Has Auckland changed from a sellers’ to a buyers’ market?

September 2016

Has Auckland changed from a sellers’ to a buyers’ market?

In my view, the Auckland market is turning into a buyers’ market. This will be the case for the next three to six months. In the rest of New Zealand, it’s still a sellers’ market.

In the Auckland market buyer numbers have fallen. I’m expecting the market to flatten out and we’re already seeing signs of it. Over the past couple of months in auctions there’s been a clearance of only around 25% of properties, rather than the 90% to 100% clearance of recent years. At a recent local auction of 9 properties there was a bid on 1 and no bids on the other 8, none of these properties were sold.

The effectiveness of auctions as the primary means of selling properties is declining. For the first time in years we’re seeing a focus on prices rather than on auctions. Although naturally vendors prefer auctions, buyers much prefer to negotiate around a stated price.

So this is of course great news for buyers. There won’t be bargains, but we won’t be seeing the same sort of price increases. Sure, this is not welcome news for sellers, whose expectations have been hugely inflated due to the Auckland property market increases of the past four years. The expectations of vendors will have to shift.

Aucklander’s are increasingly investing outside Auckland and homeowners downsizing are cashing up and leaving Auckland. They can get better value for their money in the regions. After selling for a high price in Auckland they’ll still have money left over for travel, retirement or lifestyle. Plenty of these Auckland buyers are heading to Hamilton, Whanganui, Rotorua, Tauranga and Wellington to scoop up the last bargains. But even in the regions, prices are peaking and listings are becoming in short supply.

The rest of New Zealand real estate still has some growth potential but only for a brief time.   Over time Auckland will still out-perform the rest of NZ in capital gains as they have done over the last 30-40 years.

A lot of retirees are asset rich and cash poor and that is their reason for selling.

However, shrewd investors will still buy in Auckland. This is the time to be buying good quality stock. It requires courage to buy in a flat market – but that’s when the top investors buy.

The Governor of the Reserve Bank had threatened to increase the deposit for property investments to 40% from 1st September 2016 and then pushed this date back to 1st October 2016.  I believe this is only a threat and may very well not happen.

The majority of other house buyers will still fall under the 20% deposit category. But what this 40% restriction does do is penalise the mum and dad first investors trying to fund their retirement.

When banks become tougher on lending criteria you’ve got to ask why. On the surface it’s all about trying to slow down the property market. But do they know something we don’t? My feeling is that the Reserve Bank is putting measures in place to help banks to have a softer landing when the crunch comes. You’ll notice that banks weren’t exactly unenthusiastic about the Reserve Bank’s insistence on tighter loan restrictions.

About $30 billion in potential investment funds was gouged from the global property market when the Chinese Government recently turned off its sub-bank loans – often used for money laundering.

We’re now seeing the effect of this here. The Chinese are pretty much out of the local market at present. They are definitely not buying in the same numbers on Auckland’s North Shore. Conversely there’s more housing stock available, but there are fewer people at open homes – and fewer cashed-up Asian buyers in general. Why are our Chinese buyers sitting on their hands? Why has the Chinese government turned off the lending tap?

The world is in deflation mode and governments and banks don’t know how to stimulate the economies of their own countries.

I predict that in October/November there will be another downturn in the world economy. I hope I’m wrong. But all the signs are there. The Australians are buckling under their debt load. The US economy is not in good shape and Europe is a mess. Where is the good news?

Perhaps we have had our day in the sun but New Zealand is still a great place to live and more people will move here and put more pressure on the housing shortage and eventually increase prices again.