Independent economist Tony Alexander has released his latest survey of New Zealand real estate agents, which reveals that the Reserve Bank’s aggressive monetary tightening has well and truly killed home buyer demand.
The survey shows that the main concern of Kiwi home buyers is “rising interest rates”, followed by “difficulties getting finance” and “worries that prices will fall” after purchasing:
“Only 6% of agents feel that buyers are displaying a fear of missing out on making a purchase. When prices were rising rapidly and turnover was very high our FOMO [fear of missing out] measure was typically between 50% and 92%. We are about as far removed from that particular psychological state of the market as it is possible to be”, says Alexander.
“A net 19% of the 512 real estate agents responding in this month’s survey have reported that fewer people are showing up at auctions”.
This “tells us that for now the people who do go to auctions are not facing much competition”.
The reduction in buyer demand is lowering house prices, with “a net 59% of agents throughout the country report[ing] that prices are falling in their location of interest”.
“This result is consistent with almost all others since early last year and therefore gives no hint that the pace of price decline is necessarily slowing as yet”.
Thus, rising interest rates and the reduced borrowing capacity that entails has cratered buyer demand, which has sent house prices tumbling.
The situation is unlikely to change in the near term given the Reserve Bank last week hiked the official cash rate another 0.5% to 5.25%:
Until rates start to moderate, New Zealand buyers will likely remain on the side lines and home prices will continue to fall.
