ANALYSIS: Last week I finished my column discussing results from my regular survey of property investors by noting that in the near future the housing cycle looked like being fairly muted. The same conclusion comes out of my latest survey, this one of real estate agents located all around the country.

An easy way to see this is to look at the proportion of agents who say that buyers are worried about missing out – FOMO or fear of missing out. During the peak of the pandemic frenzy over the second half of 2020 and early part of 2021 on average 86% of agents said that buyers were displaying FOMO. The country was gripped by it.

This fell away to only 7% come early-2022 as interest rates started rising and the Reserve Bank and the Government took measures which created a credit crunch. The reading stayed at around this depressed level until the second half of 2023 when lower prices and good job security attracted a wave of first-home buyers into the market followed by investors. But the surge did not last.

As households got hit in the first half of 2024 by soaring costs for council rates and insurance, rising unemployment, and generally depressed sentiment, the FOMO reading fell back again to only 1% come June of last year.

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Since interest rates have been falling the feelings of FOMO have risen again – but only to a peak of 19% last October, with the latest reading this week of 11%. Buyers feel that they do not need to hurry. Why?

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Probably because of high awareness of the weak state of the labour market and what this means for the likely number of other buyers in the housing market – fewer. Also, hopes of interest rates really falling away have backed off somewhat, encouraged by the likes of myself and other economists warning of underlying inflationary pressures still being too strong.

Then there are the many monthly measures showing house prices either flat or falling. In fact, last week the REINZ nationwide measure which I track fell 0.8% in December to register a monthly rise averaging only 0.1% for the three months in the December quarter.

There is no upward momentum in house prices on average. Will there be this year? I think yes, however, with higher unemployment to be reported soon, new uncertainty in the global trading environment, net annual migration running 100,000 weaker than a year ago (though still 31,000 positive) and still good house supply growth, gains will be quite minor.

House price growth is tipped to be muted this year. Photo / Fiona Goodall

Independent economist Tony Alexander: "So far this housing cycle is quite boring. It might be quite good if it stayed that way." Photo / Fiona Goodall

Might the Government’s new focus on getting more foreign tourists onto our roads and into our short-term rental accommodation have an impact? At the margin yes. But the impact is likely to be very small, as will any impact from digital nomads coming our way to occupy NZ houses while performing work for offshore customers.

One other statistic worth mentioning from my monthly real estate agent survey with NZHL is the net 13% who have just reported that they are seeing more investors in the market looking to buy. The result is positive. But it is also a long way down from a net 43% of agents in October who reported more investors and the net 36% in November.

As noted here last week, this is not a housing cycle which is as yet attracting much interest from investors. The numbers don’t stack up for many given hikes in some key costs alongside reduced willingness to believe that house prices will rise all that much in the next few years.

In fact, when I ask agents what factors are motivating investors to buy only 19% say it is expectations that prices will rise. That proportion is down from 28% in October.

All up, so far this housing cycle is quite boring. It might be quite good if it stayed that way.

- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz