Market Update: Bonafide Buyers Market!

‘This is a bonafide buyers’s market’

There is no sign of a looming property crash and New Zealand is now a “bona fide buyers’ market”, property experts say.

New data from property listings website realestate.co.nz suggests the country has settled into a new, more stabilised normal, resulting in a buyers’ market.

The number of properties on the market has been steadily increasing since mid- 2021, from 12,684 at the end of July last year to 26,358 at the end of July this year, the data from realestate.co.nz shows. In Auckland, buyers’ options had increased, with 82.9% more listings in the region year-on-year.

Vanessa Williams, a spokesperson for realestate.co.nz, says the stock increases are in stark contrast to the record lows Kiwis witnessed only a year ago.

“Throughout 2021, we saw record-low housing stock month after month, which would have created challenges for buyers and increased urgency in the market.

“But for the last few months, New Zealand has experienced housing stock levels not seen since 2019. This has created a stable and less urgent environment for buyers - giving them time to think about their purchase, their offer, and arranging the necessary inspections.”

She says the market had shifted. In addition to a rise in housing stock, there had been a “record number of consents from councils to build new homes”, resulting in “buyer FOMO (fear of missing out) decreasing”.

However, she says the market is “merely flattening” and “there are no signs of a ‘bubble burst’ on the horizon”.

“Because the market surprised us in 2020 and 2021 with record low stock and record high asking prices, perhaps we’re expecting the surprises to keep coming. For instance, some reports are suggesting the market is swinging from extreme to extreme. But our data does not reflect that,” she says.

Realestate.co.nz data shows the national average asking price is now $942,961, up 4.2% compared to July 2021. This number has been steadily cooling since January this year.

“The scales have tipped; buyers now have the edge.”

“But with buyers’ markets nationally, in two major centres, and in two regions, along with reports of a cooling market, some may wonder why average asking prices are only shifting gently. The answer? Demand,” Williams says.

“Although housing stock is rising and buyers are choosing more carefully, the fact remains - plenty of Kiwis are in the market, ready to purchase a home. It is a Kiwi dream.

“So, although sellers may need to adjust their sales strategy to meet the changing market, in most cases, if you market your property well, buyers will be ready and waiting to make an offer.”

CoreLogic NZ Head of Research, Nick Goodall, also wasn’t expecting a property crash.

“The relatively controlled nature of this downturn is unlikely to ring alarm bells for those at the RBNZ (Reserve Bank of New Zealand) especially after such a strong upswing in values prior to the end of 2021.

“Trying to get control of inflation, through OCR increases is likely to remain their number one priority for now,” he says.

This means discussion around loosening LVRs is probably premature, he added.

“With the RBNZ most interested in financial stability, increasing the share of lower equity loans would not be the prudent option, especially with values continuing to fall in many parts across the country, increasing the likelihood of borrowers falling into negative equity.”

Goodall says this isn’t necessarily a huge problem, provided borrowers are employed and can still service the debt.

He says house price values in Auckland remain at least 7% above the same time last year, but quarterly falls of 4.0% or more in the most populous areas show the tide has turned there.

“With affordability unlikely to improve significantly while interest rates continue to increase, the outlook for values across the country is to follow a similar path to the first half of this year for the rest of 2022,” Goodall says.

Mark McLeod, Ray White Group’s new Chief Strategy Officer of Real Estate, says the experience for buyers has “changed significantly in recent times”.

“Six to eight months ago there were huge crowds at open homes, and properties were selling in just days and prices were surging.

“But times have changed. Buyers no longer have the same sentiment or feel the same experience.”

He said agents would continue to work hard to find the “very best price for our customers, regardless of the market cycle we find ourselves in”.

Ray White’s Chief Executive Carey Smith says although the burden of compromise now lies with the seller this “doesn’t mean that a premium is unachievable in today’s market”.

“But it does mean that a seller must be far more selective when it comes to listing their home.”

“Choosing the most appropriate method of sale for your market conditions and personal needs remains important,” Smith says.

“We know the most active purchasers in the market typically inquire early on property and are attracted to ‘fresh’ homes coming to the market. This means that most properties generate higher levels of interest in the early days of being on the market, and over time, the level of interest starts to wane. This means that the method of sale chosen should be one that condenses the process into a finite period.”

Ray White New Zealand had 561 properties scheduled to go to auction in June, leading to an all-sold clearance rate of 43.5 percent.