Independent economist Tony Alexander has released his monthly survey of New Zealand real estate agents, which shows that the nascent recovery in sentiment flagged the month prior has been squashed by the Reserve Bank of New Zealand’s (RBNZ) aggressive interest rate hikes.
Fewer people were showing up at auctions and open homes in October, and first home buyer and investor demand faded. Accordingly, more agents saw prices fall over the month. Buyers also become increasingly concerned about rising interest rates.
With the RBNZ all but certain to hike rates again by at least 0.5% (and possibly by 0.75%) later this month, New Zealand’s housing market will remain under intense pressure.
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ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS
As is the case for most of our measures this month, there has been a slight deterioration in the net proportion of real estate agents saying they are seeing more people attending auctions. This month’s result shows a net 10% of respondents seeing fewer people — down from 8% last month.
Statistically, there is no difference. But the main comment to be made here is that the improvement trend underway since March — which soared in August — has stalled for now. But things are nowhere near as bad as they were when the credit crunch was at its worst in the months surrounding the turning of 2021 into 2022.
ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?
As with our result for auction attendance, there has also been a small decline in perceptions of people showing up at open homes. At a net 3% positive, the result still tells us more people are physically perusing properties.
However, this figure is down from the firm net 19% positive in September, and for now, the improvement in home viewing has stalled.
HOW DO YOU FEEL PRICES ARE GENERALLY CHANGING AT THE MOMENT?
A net 45% of our survey respondents feel prices are easing. This is a small deterioration from the net 39% recorded in the previous survey. It is still much better than the net 72% who felt that prices were easing in June.
The important point is that agents still see prices going down around the country — just at a slowing pace.
DO YOU THINK FOMO IS IN PLAY FOR BUYERS?
FOMO = Fear of missing out
Only a small gross 6% of agents have said that they can see buyers displaying FOMO. The measure has sat just above zero since February. It strongly tells us that turnover in the residential real estate market this year has been and remains up to the willingness of vendors to accept the weaker conditions and meet the lower offers submitted by the fewer buyers now actively engaged in searching for a property.
ARE YOU NOTICING MORE OR FEWER FIRST HOME BUYERS IN THE MARKET?
There has been a slight weakening in the net proportion of agents seeing more first home buyers — from 27% last month to 15% this month. The result tells us that this buyer group is returning to the market in greater numbers but that their stepping forward has slowed down for the moment — undoubtedly in the face of the extra jump up in interest rates recently.
ARE YOU NOTICING MORE OR FEWER INVESTORS IN THE MARKET?
We now see the biggest impact of the recent lift in mortgage interest rates. Unlike the 12-point deterioration in the net proportion of agents seeing more first home buyers, there has been a 20-point deterioration in the proportion seeing investors — from -28% to -48%.
Investors have decidedly stepped back from the market anew over the past month. However, it pays to note that while they remain rare in the market, the degree to which they are absent is less severe than earlier this year when credit conditions were tighter and prices had not fallen as far as they have now.
WHAT ARE THE MAIN CONCERNS OF BUYERS?
Each month we ask real estate agents to indicate buyers’ main concerns. Consistent with all other months this year, the top three concerns are rising interest rates, reported by 91% of agents, difficulties getting finance reported by 75%, and worries that prices may fall after one has bought, noted by 63% of agents.
With the September quarter annual inflation number for New Zealand coming in almost 0.7% higher than expected and banks undertaking a round of mortgage rate rises near 0.5%, concerns about interest rates have gone back up again. This is shown as the grey line in the following graph. Worries about employment remain very low, reflecting the low availability of staff in New Zealand.
There has been a slight lift in worries expressed by buyers about getting finance in the past two months, but no renewed lift in FOOP — the concerns that prices will fall. Many do not perceive the availability of listings as a problem for buyers.
ARE INVESTORS BRINGING MORE OR FEWER PROPERTIES TO THE MARKET TO SELL THAN THREE MONTHS AGO?
This is the only measure in our survey that has not seen a blip in its recent trend this month. There has been a further rise in the net proportion of real estate agents saying they are seeing more investors looking to sell.
That percentage now sits at 6% — compared to -6% last month and -12% the month prior. We cannot call this a wave of selling. Still, the correlation of this shift with the jump up in borrowing costs suggests that interest rates and the decreasing ability to deduct this rising expense when calculating taxable income are making some investors rethink their property holding timeframes.
