ANALYSIS: I run five surveys each month which among other things give me insights into changes in the residential real estate market weeks in advance of what the data on sales and prices eventually show. The key things the surveys are saying about the real estate coalface right now include the following.
First, credit availability is starting to improve – or perhaps more accurately speaking, get less bad. The monthly survey of mortgage advisers I run with mortgages.co.nz shows that two weeks ago a net 8% of advisers felt that banks were becoming more willing to lend.
This is a turnaround from a net 12% in March who thought they were getting tighter, 61% in February, and 83% in January. The peak period for banks closing up shop on mortgage applicants was December when a net 93% of advisers said willingness to lend was deteriorating.
The improvement just recorded doesn’t suggest that prices are about to leap ahead anew. But it does suggest the Minister of Commerce’s announcement of upcoming CCCFA tweaks has had an impact and that the credit crunch is easing.
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Second, there is still no rush to the exit door by investors. As buyers, investors have stood back from the housing market since the end of March last year when tax rules changed. But my latest survey of real estate agents alongside REINZ shows that a net 5% of those agents nationwide say they are seeing fewer investors looking to sell – not more.
The monthly survey of existing property investors which I undertake with Crockers Property Management shows that three weeks ago only 20% of investors said they were contemplating selling a property in the next 12 months. That is the lowest reading since I started this particular survey in June last year and the result is down from 27% in January.
Third, FOMO is gone and it remains gone. My survey with REINZ shows only 6% of agents saying they can see buyers displaying fear of missing out. That is down from 70% in October. Instead, 65% of agents say that buyers have a fear of over-paying – FOOP. This is up from 19% in October.
Tony Alexander: “FOMO is gone and it remains gone.” Photo / Fiona Goodall
People can see that prices are falling and have some concerns that if they wait, they could get a better price. They probably will, but they might not necessarily get as good a property as the one they just passed up for want of paying 5% less.
Fourth, and this is an important point for what happens as interest rates go higher. Only 12% of agents say that one of the main concerns buyers have is that they will lose their job or suffer a reduction in their income. That reading was 48% two years ago and tells us that job security is high.
This is a way in which this period of a soaring cost of living and rising interest rates differs from painful periods in the past. Opportunities in the tight labour market remain plentiful and that will tend to cushion the current pullback in household spending and keep people at least looking at property listings with an eye to making a purchase. It is more important, however, in staying the hand of those who might otherwise have sold their property for fear of not being able to service the mortgage shortly.
Fifth, much as people think all investors have been scared away by tax changes and rising interest rates, the reality is different. Purchasing by investors paying cash is increasing in market share, and my survey of real estate agents reveals that 39% can see investors motivated by hopes of getting a bargain. That reading was just 17% in October.
The nationwide and Auckland housing markets are in a corrective phase which will probably peter out before mid-2023. My surveys suggest that the coming flat period may even start before the end of this year.
- Tony Alexander is an economics commentator and former chief economist for BNZ. Additional commentary from him can be found at www.tonyalexander.nz
