Interesting that Tony Alexander's surveys are showing less investors and more FHB's amongst those wanting to buy houses. It's also interesting that he's picking that Real Estate prices in the regional cities will recover before Auckland but, historically it's been Auckland which has led the rest of the country in price rises and falls.
Tony Alexander: Dream scenario for thousands of young buyers as investors sell, sell, sell
The annual Budget has been and gone and, according to my latest monthly survey of real estate agents with NZHL, has produced no positive movements in the housing market – unless you are a buyer.
At the end of 2024, as consumers and businesses reacted extremely positively to the easing of monetary policy from August, there were some good readings in my survey. In early December, a net 27% of agents said they were seeing more people at auctions, and a net 28% said they were seeing more people at open homes.
Now, a net 20% say fewer people are in the auction rooms, and a net 16% say fewer people are attending open homes. Similar declines have been recorded across my other measures, including the proportion of agents saying that buyers feel FOMO – a fear of missing out.
Late last year, 19% of agents said there was FOMO, but now only 5% say that. This reading is almost exactly where it was at the start of 2023 before first-home buyers began entering the market in large numbers to take advantage of lower prices, strong listings, little competition, and secure incomes.
So, are the first-home buyers still there? Yes. A net 29% of agents say they are seeing more. The residential real estate market in New Zealand is being driven by young buyers. What about investors? No.
There are two aspects to this "no". First, a net 4% of agents say they are seeing fewer investors looking to buy. At the end of last year, the reading was a positive 36% of agents who were seeing more investor buyers.
Second, more investors want to sell what they already have. This is the part of the equation most people have yet to catch up on. A net 24% of agents say they are seeing more investors trying to sell. The five-year average reading is just 4%.
Why are investors selling? The costs of running a rental business have jumped sharply courtesy of big increases in council rates, insurance premiums, and maintenance expenses. Good tenants have become harder to find amidst a plethora of properties being offered for rent because the owner/vendor cannot sell them for the price they want.
Also, many of the people who heeded government advertising campaigns from the early-1990s to save and invest more to prepare for retirement want to sell to finance what is turning out to be a far more expensive retirement than expected – because of the expense jumps just noted alongside higher food and electricity prices.
Is it all doom and gloom? Definitely not. This is almost exactly the environment tens if not hundreds of thousands of young couples have been dreaming of since house prices started soaring in the 1990s. Listings are plentiful, mortgage rates are at or near cyclical lows, investors in net terms are leaving the market, the Government is ensuring more development land and intensification zones are available, and there is little competition from net migration.
The only missing element is job security and history tells us that always returns. Assisted by unusually strong prices being received for our commodity exports that security may first start returning in the regions. That is, the order of return of strength to the residential real estate market looks likely to be the regions (Invercargill, Dunedin, Tauranga, Napier etc.), Christchurch, Auckland next year, and maybe Wellington come 2027.
Plenty of options and discounts out there.
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In fact Stuffs own reporting failed to acknowledge he was along term Stuff employee, instead claiming he was Luxons Press Secretary.
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