Weekend Herald

Ash­ley Church: Why aren’t we sell­ing?

- Ash­ley Church - Ash­ley Church is a prop­erty com­men­ta­tor for OneRoof. co. nz. Email him at ash­ley@ nze­mail. com Business · Real Estate

If you’ve been watch­ing the hous­ing mar­ket over the past few months you’ll know that de­spite the ex­pec­ta­tions of the ma­jor trad­ing banks – and in spite of the in­con­ve­nience of the most se­ri­ous global pan­demic in a gen­er­a­tion - house prices have been in­creas­ing. Be­tween March and May when we were still in lock­down there were som­bre warn­ings of drops in house prices with the banks uni­formly pre­dict­ing falls rang­ing from 5 per cent to 15 per cent.

The logic of their ar­gu­ment was rea­son­able. The econ­omy had taken a mas­sive hit with sug­ges­tions it could take years to re­cover from the im­pact of Covid. Peo­ple were los­ing their jobs – and those who still had them were ner­vous that the worst might be yet to come. There was a nat­u­ral fear that hous­ing mar­ket sen­ti­ment would re­flect these things and that house prices would fall away in the wake of the hit on con­fi­dence.

But it didn’t hap­pen. In­stead, house prices not only held up, but we’re now in the mid­dle of one of the strong­est hous­ing mar­kets in years in most parts of the coun­try with reg­u­lar me­dia sto­ries about houses sell­ing for record prices. In fact, so pro­nounced is this phe­nom­e­non that I re­cently put my neck and rep­u­ta­tion on the line and sug­gested that, for Auck­land at least, this isn’t just a blip, it’s the be­gin­ning of the next hous­ing mar­ket boom, about a year ear­lier than might have been ex­pected.

There are many the­o­ries about why this has hap­pened and I don’t pre­tend to have any greater in­sight than oth­ers – ex­cept to say that there ap­pear to be two sig­nif­i­cant fac­tors in play that are, at least, par­tially re­spon­si­ble.

The first of these is the on­go­ing re­duc­tion in mort­gage in­ter­est rates, and the ex­pec­ta­tion of fur­ther drops. The mes­sage seems to be get­ting through that rates have fur­ther to fall and this is fu­elling con­fi­dence in the mar­ket. The sec­ond driver is the gap be­tween the num­ber of peo­ple who want to buy and the num­ber who are pre­pared to list their prop­erty to sell, which has ef­fec­tively cre­ated a short­age of stock at a time when there’s a huge de­mand from buy­ers. Nat­u­rally, this puts pres­sure on house prices.

Which begs the ques­tion – why are some peo­ple he­si­tant to sell? You’d think ven­dors would be lin­ing up to list their homes – but they’re not. Here are some pos­si­ble rea­sons why:

1. They’re still ner­vous that house prices might drop

While I don’t think this is a ma­jor cause of hes­i­ta­tion to sell, there will still be pock­ets where peo­ple are so fear­ful of the im­pacts of Covid that they sim­ply won’t be­lieve that they’re not go­ing to lose money if they sell their home.

2. They’re ner­vous about job se­cu­rity

In the midst of sig­nif­i­cant eco­nomic un­cer­tainty and no clear plan from the Gov­ern­ment to get us out of this mess, some peo­ple would be he­si­tant to sell their homes un­til they’re sure that they would def­i­nitely be in a po­si­tion to buy an­other. Add to this the num­ber of peo­ple who’ve al­ready lost their jobs and there­fore couldn’t raise a new mort­gage for the por­tion of their home they’d need to re­fi­nance in or­der to buy an­other one and you can un­der­stand the hes­i­ta­tion.

3. They’re wait­ing for the cost of money to drop fur­ther

Those who un­der­stand the re­la­tion­ship be­tween house prices and drop­ping mort­gage rates may sim­ply be wait­ing for those rates to drop fur­ther in the ex­pec­ta­tion that they will get even more for their home when money is even cheaper than it is now.

4. They’re wor­ried that they may not find a re­place­ment prop­erty

While ven­dors can achieve fan­tas­tic re­turns right now, many of them would also need to buy an­other prop­erty to re­place the one they’ve sold. Un­less they’re un­der­go­ing a sig­nif­i­cant life­style change ( mov­ing to an­other town or city, up­siz­ing, down­siz­ing or look­ing for some­thing with dif­fer­ent fea­tures) then the ben­e­fits of achiev­ing a great price could be off­set by the chal­lenge of hav­ing to find a new prop­erty in a mar­ket where stock is tight.

De­spite all of these fac­tors, it would be my ex­pec­ta­tion that list­ings will in­crease over the next few months and that, by Christ­mas, there will be a lot more choice avail­able to po­ten­tial buy­ers.

 ??  ??

Newspapers in English

Newspapers from New Zealand