It’s a buyer’s market, but buyers are wary

Wednesday, 1 May 2024

More homes are being put up for sale, but buyer demand is down and the market has stalled, CoreLogic says.

The property research company’s latest figures showed the average national house price dipped 0.1% to $933,633 in April.

Over the first three months of the year there were small price increases each month, but the largest was 0.5% in March.

The flat price trajectory has left the national average up 3% from the September trough, but still 10.5% down on the March 2022 market peak.

CoreLogic chief property economist Kelvin Davidson said prices were lacking any strong momentum and, combined with the increase in total listings on the market, that made it a buyer’s market.

But it was a buyer’s market with caveats as mortgage rates and lending criteria remained an issue for many, he said.

“We are calling it a buyers market because there is more choice, but that doesn’t matter if a buyer can’t act on it because they can’t get a loan. So it’s a buyer’s market for buyers who are able to get finance.”

High mortgage rate were the biggest restraint, but while changes to lending rules and loan-to-value ratios were coming, they had not happened yet, he said.

“Add in growing concerns about the labour market, and that’s left buyer demand down, even though a buyer’s market reduces sellers’ bargaining power.”

With the total stock of properties for sale up, but actual sales at a subdued level, it was no surprise price growth had flattened off, he said.

Monthly price movements across the main centres were variable, and Dunedin recorded the biggest increase, with its average up 0.7% to $645,121.

Prices in Wellington and Hamilton were up 0.4% to averages of$926,262 and $810,325 respectively.

But prices in Auckland fell 0.6% to $1.29 million, while Christchurch and Tauranga prices were flat, down 0.1% to $761,873 and $1.03m

Around the regions most markets had modest monthly price increases, except for Napier and New Plymouth which had declines of 0.4% and 0.2% respectively. Rotorua prices increased most, up 1.3% to $654,663.

Davidson said the big-picture theme of an underwhelming upturn for the market this year and possibly into 2025 remained on track.

'Inflation and the Reserve Bank's plans for the official cash rate remain hugely influential for market performance in the coming months, with significant mortgage rate falls potentially a story for 2025 not 2024.”

New data from Realestate.co.nz also reveals a nationwide decline in demand, as measured by searches and engagements per listing on the company’s website.

Nationally, searches per listing were down 10.4% annually in April, while engagements per listing decreased by 7.5%.

On a regional level, searches per listing were down or static in 13 of 19 regions, and engagements per listing decreased in 11.

Realestate.co.nz chief executive Sarah Wood said it indicated a cooling of buyer interest amid economic uncertainty.

“In response to the recession, buyers are understandably cautious.”

About 59% of existing mortgages were up for renewal within the next 12 months, and those who fixed two years ago might soon move from interest rates of around 3% to around 7%, she said.

“This is likely pulling liquidity from the market and dampening demand.

“Contributing to this waning demand, stock levels were notably high last month, echoing figures from 2015.”

There were 33,815 homes available for sale nationwide in April, up 18.1% on the same time last year.

New listings were also up nationally by 34.9% annually, but Wood said that reflected a return to normal after weather events last year led to an unusually small amount of new listings last April.

The average national asking price on the website was $868,877 in April, Realestate.co.nz’s figures showed. That was down by 0.6% on the same time last year, and by 1.8% on March.

Of the regions, West Coast and Central Otago had the biggest asking price increases at 21.6% and 17% respectively, which took their averages to $538,752 and $1.59m.

Auckland’s average asking price was down 1.2% to $1.07m, while Wellington and Canterbury’s were up 3% and 2.1% to $855,928 and $710,583.

Wood said the market typically cooled in the winter months, and this year that would be combined with a softening economy.

“It will be interesting to see how these factors play out for the market in the coming months.”