Below is an edited extract of Economist Tony Alexander’s latest REINZ survey of licensed real estate agents.
While the data is still negative and points to further price falls, the seeds are being sown for a mild recovery mid next year.
__________________________________________________________________________________________________
ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS?
In this month’s survey, a net 8% of agents reported seeing fewer people show up at auctions. This is a negative result, and it tells us the market is still weak. But it is the least negative result since September 2021, just before the market was hit by the tightening of the loan-to-value ratio regulations, followed by changes to the Credit Contracts and Consumer Finance Act (CCCFA).
The result backs up agents’ anecdotes, which point to a few more people starting to appear at auctions. This includes reports a couple of months ago relating to migrants whose visas were converted from work-only to residency, taking advantage of their new legal ability to purchase properties.
ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?
For the second month in a row, our survey has shown more agents feel there is an increase in the number of people attending open homes than those who feel there is a decrease. The result is the most positive since February last year, just before the loan-to-value regulations came back and before the Government introduced tax changes aimed at dissuading people from providing rental accommodation.
HOW DO YOU FEEL PRICES ARE GENERALLY CHANGING AT THE MOMENT?
Discussing a turning in the housing market can be a difficult exercise because some people interpret phrases such as being in the endgame to mean that prices are no longer falling and, in fact, are rising. That is not the case.
We can not just see that in the REINZ monthly house price index data but also in the responses of agents to our question regarding what they are seeing with prices in their particular area.
A net 39% of agents say prices are still falling where they operate. This is better than the net 47% who reported prices were falling at the end of August, and the net 72% who said prices were falling in June. The endgame for the residential real estate market in New Zealand has started, which is something we can see from the discussion above regarding open homes and auctions. But activity levels are still weakening, and prices continue to fall.
History tells us that it is not possible to accurately predict the month in which prices for any asset will stop falling and start rising. That includes houses, commercial property, farmland, shares, cryptoassets, precious metals, minerals, food commodities, and energy.
DO YOU THINK FOMO IS IN PLAY FOR BUYERS?
FOMO = Fear of missing out
A small gross 7% of real estate agents in this month’s survey reported buyers are displaying FOMO. This is the best result since February this year (also 7%) but overwhelmingly still tells us buyers feel no particular worries about delaying a purchase and then having to scramble as prices run away on them, as was the case in 2020 and 2021.
WHAT ARE THE MAIN CONCERNS OF BUYERS?
Each month we ask real estate agents to indicate buyers’ main concerns. Top ranking at the moment is rising interest rates noted by 75% of agents. Following that, we have 69% who say buyers are highly concerned about their ability to get finance, while 63% say that buyers are concerned about prices falling after they make a purchase. Note that only 21% of agents say that buyers are concerned about the
actual level of house prices.
The following graph tells us that worries about access to finance were at their greatest at the start of this year. Those worries have eased, but they remain well above where they were through 2020 and 2021. Concerns about a deficiency of listings fell away tremendously late last year. They have edged back up again in recent months but remain at very low levels. Worries about prices falling after making a purchase are easing off slightly but remain relatively high.
Concerns about rising interest rates fell away quite a bit in August, but in light of recent ructions in the financial markets and some increases in bank lending rates, those concerns have gone back up again but not quite back to where they were two months ago.
Note the continuing low proportion of agents saying buyers are concerned about their income or their employment security.
