ANALYSIS: Since the early part of 2023 the key group providing strength to the up, down, and now up again real estate market has been first-home buyers. At the end of 2022 in the monthly survey of real estate agents which I run with NZHL, a net 16% said that they were seeing fewer first-home buyers in the market looking to make a purchase.
That rose to a net 22% seeing more young people in February 2023 then a record high net 66% come August that same year. But with a flood of properties hitting the market at the turn of 2023 into 2024, new worries about interest rates in February, rising unemployment, and cost-of-living worries, come June this year we were back to a net 3% of agents once again seeing fewer first-home buyers.
Now, with interest rates falling and further reductions expected we are back to a net 56% of agents seeing more young buyers. That is a healthy situation and data tell us that these young buyers have been achieving good success locking in a purchase for the past year and a half.
But now the other much-watched group of property buyers is staging a move – investors. At the end of 2022 a net 69% of agents said they were seeing fewer investors. Come February 2023 that was 41% negative, and in August still 0% net despite the above-noted surge in first-home buying.
Start your property search
Discover more:
- Tony Alexander: Why NZ is likely to see fewer affordable homes in the future
- 'S***, we can't afford this': Homeowners fear they'll lose everything
- Pizza worker, 24, buys first home - after being told he wouldn't get anywhere
In June this year a net 24% of agents said there were fewer investors. A month ago a net 23% said there were more, but just one week ago when I ran my latest survey a strong net 43% of agents said more investors are in the market.
Now, we have two strong groups of buyers active in the housing market. This is causing prices to rise. A net 8% of agents say that they feel prices are now rising in their area. This is the first positive outcome for this measure since January and is well away from the net 55% in May who said prices were falling. The house price cycle has turned. In Auckland a net 15% of agents say prices are rising.
Do these measures mean the frenzy has returned? No. The proportion of agents saying that they see buyers displaying FOMO (fear of missing out) only sits at 19% from 1% in June, a peak of 40% late last year, and an average of 33% since mid-2020 when I started my survey.
Why no frenzy? Because of one very important development. Many people are looking to sell their properties. Data from OneRoof shows the number of residential properties for sale is up 24% year-on-year, with nearly 12,000 new listings hitting the market in the last 30 days. In my agent survey a net 58% of agents report they are receiving more requests for property appraisals.
Independent economist Tony Alexander: "I would expect a seller’s market to return, probably around the middle of next year." Photo / Fiona Goodall
The market overall still favours buyers, with a net 32% of agents saying it is the vendors who are most keen to get a transaction over the line, not buyers, who firmly feel that time is on their side.
When will this situation change? Historically it takes about four years from the start of a cyclical upturn in prices for very rapid (frightening) gains in prices to be achieved. Before then I would expect a seller’s market to return, probably around the middle of next year. Lower interest rates will help as will the still quite high level of house construction and evidence from data on issuance of dwelling consents that standalone house construction may already be rising again.
For the coming year at least falling construction of multi-unit complexes (can’t get presales or funding) will dominate construction data. But that will turn come 2026 and firm residential construction looks set to limit the speed of price gains this cycle in a way not seen for decades.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
