said the top third of their local price range, 35% have said the middle, and 26% have said the bottom third. The rest don’t know. The bottom third is where first home buyers and investors largely focus their attention.
Independent economist Tony Alexander: “If there were to be a flood of foreign buyers of NZ houses above $2mn in the coming year, they would face very little competition from us locals.” Photo / Fiona Goodall
My latest survey so far shows only 8% of agents feel buyers are targeting the top-third of the price range. This is the lowest reading since October 2021 and down from 14% six months ago. In contrast, 46% say buyers are mainly interested in the bottom third of the market. This is well above the 26% average and the strongest result on record.
It is the lower end of the market which is attracting most attention currently and frankly things are likely to stay that way for some time given the subdued outlook for the NZ economy this coming year. Low economic growth tends to suppress profits of those owning small and medium-sized enterprises along with bonuses and salary boosts for those in larger enterprises.
These are the sort of people who might normally purchase higher priced properties. If there were to be a flood of foreign buyers of NZ houses above $2m in the coming year, they would face very little competition from us locals I suspect.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
