MORE TURNAROUND SIGNS EVIDENT

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.

The net proportions of agents seeing more people attending auctions and open homes are at their highest levels in over two years.

• FOOP – the fear of overpaying – has fallen to its lowest level since January 22.

• FOMO is trending up but remains low with only 9% of agents noting buyers displaying this worry.

Buyers are becoming less relaxed about listings being plentiful.

ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS?

For the first time in over two years our survey has shown more agents are seeing increased numbers attending auctions than are seeing decreased numbers. The net percentage of respondents at 2% is some distance from the high results during the second half of 2020. But back then trading was in a pandemic frenzy. This time around, the result is one of many indicators telling us that the market is bottoming out and may already have done so.

ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?

A net 32% of our 374 respondents have this month reported that they are seeing more people attending open homes. This is the strongest result since February 2021 just before LVR rules returned and tax changes were imposed on investors. The willingness of people to more actively canvas potential purchasing options is clear from this result.

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

A net 30% of agents feel that house prices are falling in their location. Based on this result we have to be cautious when speaking in terms of the house price cycle hitting a bottom. But the signs are clear. Last month a net 58% of agents were seeing prices still falling and the latest result is the best since early 2022. Note how agents still observed prices as rising through 2021 even as fewer people were attending auctions and open homes. Physical presence of buyers is not the overarching determinant of house price changes.

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

A net 55% of agents this month have reported that they are seeing more first home buyers in the market. This is the strongest result since October 2020 and the jump from a net 22% last month is very noticeable. There may be little FOMO as yet, but young buyers are deciding the time is right to advance their home purchase plans. We can only expect this feeling to intensify now that the media have picked up on the firming signs evident in our survey from much earlier this year.

DO YOU THINK FOMO IS IN PLAY FOR BUYERS?

FOMO = Fear of missing out

There is a small upward trend underway in our FOMO reading — the only one available in New Zealand. But at a gross 9% of agents the level is still very low. This tells us that while more buyers are out kicking the tyres (hopefully not the walls) they do not display impatience about buying to any great degree. Buyers still feel that time is on their side.

ARE YOU NOTICING MORE OR FEWER INVESTORS IN THE MARKET?

Above we noted a sharp improvement in agent observations of more first home buyers in the market of a net 33% (22% rising to 55%). The change upward for observations of investors has been almost as strong at 26%. However, this gain from a net 44% negative last month still means that a net 18% of real estate agents say that they are seeing fewer investors in the market — not more. Tax changes are keeping many investors out of the market, and this has been the case since the end of March 2021 when tax rules were altered.

ARE YOU RECEIVING MORE OR FEWER ENQUIRIES FROM OFFSHORE?

A net 29% of agents have reported this month that they are receiving fewer enquiries from offshore. Foreign interest in the NZ housing market is limited, which is unsurprising considering the rules preventing offshore buying for all bar Australians and Singaporeans, and the flow of Kiwis leaving NZ as opposed to shifting back here.

WHAT ARE THE MAIN CONCERNS OF BUYERS?

There remain three key things which buyers are concerned about. 76% of agents cite rising interest rates, 62% cite access to finance, and 49% report worries about prices falling after buying.

ARE PROPERTY APPRAISAL REQUESTS INCREASING OR DECREASING?

This month there has been a firm lift in the net proportion of agents saying that they are seeing more requests for property appraisals coming through. A net 15% have reported this compared with a net 5% reporting fewer appraisals last month. Note that there is no clear trend in this measure as compared with the improving trends evident in almost all of our other gauges.

But while buyers are only slowly getting less concerned about access to finance, this month has produced a notable drop in the proportion of agents saying price falls are of concern. This reading has fallen to 49% from 68% last month and a range of 63% to 73% since March last year. FOOP (fear of over-paying ) is ebbing away. Note however that concerns about the supply of listings are drifting up, reaching 25% of agents noting it this month from a low of 7% in November.

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

There is still no rising trend in the proportion of agents seeing investors bringing more properties to the market to sell.

However, the following graph shows that there is no trend up or down in the proportion of investors hoping for a bargain.

WHAT FACTORS APPEAR TO BE MOTIVATING INVESTOR DEMAND?

44% of agents feel that the hopes of finding a bargain are motivating investors to make a purchase.

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 9% of agents say they are seeing buyers display FOMO. But in Wellington this is 18%.

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.