A survey of real estate agents has found huge buying interest from both first-home buyers and investors, hampered only by a shortage of listings.
The survey, the first in a series by economist Tony Alexander, with the Real Estate Institute of New Zealand, will benchmark May results to track the mood of the property market as the country emerges from lockdown.
Alexander, the former BNZ chief economist, says buyers have a fear of missing out and are eager to purchase.
A net 31 per cent of property agents nationwide say FOMO (fear of missing out) is what’s driving buyers.
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“When we say FOMO we’re thinking ‘I better buy now because the prices will go up’ but it’s not the current FOMO. Now people have a FOMO of properties not being available in six to 12 months' time.”
Their main concern is that prices will fall after they have bought, so will miss out on a wealth gain or can no longer afford the asset, Alexander says.
However, those worries are not holding people back as they are buying property for the long run, he adds.
While buyers are hopeful to make a purchase in the current economic conditions, they are unlikely to get what they want as there’s not a lot to choose from, Alexander says.
During the recession 10 years ago the number of properties for sale in the country was 58,000 compared to only 19,000 listed this May.
“A lot of people have been frustrated in their search for a number of years as the market tightened. They are hoping there’s an opportunity for them to buy now, with stressed sellers out there and they are seeing this as an opportunity,” he says.
“Over the last 12 years the availability of properties tightened up and owners have seen their prices rise over time.
“So, why sell? Of course, there’s a shortage of construction and not enough new builds coming forward.”
A net 55 per cent of real estate agents, say first-home buyers are the most active market, compared to only a net 4 per cent a month ago.
But there are signs the market boom will be stymied by a lack of listings.
While a net 7 per cent of agents have seen an increase in requests for appraisals (the first stage of listing a property), Alexander says this is low. It appears vendors who don’t have to sell are waiting to see how the economy and housing markets develop over the rest of the year.
The survey found that 30 per cent of agents felt house prices were rising, 12 per cent thought they were falling and a majority 58 per cent felt prices are flat.
Alexander points out that while agents sense FOMO is driving buyers, it doesn’t mean prices will rise.
However, he says that while FOMO is not the same as saying that they will immediately take action to purchase, it does show where demand is likely to be trending.
He adds that while anecdotes have pointed to property interest by returning expat Kiwis, the numbers “do not support a view that the bulk of the net 1 million Kiwis living offshore are about to head home.”
Alexander says agents report cautious lending by banks and that investors are not deterred by economic uncertainty, but that demand is being driven by “a queue of frustrated buyers” who are back in the market after the Covid-19 months.
Bindi Norwell, Chief Executive at REINZ says: “As we move through the Alert Level system people’s confidence in the property market is picking up and we would expect this to continue as we move forward over the coming months.
“So far, we’re hearing lots of anecdotal stories from agents around the country that where there are good levels of demand that properties are achieving strong prices. This is positive given some of the economists’ early predictions around how the real estate market could potentially perform post COVID. However, it is still relatively early days and there are likely to be some tough times ahead.
“Looking forward, there are a number of key challenges the industry is likely to face including getting enough listings to meet demand, quelling consumers’ fears around confidence levels and pricing, financial stability, the level of unemployment. Additionally, there is likely to be some increased activity levels when the mortgage ‘holidays’ come to an end in a few months’ time.
“We are starting to hear murmurs that there are some difficulties around getting access to finance from the banks. However, that’s not entirely surprising, given that it’s still relatively early days and that the banks are still likely to be trying to price the risk at the moment. Hopefully if the country remains COVID-free and as the economy starts to show more signs of green shoots, that this will become less of an issue,” she concludes.
Alexander adds: “Demand is still there. The chances are now looking very low that residential real estate turnover will fall by anywhere near the 40 per cent we were thinking when the virus shock first hit.”
Ray White agent in Beachlands, east Auckland, Brianne Bignell has certainly seen the lack of supply. She says there are limited options for entry-level homes, which are in high demand.
“You can get better money for your property than ever before because the buyers are there but there’s just nothing to sell to them.”
Bignell says first-home buyers with secure employment have a big interest in her area.
“They are taking advantage of low interest rates and LVRs but the issue we have is the supply, giving them those properties to buy.”
