Price drop sees change in market
Any easing of credit constraints is likely to provide a boost to the cheaper end of the property market, commentators say.
Prices have started to drop – 154 suburbs around the country recorded falls in the three months to February, according to CoreLogic’s latest mapping analysis – and listings have increased across the board.
New Realestate.co.nz figures show a 54 per cent increase nationwide in listings for lowerend properties last month, compared to the same period last year.
There were 6145 listings under the national average asking price of $738,253, up from the 3987 listings under the thenaverage price of $620,287 in March last year.
In Auckland and Wellington, listings under the regions’ average asking prices were up 47 per cent and 86 per cent respectively, although in Canterbury, they were down by 9 per cent.
And with the Government’s new interest deductibility rules around rental income now law, there could be an ongoing increase in listings of cheaper, ex-rental stock as investors look to sell.
But Harcourts managing director Bryan Thomson said the desire to buy did not stop when the market slowed, and demand for more affordable properties, particularly from first-home buyers, was still there.
Those who had the finance and were in a position to buy remained in the market, he said.
‘‘What is holding others back are issues around securing lending, but that should get easier when the changes to the CCCFA [Credit Contracts and Consumer Finance Act] rules come into effect.’’
Buyer confidence could get rattled by commentators’ rhetoric around falling prices, but there was likely to be more activity at the lower end of the market once more first-home buyers could get finance, he said.
‘‘The new tax rules mean it is harder for investors, but there is still interest in cheaper properties from some. It is different for those who trade for profit as when the market slows they are more reticent and wait to see how it pans out.’’
No-one was predicting a massive fall in prices, so buyers who were waiting for the market to crash to get the best possible deal were likely to be disappointed, he said.
In Auckland sales of lowerend properties increased last month, according to Barfoot & Thompson. Its latest figures showed close to a quarter of all sales (24.3 per cent) last month were of properties valued at less than $750,000.
In February, properties under $750,000 accounted for 21.5 per cent of sales, and in January the figure was 18.1 per cent.
Barfoot & Thompson managing director Peter
Thompson said those lower-end sales included some apartments, bare sections and houses in outer suburbs of little developer interest, but townhouses were a big portion of them.
‘‘It is possible to buy a solid, three-bedroom townhouse with a yard for prices around that price point. It’s just that they are a bit smaller, but they are great for first-home buyers.’’
Over the next year, there was likely to be more listings and sales under $750,000 in
Auckland, and that meant there would be more affordable options, he said.
This would benefit aspiring first-home buyers once the lending rules eased.
‘‘Overall, we are returning to real estate of old as the market rebalances after the boom, and prices become a bit more acceptable, although they are still high.
‘‘It means buyers have more choice and power, and can negotiate rather than having to snap up whatever they can. And the ball is less in the sellers’ court, so they need to be realistic in their expectations.’’
Scott Dunn, sales manager at City Sales, said the apartment market had slowed because of the wider downturn, but cheaper, smaller apartments, which were traditional investor stock, were most affected.
There was more stock of that type coming on to the market, and it was harder to shift, he said.
‘‘It means there is more to choose from, but Covid and economic uncertainty is knocking confidence and making buyers more cautious.’’
But larger apartments aimed at owner-occupiers were still selling, and first-home buyers remained in the market despite funding issues, Dunn said.
‘‘They often look at smaller apartments too, but they want a place to live in and enjoy, where they can have their friends over. And they don’t want to knee-cap anyone to get a deal, so that part of the market is doing OK – although it is not what it was before Christmas.’’
One market sector that could be hit hard by the downturn is new-build developments. In recent weeks, two Auckland townhouse developments, one in Panmure and one in Sunnynook, had been put up for mortgagee sale.
Mortgages Online director Hamish Patel said development funding had dried up, even from non-bank lenders.
‘‘With more restricted finance and increasing build costs, there is a real, and increasing, risk that we will see more half-finished projects getting dumped.
‘‘A slowing market is a natural part of the property cycle, and most people will get by OK.
‘‘But it is the risk-takers, like developers, who might run into problems, and yet we need them for new housing.’’