Agency heads give their take on the year ahead for property
Agency heads explain what they expect to come
It’s the 2023 selling season and plucky sellers are stepping up to the plate in good numbers. This time last year, home sellers weren’t necessarily accepting that they were in a changing market, whereas this February/March selling period, expectations are much more realistic.
Agency heads and property experts are expecting that prices will continue to fall this year, albeit at a slowed pace compared to 2022. Experienced agents are being honest that they genuinely don’t know what a home might sell for at the moment. It will depend on the pool of buyers each home attracts.
What will be the key economic influencers that will affect Q1 property market?
What should agents be watching out for during this year, when anything could happen to the global economy? Quarterly Consumer Price Index figures showing inflation rates will be ones to watch, with an impending OCR rise in February, says CoreLogic chief property economist Kelvin Davidson. The latest CPI for Q4 2022 announced on January 25 showed that the overall rate of inflation had stayed the same at 7.2% which may not have been the drop some had been hoping for but wasn’t the rise to 7.5% the Reserve Bank had been anticipating. This might not be enough to make RBNZ Governor, Adrian Orr, pause for thought when considering the next OCR hike of up to 0.75%, says Kelvin.
Either way, the CoreLogic economist doesn’t think mortgage rates have peaked. Interest rates on three to five year mortgages might have peaked but not one year term mortgages or floating rates. Meanwhile, his rough guide is that total house prices will continue to fall in January, February, March by around a total of 3-4%.
Kelvin expects the volume of property listings in January and February will be lower than the normal volume of listings at this time of year, though he expects there will still be a reasonable supply with a combination of new listings and those hanging over from 2022.
The listing flows in November/December were a bit lower than normal and that’s what you’d expect, he explains. “Nobody sells on a whim, there’s got to be a reason for it and there are no signs of investors selling,” adds Kelvin.
Why it’s still a good time to sell and buy despite price falls continuing
For Kiwi homeowners who intend selling this year, it may well be better to do it in the first half than the second half, say real estate leaders. The latter period may go quiet, close to the national election due to happen in October.
Speaking to offices around the country, Bayleys head of Insights, Data and Consulting, Chris Farhi, says Bayleys agents are expecting a normal amount of listings to come on in the next few popular selling months.”It won’t be a giant tidal wave but there’s no sense that they’re drying up either,” he explains.
A number of agents are seeing more buyer activity than they were expecting in the New Year, adds Chris. “People feel like they can get a good home in the current market.”
People selling homes in 2023 will be coming prepared for the market, he says. Some vendors selling in early 2022 were caught off guard by the changing conditions, while other vendors in the “nice to sell” category just took their homes off the market. Those vendors who have a more genuine reason to sell, for lifestyle reasons, for instance, have had their price expectations reset and will move to sell.
The market conditions are unlikely to drastically improve in 2023, says Chris. “Waiting now won’t solve the price issue, they’ll push ahead anyway,” he predicts.
And vendors bringing new stock to the market this summer will have quite realistic price expectations too, says the Bayleys head of data.
In 2022, cities like Auckland had a very fast correction on prices, says Chris. There will be a point where prices settle and then you can expect market activity to catch up, he believes. “Prices in Auckland and Wellington are considerably more affordable than they were,” he adds.
And while the Bayleys commentator is expecting prices continuing to fall in 2023, as do most other real estate experts, they’re unlikely to fall by as much as those early on in the market decline last year.
At the start of the housing market decline in 2022, house prices were correcting by 4% to 5% every quarter, but this rate has slowed quite a lot and Chris is expecting to see it more like approximately 2-3% in the first quarter of 2023.
There are lots of reasons why buyers should be tempted by the current market in early 2023, he believes. Buyers have got a good selection of properties and opportunities to negotiate on conditions.
Even if the market falls by a further 5%, on a median house of $1 million, that’s $50,000, and that’s in the zone a buyer can negotiate on if they’re dealing with the right vendor, explains Chris.
The Bayleys head of data warns when the market picks back up there’ll be less selection for buyers. “It’s unusual to get all the stars aligning,” he says.
At the moment, there’s no urgency for buyers because prices are not going to go up, he says.
A chance that interest rates might go down with recession in 2023
Chris notes that the country has seen a slight improvement in migration stats, with more migrants coming into the country as the Government opens the gateway for more skilled workers to enter the country. And if there’s recession this year as predicted, then he asks, will the Reserve Bank continue to keep interest rates high if inflation abates?
“Reduced interest rates would change the rhetoric in the housing market,” he says. Everyone is assuming interest rate rises will continue but if the economy does slow, mortgage rate rises may slow too.
The most recent figures in the United States is that their inflation rate was lower than expected, with the view forming that they might have peaked.
What agency heads are saying about the January - April selling season
Real estate agency heads of companies including Ray White, Harcourts and UP Real Estate say they’re expecting a similar amount of listings for February, March to this time last year. However, it may seem like more, as properties listed late in the year which didn’t sell boost the total numbers.
Ray White NZ CEO, Daniel Coulson believes that listing activity in the coming months will be driven by homeowners coming out of fixed term mortgages and deciding they can’t comfortably service their mortgages at current higher interest rates.
“They might have to get their homes on the market in quarter one and quarter two this year,” suggests Daniel. Rising interest rates will have a “severe impact” on these homeowners and investors, he says.
The Ray White CEO expects this first quarter will be “headlined” by interest rates and people’s ability to service their debt and general consumer confidence will play a role too.
A number of potential sellers are watching how the first sales of the year go, he explains. They know they want to sell this year, but a lot of them want to sit in the market and see what happens first.
Potential vendors will be watching sales results over the next two to three weeks before making a decision to sell.
And there will be results coming in. Daniel says the Ray White team at Manukau have 30 auctions scheduled before the end of January, which is a very strong start for the year.
He’s optimistic. “A lot more salespeople are saying we’re getting more stock and more appraisals, with more people coming and listing,” says Daniel.
“Every single market I’ve talked to has said there’s more stock coming, lots of opportunities for listings, saying they’re going to bring their stock to market.”
And on another positive note, a number of agents he’s spoken to nationwide have said their open homes are being well attended, and that buyer activity is up.
Volume of sales in 2022 close to Global Financial Crisis of 2007-2008
Harcourts Managing Director Bryan Thomson is looking forward to a better year in 2023 after a tough one in 2022, with the volume in sales bouncing along the bottom.
The volume of sales in 2022 was back or below Global Financial Crisis (GFC) levels of 2007-2008 as vendors responded to price adjustments, he says.
So why would vendors sell in the first quarter of 2023? “If it’s a life decision, a birth, death, marriage, they’ve come into money or a new job, or for negative reasons, like they’re struggling financially,” he suggests.
If it’s one of those normal life events and it's to then buy a house that they’re going to live in for years, then they should get on and do it, he advises.
“What people sell for and buy for is irrelevant. If they’re trading up from their first home to a family home, the gap will be smaller. It’s a great time to trade up,” says the Harcourts MD.
When it comes to the Harcourts supply pipeline of listings, he says: “We’ll see an increase in stock from mid late January to March, it’s peak selling time.”
More buyers are looking, have more choice, and Bryan believes vendors will be determined to sell in the first quarter.
And when communicating with anxious vendors, agents should be advising them that, rather than listening to predictions of prices falling from commentators, they should stick to the facts. Look at similar properties in the area, who are those competing for the property, and what do they think could be achievable in the market? “Every property is different, it’s a hyper local market and hyper-relevant (constantly changing),” says the Harcourts MD.
The Harcourts director says he’ll be keeping an eye on the housing supply of new builds, the numbers of building consents, and the construction costs in 2023. Other areas he’ll be monitoring will be the interest rate environment, finance availability and the national election.
“There are things in life you can control and things you can’t. Big international issues could have an impact. If the war in Ukraine escalates, there could be all sorts of pressure, if there’s a change in Government and National does the things they claim they will (interest rate deductibility for investors), that will have an impact on the investor market,” says Bryan.
What upper end boutique Auckland agencies are seeing
As house selling for 2023 swings into action, there are two markets of buyers, says Barry Thom, co-founder of UP Real Estate in Auckland. One is mortgage dependent and one is a pool of people who may or may not be borrowing at all, (typically in the $4 million to $10 million price range).
Among vendors in 2023, there’s an acceptance on the part of vendors that the market has softened. “They’re more ready to look at an offer than they were six months ago,” he says.
“Everyone is accepting that the market is more difficult with interest rates climbing. A particular buyer is still wanting to buy, but what they can borrow is less and what they can offer is less. What they offer will be dictated by their funding ability,” says Barry.
Why are people selling in the current environment? Peoples’ lives are carrying on, says the UP director.
At the end of December, UP had 30 to 40 homes it was planning to list in the next month. “If Harry’s just had a hip replacement, they’re going to sell, a whole lot of baby boomers are going to sell,” says Barry.
And what they sell for will depend on their individual property. “It’s just the way the market reacts to a particular property, that’s really the environment that we’re in,” says the UP director.
“A good family home that’s on a freehold free-standing site with good indoor outdoor living, three to four bedrooms, it’ll sell just fine, the demand hasn’t gone away, “ he adds.
And while a number of agents are returning to the market after a well-earned break, some have kept working. As he brings a picture perfect Freeman’s Bay home to the market in mid January, Martin Dobson at Kellands Real Estate, says he sold a property on January 2nd this year and is happy with his pipeline of listings.
“There are some coming through, some we’re working on bringing to the market. We’ve started working with vendors and liaising with them, he says.
In his central Auckland market, people are selling for a myriad of reasons, they have another property to go to, they’re downsizing, they don’t want the land, he explains.
1 Picton Street, Freemans Bay, Auckland City, Auckland
Expectations from Wellington agency heads
Wellington has seen some of the greatest price falls in 2022, after some of the greatest price rises the previous year. And the capital’s last quarter of 2022 was not great, says Tommy’s Nicki Cruickshank. The last interest rate put the brakes on buyers and those buyers actively looking, feel like they’re in control, she says.
Buyers are wanting to see something completely done, anything that needs work is less popular in this market, says Nicki.
A lot of properties were being withdrawn from sale in late 2022, explains the senior Tommy’s agent. Tommy’s saw five times more property withdrawn from sale than the year before, she says.
Despite this, the senior Tommy’s agent is expecting there to be a bit of a mini rush of new listings in January,
“When it comes to buyers, there’s good strength in first home buyers and at the top of the market. It’s the middle market where people aren’t sure if they want to take the risk of buying and selling,” explains Nicki.
According to Craig Lowe, Managing Director of Lowe & Co in Wellington, the first quarter depends on the view on global inflation and the Reserve Banks’ ability to get it under control in Aotearoa New Zealand. The key things to watch will be wage growth which is a big driver of inflation and it’s likely that the Reserve Bank will overshoot a bit this year in terms of OCR rises, says Craig.
He’s happy with the listings coming on at his central Wellington agency. It’s a reasonable pipeline, he says.
Anyone looking for a quick change to this market is going to be disappointed, says the MD. Last time, with the GFC, the market saw interest rates cut by the central bank to support the economy, while this time it’s about rising interest rates and inflation.
“I don’t think people should make selling or buying decisions based on what the market will do in six months,” says Craig.
“History will look at this as a buying opportunity,” he says. The upswing may not be for a long time, and buyers don’t want a rising market, they want a declining market,” he says.
An Auckland agent selling in February’s market
Of course, there’s one way an agent can instil confidence in their clients to sell, and that’s to sell themselves. Ray White Pt Chevalier agent, Derek von Sturmer, is auctioning his own home of five years in the suburb’s sought-after Dignan Street on February 2nd.
He’s made some changes to his normal marketing, by disclosing to buyers that his reserve price at auction s $2.75 million. He sees this as a sign of good faith to buyers: ”People are fed up with being misled,” he says.
With the valuation of the four bedroom, two bathroom home coming in at a likely $3 million, he knows he could potentially get $3 million for it. “But we’re putting $250,000 on the table because we’d like people to come and have a look,” he explains. Derek and his wife are highly motivated sellers, having snapped up a property off-market with lots of land on nearby Moa Road.
The Ray White agent says they probably paid a bit too much for it but that’s irrelevant, it’s a property they missed out on a few years ago and it provides them with the outdoors and privacy they, as dog owners and gardeners, really value.
Like all sellers in the current market, Derek admits to being nervous and not knowing what to expect, he’s human after all, but he’s optimistic after strong interest. His Dignan Street property is subdivisible, and he has plans ready for resource consent. Some interested buyers are thinking they might do an extension, he says.
“We’re trying not to take too much notice of everyone’s opinion, we’ve got a goal,” says Derek..
The Pt Chevalier Ray White agent is optimistic about the February-April selling period. His office’s pipeline of listings for the next couple of months is a bit better than this time last year, he says, though the product is slightly different from January 2022.
“Last year we were selling bigger family homes, now we’ve got some really cute three bedroom bungalows on half sites, and more townhouses are coming up for resale,” he explains.
Ray White CEO, Daniel Coulson likes Derek’s unusual decision to disclose his reserve price. If you’re confident in the product, why not provide clarity like that. If you’re going to put a price on a property or you’re not confident about the price, the market can sense that.
“We saw in the last market, and the one before that, that people will start employing different strategies to stand out to the buyer pool. There will be sellers who use certain strategies to engage buyers,” says the Ray White CEO.
89 Dignan Street, Point Chevalier, Auckland City, Auckland
Agents can help vendors through the lengthier than usual selling process, says Bayleys’ Chris Farhi. If they need to invest more in advertising or extending home staging, it can become a real trigger point for vendors to assess what they’re doing, so it’s a part of the agency process to be carefully handled. With home staging often the contract will be for 4-5 weeks which may not be long enough for a property to find a buyer. So for agents, it’s about setting expectations and managing any updates vendors might have to consider.