ANALYSIS: I’ve just completed my second monthly survey of real estate agents for the year, sponsored by NZHL, and the results in most cases are a tad stronger than they were at the end of January.
For instance, there has been a lift in the net proportion of agents saying they are seeing more first-home buyers to 55% from 48% a month ago. This is where the reading has sat in most months since late September as young buyers look to take advantage of lower interest rates, greater availability of bank finance, and strong numbers of listings.
Speaking of which, in this month’s survey a net 68% of agents said that more potential sellers are asking them for property appraisals. This is the second highest reading in almost five years and tells us that strong listings stocks are set to continue.
Last week I mentioned that while there are more investors entering the market as buyers, there are also more appearing as sellers. We can see that in this survey with a record net 32% of agents saying more investors are wanting to sell. This is consistent with something we first started to see early in 2023.
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When the market shows strength, some investors are looking to sell into it. But the fact that more investor buyers are arriving suggests some good turnover for real estate agents around the country.
Only 37% of agents have reported that buyers are worried about access to finance. This is the lowest reading on record and backs up the evidence of competition between banks heating up revealed in some recent discounting of fixed lending rates out to three years.
Forty-four per cent of agents state that potential buyers are worried about their incomes. This is down from the record 56% of mid-2024 and 51% last month, but is still well above the five-year average of 22%. History tells us that if people are worried about their ability to service a mortgage they will naturally be less willing to commit to one in the first place.
Independent economist Tony Alexander: "It probably won’t be until late this year that employment confidence improves by enough for there to be a noticeable extra boost in home demand." Photo / Fiona Goodall
Thankfully we are starting to see some early signs of the period of deterioration in the labour market coming to an end in the form of improving job ad numbers and strong hiring intentions in business surveys. But it probably won’t be until late this year that employment confidence improves by enough for there to be a noticeable extra boost in home demand.
Will there be enough homes to satisfy that demand? Probably. Currently there is an over-supply of townhouses in our two biggest cities. Also, the annual number of consents issued for all types of dwellings to be built seems to have bottomed out at around 33,600. This is equal to about 0.6% of our 5.3 million population and for the past five decades the ratio of annual consent numbers to population has been exactly that.
This is important. It tells us that even after the lengthy period of high interest rates just experienced, the worst that has happened to home building is a fall to average – not well below it as has happened in the past after a tightening of monetary policy.
The scene is set for good growth in new house supply especially with the new rules in place regarding intensification and residential land classifications by councils.
This supply factor alongside the restraining effects of the new debt to income rules, interest rates not falling to very low levels, and more investors looking to switch to other assets tells us that price gains this cycle are likely to be relatively mild on average.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
