ANALYSIS: I’ve been keeping an eye on the housing market in New Zealand since 1987 and undertaking focused analysis and commentary since 2008. It’s a market that thrives on positivism and a view that things are getting better – especially prices.
If people believe prices are rising, they are more likely to bring forward plans for getting a house built, land will be developed and subdivided, finance will flow, real estate agents, mortgage brokers and banks will be busy, and sellers will have the upper hand.
So, it is not surprising that over the past two years even when conditions have clearly been weak, there has been a general view that improvement lies just around the corner. Currently, there is improvement underway, assisted mainly by falls in interest rates since the middle of last year. But it is difficult to find evidence that the cyclical upturn in the market is gaining momentum, much as many commentators write glowingly about the statistically normal instances of upward moves here and there.
I get my most up-to-date measures of what is happening in housing from the monthly survey of real estate agents I run with sponsorship from NZHL. I’ve just completed this month’s survey, and the key message is this – buyers are in no hurry to hasten their purchase.
Start your property search
Discover more:
- ‘Oh my God, this is like Dubai coming to New Zealand’ - 300 enquiries a week for new suburb
- 'Scary' trend: Homeowners losing thousands of dollars with short-term mortgage fixes
- OneRoof's Need to Know: What happened to Paul Henry's 'fabulously expensive' mansion?
Are there buyers? Yes. A net 52% of agents say they are seeing more first-home buyers and a net 18% say they are seeing more investors. Many people are attending open homes and auctions. But just as there are many buyers, so too are there many sellers.
Agents are very busy undertaking home appraisals for potential sellers, and a strong net 24% of them say that they are seeing more investors looking to sell.
If there are both more buyers and more sellers, it is not surprising that prices are going nowhere. But shouldn’t sales be rising quite well? Data from REINZ show that in rough seasonally adjusted terms dwelling sales around the country in the three months to February were down some 5% from the three months to November, though ahead 13% from a year ago.
Something is clogging the works, and that thing seems to be a continuing high unwillingness on the part of vendors to meet the market. Too many people believe they can achieve the ridiculously high prices seen during the pandemic when interest rates were at record lows, money flowed freely, and buyers were in a frenzy.
Independent economist Tony Alexander: "Too many people believe they can achieve the ridiculously high prices seen during the pandemic." Photo / Fiona Goodall
But we are in a different world now, and vendors continuing to hold out for high prices risk having their properties sit on the market for a long time or eventually biting the bullet and selling for 5% - 10% less than the first offer they received when their property was fresh on the market.
At a time when more buyers are getting worried that prices might fall after they buy, concerns about employment remain high, and realisation is growing that interest rate falls have almost ended, vendors have to acknowledge they don’t have much market power. Buyers do.
In fact, whereas late in 2021 a net 60% of agents said that we were in a seller’s market, now a net 37% say that we are in a buyer’s market.
For the many people out there accounting for the 40,000-plus properties currently listed for sale, my message is this: there are buyers interested in purchasing, but they enjoy the best range of properties to choose from since 2015 and won’t tolerate vendors playing games. When it comes to the negotiations you are the one who will need to blink.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
