Market getting weaker as buyers pull back

Buyers are backing away from the housing market as economic concerns grow, economist Tony Alexander says.

He surveys real estate agents on a monthly basis, and his latest survey shows that attendance at auctions and open homes has declined.

A net 22% of agents reported that fewer people were attending open homes compared with a net 9% last month who said they were seeing more people.

It was the weakest result since November 2022 when the Reserve Bank warned the economy was heading into recession and boosted the official cash rate by 0.75%, but “we are now back in recession”, Alexander said.

At the same time, a net 26% of agents reported that fewer people were showing up at auctions, from a net 6% last month. In August, a net 35% said they were seeing more people at auctions. Both results showed there had been a decline in buyer demand and market activity, and signalled the market was weaker than expected, Alexander said.

“Buyers do not have a sense of urgency, and do not feel the need to get out there and buy, so there has been a pull back from the market.”

There were several reasons for this, including ANZ’s recent forecast that interest rates could go up further, Stats NZ’s confirmation last week the country was back in recession, and the weaker outlook for the labour market.

People were likely to be holding back to see if their industry, or job, is negatively affected by the economic environment before they think about buying property, he said.

But the survey had a net 39% of agents reporting they were seeing more people wanting to get their properties appraised for potential sale.

Alexander said sellers had come forward more strongly than he anticipated since the upturn in the market in the mid to late part of last year, and that had led to a 21% increase in new listings.

“Still, winter is fast approaching, so a great increase in activity over the coming months is unlikely, and the market will probably stay flat, and stagger along a bit.

“That is not going to change until we get interest rates going down by about 1%, and that is not likely to be until the first part of next year.”

At that time, strong population growth and the falling supply of new homes on the market would combine to push people back into the market, he said.

Real estate giant Bayleys surveys its agents nationwide on a quarterly basis, and its latest results also suggested a softening of the market. The agency’s head of insights and data, Chris Farhi, said in the previous quarter’s survey, most agents thought the market was neutral but getting stronger.

“But in our latest survey, there was a greater proportion of agents who said the market was between neutral and weak.”

Bayleys agents reported the main issues last quarter were problems around finance, and sellers with unrealistic pricing expectations, he said.

“But in the latest survey, agents said that on top of those issues, buyers now have a lot more choice due to the large number of listings. That has led to a lack of urgency because if they see a property that doesn’t tick all their boxes, they don’t mind waiting to see if another one comes along that does.”

At the same time, agents reported that buyers were struggling to find good quality, “sweet spot” homes, he said.

“Good quality homes that are fairly priced typically sell at auction. But any challenges around price expectations or issues with a property and they are harder to move.”

Both surveys showed agents felt the weaker market was affecting prices.