ANALYSIS: This is my first column for the month, which means I have in hand the results from my survey of real estate agents around the country. The data show us that the upward momentum in residential real estate, which was apparent even before the August 14 easing of monetary policy, has strengthened.
Whereas two months ago a net 35% of agents said that they were seeing fewer people attending open homes, now a net 42% say they are seeing more. The late-July result was 11%. People are definitely out looking at what is on offer. Are they buying?
We don’t have August sales data yet from REINZ, but my latest survey has shown that a net 12% of agents are seeing more people attending auctions compared with a net 11% seeing fewer last month and 37% two months ago.
Is this apparent extra buying causing prices to rise?
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Not yet. A net 7% of agents still say that prices are falling in their area of operations. This is at least better than the net 29% seeing falls last month and rather large 50% of two months ago.
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Is this lack of rising prices on average because investors are not buying?
No. A net 25% of agents say that there are more investors in the market looking to make a purchase. Two months ago a net 24% said that they were seeing fewer investors.
So, if buyer demand is up, why might prices not yet be rising?
Because supply is increasing. A net 50% of agents have reported that they are receiving more requests for property appraisals. This is up from just 3% two months ago and the strongest result since February’s net 61%. More people are looking to sell now that they can see discussions about falling interest rates causing the housing market to pick up.
Some of these new appraisals may be from investors. A net 20% of agents say that they are seeing more investors looking to sell. That seems understandable when we consider the strong increases in the costs of running a rental business – council rates and insurance premiums in particular.
Independent economist Tony Alexander: "Agents have reported that they are receiving more requests for property appraisals." Photo / Fiona Goodall
It is also worth noting that although more people are looking to buy, 48% of agents still say that these buyers are concerned about their employment. At the start of this year only 14% of agents said buyers had income worries and the 48% in this latest survey is not much lower than the recent peak of 56% seen at the end of June.
More than 50% of agents say buyers are finding it difficult to get finance, and only 24% now say there are concerns about prices falling. Two months ago this reading was 44%. I read this as indicating that buyers have a general expectation that as the market gathers momentum there will be a price response.
But for now the lack of upward movement in prices on average means that the proportion of agents saying buyers have a fear of missing out (FOMO) has risen to 15% from 1% two months ago. In fact, overall a net 29% of agents still say we are in a buyer’s market.
That is, agents believe that for the moment the buyers who are active in the market looking to get on with their lives are in a stronger bargaining position than the vendors. I expect this situation will change and the chances are high that unlike late last year when we were only briefly back in a seller’s market for three months, the change this time around will be sustained for perhaps 2-3 years.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
