Winter 2022 - Market Cycles, Are we in a softening market?

It is times like this we must remember that there are always buyers and sellers for real estate no matter what stage of the cycle we are in. People move for employment changes, need to upsize or downsize, lifestyle change and many other reasons. Generally people are buying and selling in the “same” market.  If you are in property for the longer term, history shows that values typically increase better than CPI (Consumer Price Index). Even with a correction as we are seeing around the country, most sellers are still achieving a good return on their investment.

Here are a few key summary points for the Greater Kerikeri property market:

• The volume of sales through May 31st is down by 27% for the same period last year a further decline from 21% down last month.
• The median house sales price dropped in May driven by a mix of lower priced properties being sold during the period. The quarterly moving average median price indicates prices are starting to soften. How this unfolds will be more clear as we see more results in future months.
• Inventory levels have increased year on year but are fairly level compared with last month (190 listings this month compared with 188 last month). i.e. the sold and withdrawn listings are about equal to the number of new listings.
• Our feeder markets Wellington and Auckland continue to show lower median prices and lower sales volume.
• Uncertainty continues about the impact of interest rate hikes, inflation, tougher lending rules and the economic effects of the war in Ukraine. Now we also have the first real data showing negative net migration into New Zealand (touted by the media as the” brain drain”) and news that the global financial markets have declined into bear territory.
• The cost of building keeps increasing and are likely to increase even further when new building regulations are enacted in September. This cost is unlikely to drop and underpins the floor to which property prices are likely to drop to.
• There are still other positive tail-winds as Covid restrictions are lifted and more people from around the world are able to travel resulting in higher levels of enquiry from returning ex-pats and overseas buyers. Some first time home buyers also are getting some relief as banks implement more reasonable screening as part of their lending criteria. We have seen an increase in enquiry from investors and first time home buyers in recent weeks. Enquiry from local buyers has picked up also now they have more confidence they will have a place to move to and less competition from buyers moving from the cities.

Vendor vs. Vendor...

In May we witnessed the second month in a row where sales volumes were 30% to 40% below average. It is too early to see the effect on median prices as we need several months of results to notice a trend. Our experience of other cycles tells us that price declines usually follow volume declines within 3 to 6 months. Other evidence of a softening market is more properties selling below their asking price than last year, fewer multi-offers, fewer sales under the hammer at auctions and vendors, particularly in higher brackets,  lowering asking prices to meet the market. The buyer versus buyer market of 2021 has transitioned to the vendor versus vendor market in 2022. Vendors therefore have to be “best in class” to attract offers away from other vendors. That means top level presentation, targeted marketing across all media platforms and sharp pricing.

Interestingly sales of well-presented, low maintenance homes below $1,100,000 are still selling reasonably quickly and some are even achieving record level prices. In this bracket we have a steady stream of buyers and limited stock available. In price brackets above $1,100,000 higher stock levels are now providing more choice for buyers and most seem to be more cautious than last year and are taking their time in their searches.  As a result, on average properties at this level are taking a bit longer to sell than last year.

The value of experience.

Our focus on family values, supporting each other, ethical behaviour and a cooperative, collaborative approach to selling real estate means our company experiences extraordinary low levels of staff turnover. As a result our people have many years of experience working in Kerikeri. Most of us have been through several industry cycles. Our newer members get daily hands on coaching from other team members so they are up to speed quickly too. As a result we have great depth and experience of how to produce the best results for our vendors in various stages of the market cycles. At this time, this experience is very important to you if you are selling your home. As we say, anybody can sell in a hot market, but the real value of experience comes to light when times are tougher.

If you want to find out more about what’s happening in our market or obtain a no obligation appraisal, please give any of our team a call or pop in to the office for a coffee and a chat.

ACHIEVING GREAT THINGS TOGETHER