Independent economist Tony Alexander has published his monthly survey of New Zealand real estate agents, which suggests that for the first time since November 2021, FOMO (‘fear of missing out’) has replaced FOOP (‘fear of overpaying’) as the key driver of the housing market.
Accordingly, there has been a rise in requests recently for property appraisals, suggesting more stock coming forward soon for buyers to peruse. Attendance numbers at auctions and open homes continue to rise. And first home buyers are becoming the key driving force in the market.
There has also been a sharp fall in buyer concerns around interest rates.
ARE MORE OR FEWER PEOPLE SHOWING UP AT AUCTIONS?
A net 30% of the 447 agents responding to this month’s nationwide survey have reported that they are seeing more people showing up at auctions.
This is the strongest result since February 2021 and continues a string of improvements in this gauge of buyer interest in the market which has been underway since the start of this year.
Note how like many of our other gauges of buyer interest the graph of auction attendance shows a sharp deterioration in our November survey, undertaken at the very end of October.
This reflects the higher than expected inflation number released on October 18 causing an eventual extra 1% to be added to fixed mortgage rates as monetary policy got tightened more than had been previously expected – or at least hoped.
ARE MORE OR FEWER PEOPLE ATTENDING OPEN HOMES?
A net 51% of our survey respondents have said that they are seeing more people at open homes. This is the fifth highest reading for this measure in the three years our survey has been running and a long way from the net 48% who in November last year said they were seeing fewer open home attendees.
Perusing houses is a precursor to buying them.
HOW DO YOU FEEL PRICES ARE GENERALLY CHANGING AT THE MOMENT?
For the first time since November 2021, when the credit crunch hit, there are more agents saying that prices are rising in their area than say they are falling – a net 9%.
Prices change in lagged response to changes in sales and other measures we track, and it seems probable that this measure will move to higher readings in the near future.
This may be especially so when we consider that the housing market is picking up despite not just the absence of any declines in mortgage interest rates but some fresh increases recently despite no extra monetary policy tightening.
DO YOU THINK FOMO IS IN PLAY FOR BUYERS?
FOMO = Fear of missing out
FOMO is making a firm return but has yet to scale the heights seen in 2020 and 2021. A gross 34% of agents this month have said that they see buyers displaying signs of worry about missing out.
That can mean either missing out on a particular type of purchase or range of choice or failing to buy before prices go higher.
ARE YOU NOTICING MORE OR FEWER FIRST HOME BUYERS IN THE MARKET?
For three months now just below a net 58% of agents have reported that they are seeing more first home buyers in the market. This measure moved into sustained positive territory in February this year and experienced a big jump up in our May survey undertaken at the end of April.
Note that this jump then from 22% to 55% occurred before the Reserve Bank stopped raising interest rates.
ARE YOU NOTICING MORE OR FEWER INVESTORS IN THE MARKET?
One of the distinct characteristics of the turnaround in the residential real estate market which is currently underway is the absence of investor buyers. Individuals buying in order to provide accommodation for the one-third of New Zealanders needing rental space have stood back from the market ever since the tax change of March 2021.
To date, the effect on the rental supply of this lack of buying and slightly greater than average selling has had its impact obscured by the record surge in house construction over the past decade.
But as that boom now fades away and we see the exit of some long-term accommodation to serve holidaymakers and foreign students, conditions are likely to tighten considerably in rental markets. This is especially likely in the main cities.
This month a net 13% of agents still report that they are seeing fewer investors in the market. This is the least weak reading since March 2021 – but it is still negative and well removed from the net 59% positive reading for first home buyers.
ARE PROPERTY APPRAISAL REQUESTS INCREASING OR DECREASING?
This month a net 33% of agents have said that they are receiving more requests for property appraisals. This is a firm rise from a net 13% in last month’s survey and tells us that there should be some new listings coming forward in the near future.
Note however that history tells us when the housing market picks up the arrival of buyers tends to exceed the number of new vendors and the end-month stock of listings trends down as has already been happening since the start of this year.
WHAT ARE THE MAIN CONCERNS OF BUYERS?
We ask agents to identify from a list the main things which buyers seem to be concerned about. Their main concern currently is rising interest rates followed by difficulties getting finance and then insufficient listings:
We have two graphs showing the changes over time in areas of buyer concern and they warrant extra study by readers this month. In this first graph note the grey line. It shows the proportion of agents noting that buyers are worried about prices falling after they make a purchase.
This is our FOOP measure – fear of overpaying. Only 28% of buyers now say FOOP is a concern. This is the lowest reading for this concern since October 2021. Note how it has fallen as FOMO has risen and for the first time since November 2021, FOMO exceeds FOOP.
Second, note the dark purple line. It records the proportion of agents saying buyers are worried that there are not enough listings. It has risen to 46% from only 14% just three months ago. The window of opportunity for buyers to casually peruse a good number of properties on offer is closing quickly.
This second graph shows the proportion of agents noticing that buyers are concerned about their incomes and rising interest rates. Worries about employment remain low, while worries about finance costs are still high though easing off slowly.
