Auctions will be back

Auction clearance rates in Auckland have dropped dramatically in recent weeks, which has prompted speculation that the market has turned.

But Ray White Remuera principal Megan Jaffe said the market was moving with the property and seasonal cycles.

Spring usually means an increased volume of stock coming on to the market and there are also more unsold properties from previous months.

This is affording buyers more choice.

But auctions were still working for realistically-priced properties, Jaffe said.

“Property prices remain strong for the right type of property. So vendors who are priced for current market conditions are enjoying the timely sale of their properties at auction.”

She believes that a healthy economy, low interest rates and high demand mean the Auckland market is strong, but a sense of equilibrium had been restored.

The decline in auction clearance rates has been dramatic but, overall, it’s a blip, veteran real estate agent Martin Dunn, of City Sales, said.

“No market can keeping going at the pace Auckland has been forever. October saw the arrival of the Government tax measures and the looming LVR restrictions. And this has all led to a breather in the market.”

But he said residential property in Auckland would continue to be a gold mine, because of the city’s strong growth and severe shortage of houses and apartments.

“The current slowdown is just breathing space in the market. It is in buyers’ favour and they should take advantage of it, but it is not going to be a buyers’ market.”

Dunn said there was likely to be a period of settling down for the market but, rather than taking a huge dive, it would flatten out before beginning to creep back up again.

“But the predominance of auctions has changed. There will be less auction activity for a while. We are going to see more asking prices and sales by negotiation.”

Property Institute chief executive Ashley Church agreed little should be read into the drop in auction clearance rates.

He said there are a number of factors at play. These include a cyclical element, the seasonal dip, and the impact of the new tax rules which probably were a scare for buyers.

“So people probably bought up first, pushing up activity earlier, and then decided to stay out of the market for a bit, causing the market to come off.

“Also, there was a fair bit of overseas money coming into the market from nefarious sources. When the new tax rules were announced that just dried up.”

Market sentiment in response to reports of a slowdown is likely to be an additional factor, Church said.

“But, overall, I think it’s a blip. In a couple of months’ time, we will be seeing runaway prices in Auckland again.”