House hunters are so conscious of getting a good price in the market downturn, some sellers are resorting to big price drops and even adding in sweeteners to move their property.
Dean Smith, sales manager for Ray White Central West in Auckland, says buyers are “incredibly price conscious” to the point some vendors are getting creative and innovative to get sold, although others who don’t have to sell are simply removing the property from market.
Developers especially have turned to making offerings, such as department store packages for deals completed quickly, he says.
OneRoof recently reported on a developer offering an $80,000 Tesla as part of the marketing for a five-bedroom Flat Bush home, and also on a real estate agent who put vendors who listed with him in a draw for a Mercedes-Benz.
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Smith hasn’t seen Teslas or other cars added to deals but says one vendor took a fresh look at the pricing on a completed up-market development by looking at adding in a $10,000 Harvey Norman package for deals completed before Christmas.
Price drops are what really count, however, and another developer saw success by slashing over $100,000 from the around $980,000 price tag.
Smith says a boutique development backing on to a park in Te Atatu had eight properties on offer, one of which sold quickly off plan but seven did not.
Agents talked to the developer about getting ahead of the curve and the developer listened: “He’s dropped it to $849,000 and suddenly, boom, we’re getting some really good healthy inquiries and we expect to put one or two people to paper before Christmas.”
When people have to sell, Smith says agents have to be straight about the market conditions because buyers are more price conscious than they have been for at least 10 years.
“If the price is right then they will likely get a sales transaction going.”
Ray White Central West sales manager Dean Smith: “I do think in a way the New Zealand property market’s in uncharted waters.” Photo / Supplied
Smith says a property will always sell if the right price is reached - unless it’s unsellable due to some major issues.
Banks are wanting to see building reports more than in the past and in some case are not loaning on plaster-clad homes, but they can also be more hesitant on more traditional types of properties, he says.
Vouchers for a store like Harvey Norman may not get homes with issues across the line but price drops - sometimes substantial - usually do.
For other buys, vouchers are the icing on the cake: “The principle remains the same in any flat, declining market, that it will sell at the right price.”
Some vendors, however, are still “detached from reality” hoping for prices fetched 12 months ago.
“A listing agent takes that on board at their peril because there could be a whole lot of hard work involved and they’re never going to come down to where the more realistic price is.”
Vendors need to have a reality check because while there are buyers out there they are spoilt for choice and not in a rush.
Smith also says in a downturn it’s more important than ever they don’t scrimp on marketing because more exposure gets more potential buyers.
“I think moreso than in recent memory now is the time to sing it from the rooftops if you really want to get the best price and sell it in the least period of time.”
Auctions are still working, he adds, saying his agency had its best November ever selling 13 properties under the hammer at what was dubbed The Big Event.
A three-bedroom new-build on in Tirimoana Road, in Te Atatu South, Auckland, has found success after dropping in price. Photo / Supplied
Homes that did not sell at auction sold soon afterwards: “The auction process, if it’s done correctly, actually concentrates conditional interest so you find that for those buyers, they’re not second-class citizens.
“If they can’t afford to bid unconditionally at that auction we still invite them to be there because if it doesn’t sell then they’ve got every opportunity to put an offer forward, albeit conditional.
“It’s not to low-ball - they might need to do a builder’s report or they need to get finance.”
Smith describes the resulting multi-offer process that can result when a property is handed in at auction as being like a “pseudo-auction”.
He says while there is fear in the marketplace of paying too much, the changes to the CCCFA have been the real game changer, causing a “nuclear winter” in the finance market and affecting all kinds of buyers from investors to first home buyers.
The result has been like the “decoupling of a train” and there is now also uncertainty around inflation, interest rates and the possibility of rising unemployment in 2023: “I do think in a way the New Zealand property market’s in uncharted waters.”
Richie Lewis from Ray White Manukau says he’s not come across sweeteners from vendors in his patch, but he also says he would consider anything to help sellers in the current market.
What usually happens when a vendor is desperate to sell is they give authority to put a price at the lowest level they are prepared to sell for.
Ray White Manukau sales agent Richie Lewis says often the only option for vendors is to keep dropping the price. Photo / Supplied
Often the property has been on the market for a while and if the new price is in the realm of where the market sees the value calls will come in fairly fast.
If the calls don’t come that indicates the property is still sitting above what the market thinks the property is worth.
“It’s at that point the vendor has an opportunity to adjust again or wait and that's when it really starts to come down to how motivated they are to need or want to make the sale.”
The only option for a vendor who is desperate to sell is to keep dropping the price, probably by five per cent increments, to see if there is engagement.
If there is engagement, a multi-offer situation might result which could then see the price go up a bit but if not the longer the house stays on the market the harder it gets to sell.
Lewis says anything that would trigger engagement in this kind of market is worth exploring.
David Ding, a top Harcourts agent who sells in first home buyer territory on the North Shore, says he’s not seen any desperation in his market as yet so hasn’t come across the need for any sweeteners.
But he says a Tesla car worth around $80,000 could be seen as a percentage of the property price.
“Let’s say they're selling the property for $800,000, right. Instead of dropping the price to let's say $730,000, that's 10% off.”
Offering an incentive like that at the start of a campaign could work as statistics show premium dollar is achieved in the first three to four weeks of a campaign.
A first home buyer could be enticed by a new Tesla, an electric car which means they don’t have to pay petrol costs, but Ding says the customer needs to be aware of where the money is coming from “and eventually it’s coming from themselves”.
