There’s life in the market yet
Monday 11 May 2020
The residential property market might currently be lacking in strength, but those working in the sector don’t see it as suffering from widespread weakness, according to economist Tony Alexander’s latest poll.
By The Landlord
In fact, not only is buyer strength seen as exceeding seller willingness in many areas, but just a net 27% of the 236 respondents to Alexander’s second poll of real estate agents feel it is now a buyers’ market.
Breaking down that overall figure, regional differences become clear.
Not surprisingly, in the Central Otago Lakes regions – which includes Queenstown, arguably the area hardest hit by the Covid-19 crisis - a net 85% of respondents see buyers as having the upper hand in negotiations.
In Auckland, a net 37% of respondents saw buyers having the greater strength.
In contrast, in Canterbury only 2% did, while in Nelson a net 7% feel it is still a seller’s market and in Wellington, a net 10% do.
Alexander says the fact 27% of respondents see the market as a buyers’ one is hardly surprising considering that the economy is in recession.
It will be interesting to see how this reading changes as we get not just a better feel in coming months for the extent of the downturn, but the recovery on the other side, he says.
“Ultimately it is long-term considerations which drive the decisions of almost all property buyers and sellers.
“But for now, the weight of responses and observations volunteered by the respondents shows weakness, but does not support a view that prices are set for substantial declines.”
Alexander reports that a net 17% of respondents feel that prices are declining, but the majority see them as flat or they do not know.
“That tells us that there is as yet no widespread evidence of price declines.”
However, the fact that a net 19% of respondents said property appraisal requests were decreasing is a sign that turnover will decline and that listings will remain in short supply.
Listings were in short supply (below 19,000) ahead of lockdown and remain so as vendors not needing to sell (like mortgage-free older people looking to downsize) are pulling back from the market, Alexander says.
“In contrast, there were over 58,000 listings going into the GFC… Hopes which buyers might have for listings to soar and deliver them a smorgasbord of options are likely to be dashed.”
Despite this, Alexander’s summary of comments shows that, notably, there is continued good demand for properties in the lower priced brackets. It’s the top end where buyers have pulled back.
Further, the comments suggest many buyers intend making a purchase but will wait to see what happens when the 12-week wage subsidy and, then, the six-month mortgage deferrals end.
Alexander also reports some interesting findings when it comes to investors, with a net 16% of respondents saying that they are seeing more investors in the market.
“This correlates with stories from two months back of long-term focussed investors with good capital bases calling up agents to express their interest in any well-priced properties which come along.”
This goes straight to the nitty gritty of something many people do not realise when an economy is in recession, he says.
“Not everyone is worse off. In fact, as a rule, the vast majority of people are unaffected by a recession.
“In the case of investors, while it is popular to focus on falling rents and increasing costs and regulations, the truth is that investor demand for property is strong and many investors see this recession as an opportunity to make a good purchase.”
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