Stalling market no reason to panic

Harcourts CEO Chris Kennedy

More confirmation of the slower national market came in data from the country’s biggest real estate chain today.

Harcourts’ latest market watch report reveals that sales around the country are down by 18% and there has been an 11.3% increase in unsold properties nationally, as compared to this time last year.

In Auckland, sales are down by 19% and the number of unsold properties has increased by 43.5%, as compared to this time last year.

This data follows hot on the heels of last week’s July data from REINZ which showed that national sales volumes fell by 23.9% year-on-year and by 3.3% on June, once seasonally adjusted.

It also showed that Auckland saw sales volumes decline by 29.9% year-on-year and by 2.2% on June, once seasonally adjusted.

Successive sets of data have left little doubt that the market, particularly in Auckland, has been slowing throughout the year.

But the recent figures highlight just how much the market has stalled and that is causing some consternation.

Harcourts CEO Chris Kennedy said it is inarguable that the market has dropped from the heights of 2015/16.

He put it down to the Reserve Bank’s LVR restrictions, the IRD’s bright-line tax, and the fact it is now harder for foreign investors to get money out of their countries – along with the looming election and winter.

“So yes, the property market has changed. Real estate goes through cycles and this is totally normal,” he said.

“Things have slowed, but that doesn’t mean there is going to be a crash. Just an adjustment in sales levels, prices and expectations.”

For Property Institute chief executive Ashley Church, the market slowdown is due to the “artificial constraint” of the LVRs which may have simply slowed the boom, rather than ending it.

Whatever the case, what lies ahead is largely predictable as the market has been here before, many times, and we know what happens next, he said.

“Property owners: don’t panic – house prices aren’t going to collapse.

“While there may be small pockets of the country where prices drop a bit more dramatically, history shows that Kiwi house prices tend to settle, rather than drop, at the end of each boom.

“You need to go back to the mid-70s to find the last serious collapse in kiwi house prices – and that was driven by a series of factors that simply aren’t present in the current housing market.”

However, the speed at which the market takes off again will be determined by decisions of the incoming Government, the Reserve Bank, banks, and Councils on such things as immigration and lending restrictions.

One critical factor in this is the banks’ current rationing of mortgage lending, Church said.

“Expect this to continue for a while… Although it would only take a change in policy by one bank deciding to aggressively chase market share and this could quickly change.”

Mortgage interest rates are also still on the way up, just not as quickly, he added.

Read more:

Call for LVR review as sales plunge 

Big city values plateau