House prices: Down, but another reason for first home buyers to look up
House prices and sales are down, prompting many developers and speculators to exit the market. First home buyers who were outgunned by the ‘pros’ are back in the game.
February was a grim month for property owners hoping to sell for a cracking price.
Figures from the QV House Price Index show that the national average residential property value declined by 2.7% over the three months to the end of February.
Rotorua property values declined at double the rate. Ouch.
Declines in the Auckland region went from 2.0% over the three months to January to 4.0% in the three months to February.
Sellers get a reality check
Analysis of average asking prices on Trade Me Property compared to the Real Estate Institute of NZ (REINZ) median selling prices highlights a gap between vendor expectations and prices buyers are prepared to pay.
February’s national average asking price for properties advertised on Trade Me was $870,550. However, the national median selling price recorded by the REINZ in the same month was $762,000 – a discount of $108,550 on the average asking price.
Declining property values have hit some developers and speculators hard
There are reports of million-dollar loses on properties purchased in 2021. A story published by OneRoof earlier this month quoted Harsimran Singh, a Harcourts business owner in South Auckland, who said a property owner had recently sold a development site zoned for suburban density in Papatoetoe for $1.465m at auction. The owner had paid $2.4m for the property in November 2021.
“Everyone was buying land in those suburbs in 2021,” he said. “They were thinking they would go into development, some with six months or more settlement so they could flip them.
“It was a common thing, they were working full time and buying as a syndicate or with friends or family, they’d borrow from second-tier lenders,” he said.
“The astute developers were already building, but others got tied into things, they were flipping not building, in mid-2021, hoping not to settle until into 2022.”
The situation has opened the door to some first-home buyers
According to James Wilson, head of valuation for OneRoof’s data partner Valocity, many developers are cooling their heels.
“Developers have basically gone with capital growth off the table. They’re not playing ball anymore,” he said. “They effectively stopped transactions almost overnight, that buyer pool dried up. You get developers who just say: ‘let’s take the hit and move on’.”
This is good news for first homebuyers, who are returning to the market as concerns over how far interest rates might rise start to ease, according to economist Tony Alexander.
His February survey of mortgage advisers showed a net positive 30% of respondents reported getting more inquiries from first-home buyers this month. This compares to a net negative 17% of advisers who said they were seeing fewer first-home buyers at the end of last year.
Selling hasn’t changed – it’s about connecting appealing properties with the right buyers. Call 0800 GOODWINS to discuss listing your property and how we reach your ideal market.
