MARKET UPTURN UNDERWAY

Welcome to the REINZ & Tony Alexander Real Estate Survey. This survey gathers together the views of licensed real estate agents all over New Zealand regarding how they are seeing conditions in the residential property market in their areas at the moment. We ask them how activity levels are changing, what the views of first home buyers and investors are, and the factors which are affecting sentiment of those two large groups.

The key results from this month’s survey include the following.

• FOMO is rising while FOOP (fear of overpaying) is declining.

• More people are attending open homes and auctions.

• Buyers are getting more concerned about the number of properties available for purchase.

ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?

A net 41% of our 463 respondents have reported that more people are attending open homes. This confirms the strong result in late-May and as is the case for auction attendance is the strongest reading since the start of 2021. Agents in some parts of the country have reported quite large numbers of people attending certain open homes, mainly in the lower to middle end of the price spectrum.

ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS?

The small net proportion of agents which last month reported seeing more people attending auctions has grown this month to a net 18%. This is the strongest result since late-February 2021 immediately before changes to loan-to-value rules and then alterations to the investor tax regime.

HOW DO YOU FEEL PRICES ARE GENERALLY CHANGING AT THE MOMENT?

Only a net 8% of responding agents have reported that they feel prices are falling in their location. This is the least weak outcome since November 2021 when price change observations were undergoing a rapid change downward following the credit crunch of October and November of that year.

ARE YOU NOTICING MORE OR FEWER FIRST HOME BUYERS IN THE MARKET?

For the second month in a row a very strong net proportion of agents have reported seeing more first home buyers in the market. The latest result of a net 56% matches May’s 55% and is well up from the net 16% at the end of 2022 observing fewer young buyers in the residential real estate market.

DO YOU THINK FOMO IS IN PLAY FOR BUYERS?

FOMO = Fear of missing out

A key characteristic of the frenzy pandemic period from mid-2020 to the end of 2021 was a strong concern on the part of many buyers that if they delayed their purchase they risked missing out – either in terms of having to pay a higher price or the type of property they desired not being available. At 18% of agents reporting FOMO on the part of buyers, we are nowhere near that period of rapid price rises. However, the latest result is a doubling of 9% FOMO in May and a clear break from the low levels between 4% and 9% in place for all other months since February 2022.

ARE YOU NOTICING MORE OR FEWER INVESTORS IN THE MARKET?

We are not in a situation where more agents feel that investors are returning than feel that they are leaving the market. However at 15% the net proportion saying that they are seeing fewer investors is the least negative since February 2021 and well away from the net 69% at the end of last year saying that they were seeing fewer investors. This shift towards less pessimism on the part of investors likely reflects talk of the housing market bottoming out and interest rates peaking. But the high level of interest rates alongside the progressive removal of interest expense deductibility explains why the result is negative and not positive as is the case for first home buyers.

ARE YOU RECEIVING MORE OR FEWER ENQUIRIES FROM OFFSHORE?

As ever there is little net interest in New Zealand property from offshore. Nevertheless, the easing trend in this gauge is in line with the direction of change for all the other variables which we track.

WHAT ARE THE MAIN CONCERNS OF BUYERS?

The three main worries buyers have continue to be rising interest rates, access to finance, and concerns that prices will fall after they make a purchase.

ARE PROPERTY APPRAISAL REQUESTS INCREASING OR DECREASING?

A net 13% of agents have reported that they are receiving more requests for property appraisals. This is little changed from the result late in May and perhaps mainly tells us that there is no flood of property being placed on the market by potential vendors.

This month’s survey has shown a firm decline in the proportion of agents reporting that buyers are concerned about prices falling – to 39% from 49% in May and 68% in April. At the same time there has been a noticeable lift in the proportion of agents noticing that buyers are concerned about the stock of listings – to 34% from 25% in May and 14% in April.

ARE INVESTORS BRINGING MORE OR FEWER PROPERTIES TO THE MARKET TO SELL THAN THREE MONTHS AGO?

As has been the case for almost all months since the middle of 2022, there is no sign of a wave of investors looking to sell. This is in spite of the high interest rates and tax changes.

We can see in the following graph that while there is no trend change underway in bargain buying hopes, there has been an upward shift in expectations that house prices will rise.

WHAT FACTORS APPEAR TO BE MOTIVATING INVESTOR DEMAND?

When asked about the factors which are motivating investors, 41% of agents say nothing and that their demand is in fact weakening. But 43% say that they are motivated by hopes of finding a bargain while 17% say investors expect house prices to rise.

Regional Results

The following table breaks down answers to the numerical questions above by region. No results are presented for regions with fewer than 7 responses as the sample size is too small for good statistical validity of results. The three top of the South Island regions are amalgamated into one and Gisborne is joined with Hawke’s Bay.

Best use of the table is achieved by picking a variable and comparing a region’s outcome with the national result shown in bold in the bottom line. For instance, nationwide 19% of agents say they are seeing buyers display FOMO. But in Auckland this is much stronger at 27%, while Wellington is at 28% and Canterbury 24%.

The table shows net percentages apart from the FOMO question in column F. The net percent is calculated as the percentage of responses saying a thing will go up less the percentage saying it will go down.

A. # of responses

B. Are property appraisal requests increasing or decreasing?

C. Are more or fewer people showing up at auctions?

D. Are more or fewer people attending open homes?

E. How do you feel prices are generally changing at the moment?

F. Do you think FOMO is in play for buyers?

G. Are you noticing more or fewer first home buyers in the market?

H. Are you noticing more or fewer investors in the market?

I. Are you receiving more or fewer enquiries from offshore?

J. Are investors bringing more or fewer properties to the market to sell than three months ago?

This publication is written by Tony Alexander, independent economist. You can contact me at tony@tonyalexander.nz Subscribe here

This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. To the extent that any information or recommendations in this publication constitute financial advice, they do not take into account any person’s particular financial situation or goals. We strongly recommend readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. No person involved in this publication accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication.

Newdatafromrealestate.co.nzshowsthatwhilenewlistingsweredown, moreKiwissearchedforpropertylastmonththantheydidayearago.

• LowestJuneonrecordfornewlistingsnationallyandin12regions

• Nationalaverageaskingpricestable. AucklandandCanterburyshow signsofflattening

• Aneconomicmicro-climatefortrend-buckingCentralOtago/Lakes District?

• Onlytwobuyers'marketsremaining

Thenumberofpeoplesearchingforpropertyonrealestate.co.nzwasup8.6% comparedtothesametimein2022*.Butwiththenumberofnewlistingscomingonto thesitedownby21.2%nationally,thoselookingfortheirperfectpropertyhad significantlylesstochoosefrom.

"Justover6,000propertieswerelistedlastmonth– almost2,000lessthaninJune 2022.Yet,westillhadmorepeoplesearchingforpropertythaninJunelastyear."

"Youshouldalwaysbuyandsellbasedonyourcircumstances.ButifIwereplanning tosellin2023,I'dseriouslyconsiderlistingnowwhilecompetitionbetweenvendorsis low,"saysVanessaWilliams,spokespersonforrealestate.co.nz.

Totalstocklevelswerealsodownyear-on-yearby6.1%nationallyinJune,further confirmingthelackofchoiceforbuyersinthemarket.Butit'snotjustlesscompetition thatmakescurrentconditionsripefortransactingproperty.

"Theremightbealittlemorecertaintycomingforbuyersandsellers.TheReserveBank ofNewZealandhassignalledwecouldbeattheendofitsrecentinterestratehikes. While,nationally,averageaskingpriceshavebeenstableforthepastfewmonths, perhapsgivingbothsidesmoreconfidenceonwhattoexpect,"saysVanessa.

New listings

6,218 or21.2%decrease year-on-year

Total housing stock

24,676 or61% decrease year-on-year

National average asking price

$859,871 or8.7% decrease year-on-year

National market sentiment

Sellers' market

LowestJuneonrecordfornewlistingsnationallyandin12regions Nationally,andinAuckland,Waikato,BayofPlenty,Gisborne,Hawke'sBay, Wellington,Southland,Coromandel,CentralOtago/LakesDistrict,Wairarapa,

CentralNorthIsland,andManawatu/Whanganui,newlistingswereat recordlowsforanyJunesince2007.

Year-on-year,listingsweredownbymorethan20%inthenational marketandin12ofour19regions.

VanessasaysKiwisremainedhesitanttolisttheirpropertieslast month–potentiallybecauseofeconomicfactors:

"WeknowthatKiwisarefeelingtheeffectofinflationandrising interestratesintheirpocketsrightnow,andIthinksomeproperty ownersarewatchingtoseewhathappensnext.Wemayseethis pent-upsupplyhittingthemarketlaterintheyear."

Sheaddsthat,despitesomesellersholdingoff,peoplestillbuyand sellpropertyregardlessofwhatishappeningintheworld.

"Thereisstillactivityinthemarket,"saysVanessa.

Northlandwastheonlyregionwherenewlistingnumbersincreased year-on-year.Up19.0%comparedtoJune2022,300propertiescame ontothemarketintheregionlastmonth.

Nationalaverageaskingpricestable.AucklandandCanterburyshow signsofflattening

Thenationalaverageaskingprice,whichhassatrelativelyflatsince March2023,remainedstableduringJunewithamarginaldecreaseof 0.9%comparedtoMay.AucklandandCanterburyalsoshowedsigns ofstabilising.

Vanessasuggeststhiscouldbeasignofthingstocome:

"Typically,trendsstartinourmaincentresbeforetheyemergeinother regions.Weareseeingsomepricefluctuationaroundthemotu,but thisnationalflatteningcombinedwithearlysignsinAucklandand Canterburycouldmeanmoreofthisontheway."

Aneconomicmicro-climatefortrend-buckingCentralOtago/LakesDistrict?

Continuingtobuckthefallingaverageaskingpricetrend,Central anessasaysthetourismmeccaseemstobelessimpactedbythe economicfactorsaffectingotherregionsinNewZealand: "TheCentralOtago/LakesDistrictisalmostinitsowneconomicmicroclimate.Demandisstillhighforpropertyinthisregion,anditwould seemthatbuyersarenotasimpactedbyrisinginterestratesandrising householdinflation."

Otago/LakesDistricthitanall-timerecordhighof$1,484,600inJune.The regionhasseenpricestrendingupwardssincethebeginningof2022,in directcontrasttothenationalaverageaskingprice,whichhasfallenby $129,812.

"Plus,manypeoplebuyinginthisregionarefromoverseas,wherethey potentiallyhavehigherincomesandfavourableexchangerates."

Sheaddsthatmostpeoplesearchingforpropertyintheregionwere locatedfurtherafield.ThelargestnumberofpeoplesearchinginCentral Otago/LakesDistrictinJune2023wereinAuckland,followedby CanterburyandNewSouthWales.OtherAustralianstates,Queensland, VictoriaandWesternAustraliawerealsoamongthetoptenlocations forsearchers.

Onlytwobuyers'marketsremaining

Justtworegions,AucklandandTaranaki,wereinbuyers'markets duringJune– achangefromthesevenregionsfavouringbuyersat thecloseof2022.

VanessasaysthatwhileAucklandhasbeeninabuyers'marketfor severalmonths,itappearstobeweakening.

"Ifnonewpropertiesweretocomeontothemarket,thenumberof weeksitwouldtaketosellthecurrentsupplyinAucklandismoving closertothelong-termaverage.Thistellsusthatpropertyismoving slightlyfasterinAucklandthanitwasatthebeginningoftheyear."

NathanMiglani,ManagingDirectorforNZMortgages,saysthey,too, areseeinganincreaseinmarketactivity:

"We may be in a 'technical recession', but we’re seeing a warming of the realestate market. News of a decline in inflation is giving buyers confidence, andmomentumisbuildingwithincreasing activity."

"Onedayearlierthisweek,fourclientscompetedatauctions.One missedout,butthreeweresuccessful– andeveryoneofthose auctionshadmultiplebidders."

Vanessahasalsoheardthatsuccessfulauctionsalesarerisingfrom therealestateindustry.

*Source:Internalmetrics(1June-29June2022vs1June-29June 2023)

Formediaenquiries,pleasecontact:

HannahFranklin|hannah@realestate.co.nz