Buyers can expect the housing market to move in their favour as a result of Covid-19, but a shortgage of listings could prevent steep price declines, a new survey suggests.
Economist Tony Alexander canvassed real estate agents across the country for their views on the market at alert level 3 and where they expect it will land in the months ahead.
He found that while agents note the housing market clearly lack strength they do not agree with the view that there is widespread weakness. "The weight of responses and observations volunteered by the 236 respondents does not support a view that prices are set for substantial declines," he says.
A net 27 percent of respondents nationwide felt buyers had the upper hand right now but the power shift from sellers to buyers wasn't apparent in every market.
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"In some locations buyer strength is seen as still exceeding seller willingness, as was the case heading into this crisis. For instance, in Canterbury only a net 2 percent of respondents feel that this is a buyer’s market. In Nelson and Wellington sellers are seen as still holding the upper hand," Alexander says.
In Auckland, a net 37 percent of respondents viewed buyers as having the greater strength, but the challenges facing sellers are likely to more severe in Queenstown, which has seen its tourism-dependent economy collapse as a result of Covid-19. A net 85 percent of respondents in Central Otago Lakes view buyers as having the upper hand in negotiations.
Alexander says the survey responses highlight the main challenge facing buyers right now - a shortage of listings. A net 19 percent of respondents noted that appraisals had decreased. "This negative result is in line with general expectations of two things – that turnover will decline, and that listings will remain in short supply," he says.
"That last point is relevant because the residential real estate market went into this crisis with a worsening shortage of listings in most parts of the country.
"Ahead of the 2008 Global Financial Crisis listings in April of that year were above 58,000. In March, as we headed into lockdown, they were below 19,000. Hopes which buyers might have for listings to soar and deliver them a smorgasbord of options are likely to be dashed."
Alexander says the survey results also highlight continued strength in the investor market, with a net 16 percent of agents reporting that they had seen more activity from investors. "This correlates with stories from two months back of long-term focussed investors with good capital bases calling up real estate agents to express their interest in any well-priced properties which come along," he says.
Alexander says respondents also noted that:
• There is continued demand for properties in the lower priced brackets, but at the top end buyers have pulled back.
• Many buyers say they intend making a purchase but will wait to see what happens when the 12-week wage subsidy ends, then what happens when six-month mortgage deferrals end as well.
• Vendors not needing to sell are pulling back from the market.
The survey results also highlighted key concerns within the commercial property industry. Agent responses pointed to the challenges in the hospitality and retail sectors.
"One thing for sure is that you will see a huge dent in hospitality as a lot of them only have cash flow for 1-2 months and are usually robbing Peter to pay Paul," one respondent noted.
Another agent said retail and hospitality vacancies were going to increase going forward and that accommodation sectors were going to languish until a trans-Tasman border arrangement progresses.
