We Are In a Recession. So Where To Now For The Property Market?
Well, it’s pretty strange out there in the property market!
Interest rates have jumped, then fallen, then risen again. Home sales have slumped, but inventory remains sparse — and home prices might even be rising again (more coming on that).
Inflation was under control, until it wasn’t, though maybe it is again.
We’re in a recession, but only just, and the economists are saying it will be quick.
Yes, definitely strange times and the residential market is a major component of it all.
As you know, NZ’s residential property market has been of concern for many years, with skyrocketing prices and a lack of affordable housing. In recent years, the market has seen a decline, with prices dropping and buyers becoming more hesitant. From those heady days, especially post-lockdown, we have seen buyer sentiment move from FOMO (fear of missing out) to FOOP (fear of overpaying).
But where are we now for the property market?
A few weeks ago we started seeing a hint of renewed interest from buyers. We had an increase in open home visitors and an increase in online and telephone buyer inquiries.
On top of that we are beginning to see the property market rise in the number of successful sales at auction.
Most importantly though is the fact that the media is finally reporting (quite timidly!) that we have ‘probably’ reached the bottom of the property market, at least in Auckland. Once the media start saying these kinds of things we generally see the property market sentiment change – and this can happen quite rapidly.
As an aside, we have always felt that any change in property market sentiment is generally led by buyers, then agents, then sellers, and finally, the media. I know that many of the buyers we are dealing with are saying that they feel that this is a great time to buy – if prices drop further they don’t think it will be by much.
Tony Alexander produces a monthly survey of real estate agents across New Zealand, and here is what the latest survey showed:
• The net proportions of agents seeing more people attending auctions and open homes are at their highest levels in over two years.
• FOOP – the fear of overpaying – has fallen to its lowest level since January 22.
• FOMO is trending up but remains low with only 9% of agents noting buyers displaying this worry.
• Buyers are becoming less relaxed about listings being plentiful.
Here are some issues that may well affect how this all pans out in the property market
1. This is an election year and this has traditionally meant that the property market has slowed.
People, both buyers and sellers, tend to sit on their hands a couple of months out from the election until we get a result.
Interesting, because immediately after the election everything returns to normal, no matter which party ends up winning.
For whatever reason many of the market commentaries are predicting that the election this year may have the reverse effect if it looks like there will be a change of government.
2. Interest rates have increased while house prices have dropped.
According to CoreLogic around 60% of mortgages are likely to see a rate hike in the next twelve months.
These are mainly mortgages coming up for review, and many will be coming from a previous rate of less than 2% and going to something closer to 7 or 7.5%.
Will this have an impact on house prices and the property market?
It could well mean that people will be forced to sell, thus increasing supply, or it may be that, as appears to have happened during this rate rise, people will tighten their belts and adjust their outgoings, after all, interest rates aren’t high by historical standards.
So, as usual. It is really a “time will tell”. One thing we are reasonably sure of is that we are at, or very close to, the bottom of the Auckland residential property market. Good news for homeowners, not so good news for people saving to buy a home.
PROPERTY TIP:
Question:
I had an agent knock on my door a couple of days ago.
He told me he has a number of people interested in my property and asked if he could show them through. We are not really thinking of selling, although of course we would at the right price!
I was happy to let him bring someone through but he tells me we have to sign a listing agreement first. Can’t he just show someone through and then we can sign if they want to buy it?
Thanks, Jeremy B.
Answer:
There are several things to consider here Jeremy.
Firstly, you need to be sure that he is in fact a licensed real estate salesperson before you let him in the door!
Secondly, he cannot legally show your home to prospective buyers without a signed listing/agency agreement – if he does, he has no right to claim commission if the purchase goes through.
I should repeat that: If an agent introduces someone to your property without you signing an agency agreement, and that person buys your home, you do not have to pay a commission to the agent.
So let’s say you confirm that the agent is licensed, and you go to sign a listing agreement:
Firstly, there are two types of agreements, an exclusive agency and a general agency. An exclusive means that for the period of the agency (usually 90 days) only that agent has the right to sell your property.
A general agency means that you can sign an agreement with two or more agents, usually from different agencies or brands. It may sound like the best deal for you is a general agency, but in reality that seldom works to the vendor’s advantage (you can read more about this in our book “Sold!”).
Before you sign the agreement, the agent is required by law to provide you with a written price appraisal of your property (often a price range), and a written estimate of their commission.
They must also provide you with a copy of the REAA Agency Agreement Approved Guides. And they must explain to you the length of the agency and when/how you may cancel it.
If an agent is just showing one or two potential buyers through you are quite entitled to sign an agreement for just one or two days.
In summary: If an agent wishes to bring a buyer through your home then you should ensure they provide you with an appraisal price, an estimate of their commission, and a listing agreement – for whatever term suits YOU.
And as always, before signing anything like this, please seek legal advice.
Lisa and Steve Stone
Elite Agents for Ray White