Independent economist Tony Alexander has released his monthly survey of real estate agents, which shows that the Reserve Bank of New Zealand’s (RBNZ) latest 0.75% official cash rate hike and forecast of a recession has had an immediate dampening effect on New Zealand’s housing market.
Real estate agents are reporting renewed downward pressure on buyer demand and sales prices, while buyers remain very concerned about high interest rates, access to finance, and prices falling after buying.
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ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS?
Our survey revealed that a net 39% of agents at the end of November were seeing fewer people showing up at auctions. This was a sizeable decline from the net 10% seeing fewer people in attendance at the end of October. The Reserve Bank’s increase in the official cash rate to 4.25%, prediction of a 5.5% peak and 20% fall in house prices have combined to push buyers back from the market for now.
ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?
Similar to our result for auction attendance, we have seen a large decline in the net proportion of agents seeing more people attending open homes. Of the 555 agents responding to this month’s survey, a net 48% have said they are seeing fewer people. This is a sharp reversal from the net 3% last month, seeing more people at open homes.
HOW DO YOU FEEL PRICES ARE GENERALLY CHANGING AT THE MOMENT?
Average New Zealand house prices rose by 0.2% in October. However, when announced almost a month ago, the result looked to be an outlier. The decline in price observations of real estate agents captured by our monthly survey suggests a return to monthly price falls is imminent. A record net 74% of agents say that they feel prices are currently falling in their area. This is a deterioration from a net 45% at the end of October.
DO YOU THINK FOMO IS IN PLAY FOR BUYERS?
FOMO = Fear of missing out
FOMO is essentially not present in the New Zealand housing market. Only a gross 4% of agents say that they are seeing buyers fretting about missing out. Things have been this way all year.
ARE YOU NOTICING MORE OR FEWER FIRST HOME BUYERS IN THE MARKET?
The net proportion of agents saying they are seeing more first home buyers has fallen from a positive 15% to negative 16% this month. This reading means the presence of first home buyers is still better than at any time since November last year, excluding from late August through to late October. This gauge of activity is still showing an improving trend; it is now simply looking like the optimism from August to October was a tad too accelerated.
ARE YOU NOTICING MORE OR FEWER INVESTORS IN THE MARKET?
While the trend for first home buyers remains positive, there is no improving trend for investors. They stood back from the market early in 2021, and while some started to show some interest recently as first home buyer activity grew, they have been pushed away again by rising interest rates.
WHAT ARE THE MAIN CONCERNS OF BUYERS?
Potential residential property buyers’ top three worries remain high interest rates, access to finance, and concerns that prices will fall after they have bought.
The recent tightening of monetary policy and a round of near 0.5% rises in bank fixed mortgage rates have failed to produce a new lift in the proportion of agents saying that rising interest rates are the main concern of buyers. But then the 91% in October and 89% this month are statistically the same and clearly very high readings. The small 2% decline in this measure does not seem worth reading into.
