ANALYSIS: I’ve just completed my final monthly survey of real estate agents for 2024, and the results tell us that although the market has been picking up since July buyers strongly feel they don’t need to be in a rush to make a purchase.
We started the year with 23% of agents saying that buyers were displaying a fear of missing out – FOMO. That level was well below the peak of 92% in October 2020 but well up from just 4% at the start of 2023. Now the reading is 14%. Buyers can see the market rising but feel that time and other factors are on their side.
One of those factors is plentiful supply of vendors. The number of properties listed for sale is the greatest since 2015 and in Auckland at least there is a reasonably clear over-supply of townhouses following the boom in construction after the 2016 Unitary Plan came into force. Developers are finding it very difficult to get presales and finance. Falling townhouse construction will be one of the factors constraining the economy’s improvement through 2025.
Are there any signs that the strong growth in supply of existing houses for buyers to peruse will soon ebb away? No. A net 51% of agents report that they are receiving more requests for property appraisals. The average level for this measure is 21% and back in June only a net 3% of agents reported more appraisal requests. Listings are good and set to stay that way.
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But it is not just the high availability of properties for sale causing buyers to take their time. There remains an air of caution about incomes which is holding many back. Whereas at the start of this year only 14% of agents said that buyers were worried about their jobs, now 44% say this worry exists. The average is 21% and given the widespread expectation that the unemployment rate will rise from the current 4.8% towards 5.5% next year job worries are likely to be present for a lot of 2025.
Some buyers may be taking their time because of the widely reported decline in net migration into New Zealand. The annual flow peaked at 136,000 just over a year ago and recently was just 45,000. My survey of property investors shows high awareness of this decline, which seems well correlated with a sharp falling away of the ease with which landlords can find good tenants.
My surveys and data from other agencies show there is an upturn underway in the residential real estate market, but it is characterised by both demand and supply rising at the same time. This is likely to continue to be the case through 2025 but with some extra demand to come from some slight further declines in interest rates and, eventually, some more positive economic data.
Independent economist Tony Alexander: "Now that we know Donald Trump will be US President for the next four years the outlook for global trade is worse. So too are prospects for global inflation." Photo / Fiona Goodall
Speaking of the economy, for those who haven’t noticed, the prevalent view on the strength of our upturn through 2025 has shifted towards the mediocre outlook I gave in the second half of August. I advised caution just after someone made the silly statement that we were going to be a “rock star” economy simply because interest rates were falling.
You can find a full list of the factors behind my restrained outlook in the August 22 and 29 issues of the weekly publication available on my website. An important point to note however is this. Now that we know Donald Trump will be US President for the next four years the outlook for global trade is worse. So too are prospects for global inflation and the potential rate of growth in China which accounts for about 27% of our export receipts.
At least for the moment, some primary export prices are looking better and there are early stirrings of life in the standalone house construction sector.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
