ANALYSIS: My latest survey of real estate agents across the country indicates a slowish recovery underway in the housing market. A net 33% of agents have noted more people at open homes – up from 28% last month, 8% in July, and a low of -16% in May (which is when most measures in my various surveys reached their worst levels for the year).
A net 53% of agents have also spotted more first-home buyers. In fact, first-home buyers have had a strong presence in the market since August last year when banks started cutting interest rates. Given that competition between banks for mortgage business has intensified – this week BNZ dropped its one-year fixed rate to 4.49% – we are likely to see more young people looking to buy over spring and summer.
Investors are still in the market, but not to the same degree, with only a net 6% of agents noting that they had seen more investors looking to buy. In fact, the survey results suggest that more investors are looking to sell than buy.
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The reasons for the rush to sell vary. Some will want the money for their retirement; others want out because the cost of running a small rental business has risen rapidly, as a result of higher council rates and insurance premiums. Plus, tenants are much harder to find than they were 18 months ago.
What about the third group of home buyers – existing owners looking to shift? They still seem to be sitting on their hands, and I can see a key reason as to why.
When I asked agents to identify the things buyers worry about, 55% said employment. This measure has been around the 55% mark since April last year, having started 2024 at just 14%. Until people feel that their income prospects are better, they are likely to feel less inclined than usual to engage in the sometimes costly business of shifting home.
Independent economist Tony Alexander: "People are aware of the direction in which prices are going." Photo / Fiona Goodall
What about prices? By the looks of it, they are still falling. A net 11% of agents report that prices are going down in their area of operations, little changed from 13% last month, but less than the 20% in July, 28% in June, and 38% in May.
People are aware of the direction in which prices are going. Thirty percent of agents say that one of the things buyers are worried about is prices falling after they make a purchase. This is better than the peak of 39% reached at the end of May, but well ahead of only 12% at the start of 2024. Sometimes I call this measure FOOP – fear of over-paying. The other measure, FOMO, fear of missing out, is still running at a lowly 13%. It peaked at 92% in January 2021 and hit a low of 1% in June last year.
All up, the residential real estate market is improving, but the recovery so far is very, very mild.
- Tony Alexander is an independent economics commentator. Additional commentary from him can be found at www.tonyalexander.nz
