For some vendors and buyers, the property market is proving difficult to read in 2010. Four leaders of the country's leading property agencies were asked to shed some light on patterns in the market. They concluded the market is showing stable signs with confirmed interest from buyers and sellers for an active spring property market, by Gill South.
Peter Thompson
Managing Director
Barfoot & Thompson
The stability the Auckland housing market has shown through June and July gives us confidence that, come spring, there will be a modest increase in sales activity whilst prices will remain relatively firm. When it comes to housing, most people, regardless of whether they are buying or selling a property as a home or as an investment, adopt a medium term view. This has been a major contributor to prices standing up well in winter.
While sales activity is down on where it was at the same time last year, the market continues to tick over. Sellers are entering the market. In the past two months, we listed 2500 new properties, presenting buyers with a good level of choice.
The Auckland market is now of such a size that house prices and sales do not go up or down uniformly across suburbs. There are areas and locations where prices and activity vary significantly, and even go against the overall trend. In such circumstances, knowledge about what is happening locally is important.
We see no signs that May's Budget changes are driving investors out of housing. Rather, many investors are looking to improve their operating returns and, in the past 12 months, the average rent we have achieved for rented properties has increased by $20 or 5 per cent a week.
Banks continue to lend to people who can meet repayments, and interest rates in the foreseeable future, while on the increase, still remain at historically low levels and are likely to remain low through to year end.
For the remainder of this year we believe activity is likely to improve from where it is now, with prices remaining stable. Any increase in confidence, in economic activity or immigration will be a plus that will flow into housing.
Carey Smith
Chief Executive
Ray White, New Zealand
The past quarter has seen a lower volume of real estate sales across New Zealand, down approximately 20 per cent on the previous 12 months. This, however, has not affected prices as they continue to hold in a market which has also seen reduced stock. The other key factors, for sellers in particular, are "days on market" which are holding at approximately 45 days. While these conditions may favour buyers, given the limited amount of choice on the market, this invariably has allowed prices to hold during that period.
As we head into spring there will be a noticeable increase in properties coming onto the market, as vendors decide it's the time to sell. This increased activity will lift sales volume and also the expectation that prices may marginally increase.
There are, meanwhile, overriding considerations for the real estate market which include interest rate forecasts, immigration and the general confidence in the economy. The Reserve Bank has indicated that there may now only be a slight increase in the current Official Cash Rate. This will in turn provide assurance for those who are borrowing to purchase a property and will also underpin more activity in the investment and rental sector. Immigration has remained flat and this is expected to continue for the next 12 months.
Given that the majority of property sellers in the residential owner/occupier market will be re-purchasing, this in itself will create activity over the next quarter. For vendors there will be increased competition. For buyers, there will be more stock coming on and, while this will give more choice, it is expected with more activity, the days on market will shorten and that may start to lift the price expectation of sellers.
Mike Bayley
Managing Director
Bayleys Real Estate
Throughout 2009, the volume of residential property transactions increased noticeably. This year, though, the residential market has hit another pothole - with June and July transaction numbers among the toughest experienced in the broader New Zealand real estate market.
There are a few reasons for this. Over the first quarter of the year, we were told that residential property investors and first time buyers were holding out for the Budget announcement. Then the financial recovery was not as far advanced as Kiwis first thought. And lately, winter has also been cold and miserable. August, however, has seen a noticeable improvement throughout our network - with residential offices in the main centres reporting a strong uplift in activity, both from a listing perspective and in buyer numbers.
Our goal, now, is to manage the expectations of both buyers and sellers to keep the momentum going. Mentally toughened by the flow-on effects of a tight economy, Kiwis are becoming increasingly hard nosed when it comes to sitting around the property negotiation table. On one side, sellers are digging in their heels, believing they can hold out for several thousand dollars more but the luxury of being able to command a premium has, in most cases, gone. Conversely, buyers are also digging their heels in - often mistakenly believing they hold the upper hand simply by coming to the table with an offer.
The second half of 2010 will, in our opinion, be better than the first half. The Reserve Bank has signalled that the Official Cash Rate is likely to remain at close to current levels for the remainder of the year and into early next year. Immigration remains a major issue in underpinning any recovery in the residential property sector. Quite simply, we don't have enough of it.
Hayden Duncan
Chief Executive Officer
Harcourts, New Zealand
The last quarter was a tough one in the New Zealand real estate market with the volume of sales in recent months dropping back to levels similar to the lows of 2008, when the market severely contracted following numerous buoyant years. Average prices have remained solid however.
According to Harcourts' statistics and anecdotal feedback though, performance has differed across the various locations and sectors within the market. For example, the mid-upper end of the market, which is largely dominated by owner-occupiers, has continued to perform reasonably; but the lower-end, within which investors typically operate, has struggled even post-Budget when it was expected to bounce back.
The figures from our five regions also show some variation, however what has been consistent in all areas is the low volume of sales. This is partly because there has been a limited amount of stock - in turn resulting in strong competition for the high-quality, well-located properties available.
Looking ahead, the increase in new exclusive listings Harcourts recorded in July, along with feedback from around the group and new pre-approved finance data, suggests supply and demand in the residential and lifestyle sectors may be more equitable in spring.
Low interest rates, positive net migration and tax cuts should all provide some stimulus and we expect that as the weather thaws so, too, will buyers and sellers as they traditionally do. Our team has noted a strong lift in the amount of owners preparing to list their properties in the months ahead, with many marketing campaigns already booked. On the other side of the transaction, our partner, Mortgage Express is reporting an abundance of serious buyers with a record level of pre-approved finance.
Meanwhile, with the ongoing fluctuation in our primary industries' commodity prices, particularly of milk powder, it seems logical the rural property market will remain relatively quiet, particularly with banks' tight lending criteria for farms.
* From the New Zealand Herald's quarterly 'Property Report' - a guide to house prices and great places to live.
