This winter could be a difficult one for the residential property market, with high stock levels continuing to push down on prices.
At the end of April there was a stock overhang of 30,443 residential properties on the market. That's up 11.1% on April last year, and is the biggest stock overhang in any month of the year in the last 10 years.
The overhang is the number of properties on the market left unsold at the end of each month.
What is particularly concerning about April's overhang figure is it's worryingly high, even though sales levels were reasonable and there was a big drop in new listings during the month.
The Real Estate Institute of New Zealand recorded 6427 residential sales in April. That's up 9.5% on April last year, while Realestate.co.nz recorded 8518 new listings in April, down 29% compared to March this year, and down 26% compared to April last year.
On top of that, interest.co.nz estimates more than 3000 residential properties that had been on the market were withdrawn from sale in April.
Normally, all of those things taken together would see a decline of in stock levels, but at the moment the reverse is happening.
In simple terms, there are more people wanting to sell properties at the moment than there are people who are willing or able to buy them. So sales remain low relative to stock for sale.
That is almost certainly the main reason why prices have remained relatively stagnant even as mortgage interest rates have been declining.
In a hot market, buyers must compete for properties, but in the current market, vendors are competing for buyers.
Buyers have the upper hand and they are playing their advantage hard when it comes to negotiations over price.
That does not bode well for vendors in the months ahead.
Autumn is now breathing its last gasp and in a couple of weeks we will be properly into the winter season. This is traditionally the slowest time of the year outside of the Christmas break for residential property sales.
Increasingly, the market belongs to buyers, vendors must take what they can get.
23 Comments
Efforts to boost must be due any day now, what will it be?
But with thousands of 'free' sections available to put on the 70sqm dwelling things should continue to slide.
Have to agree. The companies building 70smq will be booming.
Cap gain chasers (debt not supported by income) will be popping pepto pills. As will the companies building letter box units for rent. The prices has a way to drop back to make rental yields make sense without the tax free capital gain lollypop.
Lollypops and popcorn.
Wow, 10 Houses sitting on the market - 2 sell - 1 withdrawn - the remaining 7 still sitting on the market unsold going into winter.
Could be a price reset down perhaps - esp in Auckland
"Buyers have the upper hand in the housing market so Vendors may need to take what they can get"
Beautiful words. Going forward, it looks like buyers will continue to have control over how this great transfer of wealth proceeds or should I say "Lands". Despite what some wish, for several well documented reasons, it ain't landed yet.
Increasingly, the market belongs to buyers, vendors must take what they can get.
or as The Who put it
No, you can't always get what you want
You can't always get what you want
You can't always get what you want
But if you try sometime you'll find
You get what you need
Falling interest rates should help stabilise things going forward. Having said that, the next few months will be tough going for sellers. Auckland prices still have some way to fall IMO. Smaller cities and rural towns will likely see prices going sideways for the remainder of 2025.
Many people leave Auckland to release capital pushing up smaller towns and cities, if Auckland falls then it looks more attract at the same time as the smaller places get lower offers from the rural migration, its very interconnected.
History shows us Auckland pulls the regions up, I suggest there is less history of Auckland falling, but that for all the same reasons falls would push the regions down.
If the rent is not producing 10% yields - IT IS OVERPRICED!
- More importantly so, as longer term interest rates are on the rise. The FED has just spoken to it.
Buyers should only offer in the range of 2015 prices and older valuations, then walk away if they say no. The Vendors losses will just mount, the longer they wait.
Otherwise, if you pay near asking today - you will most likely face sustained losses into the future/negative equity.
That's a pretty dire prediction. Where is the data to back this up? $780k seems quite reasonable to me. 25 yr loan @ 5% is around $1k/wk. One 70k income earner should more or less cover that while the spouse/partner's income can cover the rest of the household expenses. Given that interest rates are falling, the numbers will look even better in 6 months time.
DTI of 4x is reasonable and will eventually return towards it.
DTI of 5x + is not sustainable and is falling like a rock, since 2021.
Hmm 4x DTI.... So either rent have to double (laughable) or houses have to drop back massively. Those with no debt won't care. Those leveraged to the moon are in trouble.
Yes, the lower the DTI the better. 4 is definitely more serviceable than 5.
Agree, Kiwi's are too scared to go in low, hard and walk.
Plus we let agents talk us out of a low price and into a higher price - They work for the vendors remember so just ignore them and send the offer in to their manager
Generalisations of course that others may disagree with
My rule of thumb is 1,000 times the weekly rental. (The math's logic is 50 weeks rental divided by 5%.) One of the advantages is that rental is a good proxy for how much people want to live there, and how much the people who live there earn.
I still think the majority are blissfully unaware of how bad things are.
Once this market has becomes the bbq/ shoe polisher/taxi driver topic. i.e every man and his dog knows housing is crashing, it will accelerate more than one might imagine.
Fire up the printer, drop the lvr's, bring in first home buyer incentives, open he borders - the 'team' have got this.
I still think the majority are blissfully unaware of how bad things are.
That's because most vendors don't pay attention to the market until they choose to sell, then they have confirmation bias and spin from RE agents. It's not hard to check the last say 12months or 2 years of REINZ reports to ascertain how much prices have dropped as a a base figure and what's selling locally for similar properties.
Tomorrow's auction activity is going to be very interesting.... all i can see is Passed In....
The housing market is slowing changing from Red to ReddishAmber... in about a year it might be Amber.. and in about 5 years AmberishGreen... Long way to go....
I spoke with an agent today.
sold 7 sections last year, 188 currently on the books
commission income down 70% from last year
commented about the high number of angry people she meets
Is it maybe time to discuss what 60-70% falls will mean?
as an investment houses need to fall this much to stack up, especially if the market is not rising
I can personally think this will take seven to ten years to flush out
I have’t read one article that discuss what changes in NZ will take place if it does crash…..not one in five years, in any media
i hope it all pans out somehow but I’ve got my doubts
We are amidst a property crash in little ole NZ. Its hit the worlds press a few times - NOT once in NZ. (The NZ Home property commission/conniving/ponzi team wont utter it)
Internationally theses crashes take on average 6 years to bottom.......the longest to bottom, was Japan at 20 years.
So yes 2027 minimum, to the NZ market bottom, maybe upto 2030.
DTI of 3x or 4x nationwide, will ring the bottoms bell!
Does that agent only sell sections? Who are the "angry people she meets" and what is their story?
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