Fear of missing out set to drive house prices higher, agents say

Wednesday, 3 February 2021

Agents near universally expect that house prices will rise, results from a new survey show.

The “fear of missing out” of getting a foot on the property ladder is expected to drive house prices higher, results of a new survey show.

The Real Estate Institute (REINZ) and Tony Alexander Real Estate survey shows fear of missing out is as strong in January as it was heading into Christmas.

Agents “near universally expect” that house prices will rise as “very strong” numbers turn out to open homes and auctions, economist Tony Alexander says.

Just under half of the 336 agents that responded to the monthly survey said they were seeing more people attending auctions, the highest result since the survey was started in May, showing that after the Christmas break buyers had returned either to bid or to get a feel of where the market was sitting.

* Agents 'unsurprised' private home sales fetch lower prices

* Market loses intensity: Could it be buyer fatigue?

The Government will announce initiatives designed to cool the property market and help first home buyers. (First published February 2, 2021)

While fear of missing out had not played a strong part in buyer sentiment back in May, by September a 'vast majority” were reporting it. There was no sign that buyers were becoming more relaxed in their property search, Alexander said.

A net 90 per cent of agents said they were seeing fear of missing out in potential buyers, up from 88 per cent in December and November, contributing to high open home attendance.

This was found across the country, with the weakest result, 71 per cent in Nelson, still strong.

More than 90 per cent of agents felt that house prices were rising, a sentiment reflected in all surveys since September when it became clear that real estate markets across the country were undergoing 'more than a simple short-lived recovery period” following nationwide lockdowns between March and May.

REINZ House Price Index data showed average house prices between September and December rose 11.7 per cent.

Alexander said analysis of data from 1992 showed that periods of extreme price growth did not last long, and a reversion to something more “acceptable” in the near future should be expected.

Agents are reporting a growing 'fear of missing out” in first time buyers.

For the very short-term however, the “extremely high momentum” in house prices may well continue based on survey results, he said.

Open homes were more highly attended, with 64 per cent of agents reporting a lift, a record for the survey measure.

“Which tells us that the well-acknowledged shortage of listings is likely encouraging people to undertake more viewing and quick property searching activity than might normally be the case,” Alexander said.

Open home attendance was strong everywhere around the country, most notably in Manawatū-Whanganui where a net 89 per cent of respondents noted high visitation.

A net 46 per cent of responding agents said they were seeing more first home buyers, down from 50 per cent in December and 64 per cent in November.

Alexander said this could be due to more first home buyers being unable to keep up with the rise in house prices, despite a post-lockdown flurry of activity when buyers were looking to take advantage of the removal of loan to value ratio requirements.

There was a 4 per cent drop in the number of people requesting property appraisals in January compared with December, and an 11 per cent drop since November, suggesting that the growth in listings may not continue in the short-term, he said.

This could be because when prices rose strongly, vendors might hold off listing in the hope of further price gains. When those expectations eased off, it could lead to a rise in listings again, he said.

Another factor in slowing appraisals could be the number of home renovations taking place since May, he said. Some people would have redirected money that would otherwise have been spent on overseas travel, but others might have increased their mortgages slightly to do so.

Although the renovation market remained strong, it might not be growing at the same pace as before, constraining the pace of growth in mortgage top-ups, Alexander said.

Barfoot and Thompson said the Auckland market had the most active January in 17 years.

Managing director Peter Thompson said the company had sold 1086 properties in January, at an average price of nearly $1.07 million. It sold 72 homes for more than $2m.

“Even during the height of the last property cycle we never came close to selling this many homes in a January.

”What made such a high turnover possible was the extraordinarily high level of new listings for the month. At 1378, it was the highest in a January for eight years.”