Mood shift could dampen rising market

I'm beginning to think that the most likely cause of a downturn in the Auckland property market could be people talking it down.

A week or two back I was in a lift in Auckland and two people were talking about the Auckland market. One said that their agents had told them that things had noticeably slowed in recent weeks and the heat had come out of the market.

As you can appreciate, I spend a lot of time watching market data very closely, particularly now as I keenly search for any sign of a change in response to the various market forces.

At the time of that lift conversation, there was no evidence of things slowing down. Quite the opposite in fact.

New listings were picking up, there was an increase in online searches and reports by banks and consumers, and feedback from valuers on the ground, was that prices continued their rapid climb, and our own various measures of value had yet to register any conclusive signs of slowing.

Nevertheless, that lift conversation made me think. Over the previous days and weeks various events may have led to people believing the end was nigh.

For a start, the tone of most media stories about the Auckland property market tends towards words like "bubble" and "crisis" and the effect of the inevitable correction. Then there was the dramatic fall in dairy prices, the Chinese stock market shock, impending rule changes by the RBNZ and Government, and real estate data suggesting prices have already started to drop.

As it turns out, dairy prices have rebounded a little, and the Chinese stock market is no longer (at the time of writing) dominating headlines. The impending rule changes are probably fuelling the market activity, not dampeningit.

Then it turns out that the apparent drop in Auckland median sales prices last month was, as I suspected, a temporary blip in an upward trend.

And now we are in spring when the market traditionally picks up dramatically. If enough people start thinking that the economic or property market outlook is not rosy then the confidence and frenetic bidding up of prices could just as quickly lead to people sitting on their hands for fear of being burned. The difficulty is that this consumer confidence is a fickle thing and almost impossible to forecast.