It’s firmly now a buyers market
ANALYSIS: Recession haunts the housing market as job loss fears take their toll, writes Tony Alexander.
This week I completed my monthly survey of real estate agents around the country undertaken with sponsorship from NZHL. The results show that amidst confirmation of a new recession, a fresh flood of listings and deepening worries about employment, we are solidly back into a buyer’s market.
A net 26% of agents say that they are seeing fewer people attending auctions. Late in October, a net 34% said they were seeing more people. The change is even more dramatic for open homes. Back then a net 47% were seeing more people out and about viewing properties. Now a net 22% say numbers are decreasing.
FOMO has all but disappeared again while there has been a solid rise in FOOP – fear of over-paying. In fact a net 26% of agents now say that in their area prices are falling. In October a net 34% said they were rising.
The ultimate outcome is a net 57% saying that it is a buyer’s market once more. In September a net 3% observed that we were in a seller’s market.
Shortly after the Reserve Bank predicted recession back in November 2022, I said that this was an important thing to do because using words to scare people into cutting spending would lessen the need for much higher interest rates. Now the same effect is occurring but via the official data from Statistics NZ rather than any new statement from our central bank.
This recession discussion arrived just after one forecasting group scared buyers off with a prediction that interest rates were set to rise another 0.5%. At the same time and still ongoing, we have rising listings numbers taking away any sense of urgency on the part of buyers. The stock of property listed for sale nationwide has now gone up 21% since July last year.
The latest new and negative development is a surge in people’s worries about job loss. I ask agents in my survey what people say they are worried about. Two months ago only 14% said people were concerned about their jobs. One month ago that rose to 23%. Now 37% of agents say potential buyers are worried about their employment and incomes.
This labour market factor probably helps explain the fresh decline in people’s sentiment captured in my monthly Spending Plans Survey. Four months ago a net 13% of consumers said they planned cutting back on their spending in the next 3-6 months. That worsened to a net 24% last month and now a net 30% say they plan spending less.
Amongst the reasons people supply for cutting back their spending is one rising in importance – worries about job loss and reduced hours of work.
The flow of data showing fresh weakness in the housing market (worsening the outlook for builders and property developers) and new deterioration in the economy, seems to be accelerating. At some stage this trend is going to encourage the Reserve Bank to bring forward its prediction for cutting interest rates from the middle of next year.
But with inflation expectations, price setting plans, and wages growth still at uncomfortably high levels, we shouldn’t expect any easing signal from the Reserve Bank until the second half of this year.