Reality check coming, warns CoreLogic
Auckland real estate agency Barfoot & Thompson says sales numbers returned to normal in June while prices held stable – but research firm CoreLogic is warning there may be a ‘‘reality check’’ coming.
Barfoot & Thompson reported
820 sales by its agents in June,
4.3 per cent more than in the same time a year earlier.
The agency’s average sale price was $943,417, up 1.4 per cent year on year.
‘‘Taken in isolation, the month’s trading was very much business as usual,’’ said managing director Peter Thompson.
‘‘What contributed to the robustness of the market in June was solid new listings at 1582,
56.3 per cent higher than in the same month last year; an influx of first-time buyers; and undoubtedly some catch-up business from the slow sales in May.
‘‘It is far too early to see this result as an indicator that the property market will defy forecasts and ride out the Covid-19 pandemic unaffected.
‘‘It does suggest that over a three- to five-year time horizon buyers have confidence in property at today’s prevailing prices and that they are not holding back in the hope of a major decline in values.’’
He said the 4001 properties on the agency’s books was the highest number in 12 months.
But Kelvin Davidson, an economist at CoreLogic, said a survey of users of its Property Guru platform, largely real estate agents, was a reality check on some of the positive stories emerging about the property market.
‘‘We don’t think that the outlook is all doom and gloom. But at the same time, we’ve had the sense in the past few weeks that the effects on property from the recession and rising unemployment might have perhaps been temporarily overlooked.’’
He said a lot of activity had picked up significantly since the country moved to Covid-19 alert level 3.
‘‘There’s a sense that some have now become too optimistic – after all, we’re in a recession and unemployment has further to rise yet. These factors will restrain the property market for the rest of 2020 at least.’’
He said quite a few vendors were listing for ‘‘wrong’’ reasons. Almost 20 per cent of properties had come onto the market because of financial distress, respondents said, and 16 per cent because of the worry of prices falling. Another 10 per cent were because vendors wanted to sell an empty property.
‘‘Of course, it wasn’t all bad – many vendors were listing because of wanting to upsize or downsize, or for other reasons such as a job relocation.
‘‘Meanwhile, survey respondents were a little mixed about whether the short-term prospects for buyer demand are better or worse than pre-Covid . . . It wasn’t a surprise that more than half of the survey respondents think actual sales volumes will be lower in 2020 than 2019.
‘‘That squares with our own expectation that volumes could be down by 25 per cent this year, to about 65,000 [sales].’’
Davidson said the survey showed a ‘‘handful’’ of respondents expected prices to rise this year but 63 per cent expected falls. A quarter thought prices could be down at least 10 per cent.
‘‘All in all, it’s important to note that our survey was taken at one point in time – mid-June – and mostly covered one audience: real estate agents.
‘‘However, the results are still a reality check and reaffirm our view that the property market isn’t out of the woods yet.
‘‘Spring remains a key period to watch, as wage subsidies and mortgage payment deferrals potentially wind down, and the general election in September possibly creates some extra uncertainty in the economy.’’