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First National New Zealand: Price and confidence barriers for property buyers

Thursday 2 December 2010, 8:44AM

By First National New Zealand

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Real estate agents are reporting pricing as the main influence on buyer reluctance, followed closely by lack of confidence, First National Group’s monthly survey shows.

However, the recent flush of new listings may help, Group general manager John Stewart says.

“Sales volumes in November were more positive than September and October, although they are still bumping along the bottom of the historic barrel.

“Employment worries of the previous few months appear to have eased, leaving prices and general confidence as the main reason buyers have their hands in their pockets.

“The year-long standoff between vendor expectation and buyer bargain-hunting is settling in some areas.  Some of this easing could be driven by the fact that there are more well-presented homes coming onto the market,” he added.

“There are a number of trends in the market right now.  The Spring – Summer lift in listings has generally arrived, contrary to some observers’ thoughts in early November!  Markets focused on discretionary spending though, [holiday markets] in the main report a dearth of both listings and buyers.

“There are though some trends in buyer preferences that seem to be universal.  They are in the main seeking large three and four bedroom homes and as a result, prices are firming in the four-bedroom sector.

“Interestingly there are fewer buyers for two-bedroom properties and this appears to be driving prices down in that sector.”

Stewart added that First National offices reported that both buyers and vendors were holding back early in the month, reflecting on a lack of confidence as to  “…is now the right time to buy?”  Additionally there were worries about the cost of and requirements for loans.

“Several areas commented that from the middle of the month “someone turned the light switch on” and listing and buyer activity hit record levels for the past two years.

“Sun, less stringent loan criteria and pent up need to relocate were cited as reasons by both groups.

“First National’s views on such a lift were clearly predicted in its October summary:

•       Spring and Summer always brings a lift compared with winter and this year’s was always going to be late due to inclement weather.

•       Additionally, Buyers especially would wait to see what household advantage would be gained from the tax cuts.

•       Banks, flush with invested funds from the Government-guarantee payouts would sooner or later need to loosen the ties on money and many now have, with loans up to 95% of value widely now accepted

“While this recent flurry in some markets is exciting for those vendors and buyers involved, other areas remain flat.   Whether the active regions quieten down or the quiet ones lift in the current market is, frankly, anyone’s guess.

“Perhaps the advent of more accessible mortgage finance at low rates still will see activity spread and settle into some sort of stability,” Stewart added.

”Late January and February will provide that answer.”

November Survey highlights:

Contracts signed:  Up on last two months but down on last year
•       Number of contracts signed slightly up on September and significantly up on a very quiet October.
•       However, 76% of offices signed either the same number or fewer contracts than November last year, and 24% signed more.

Prices:  Continuing to trend down compared with October
•       54% of offices reported prices in their regions still trending down month on month
•       38% reported prices in their areas as stable
•       9% reported price increases in at least one type of property.

•       Four-bedroom properties continue to hold prices best across all regions with 43% trending down in price, 49% stable and the remainder trending up in price on October.

•       Two-bedroom properties continued to lose value in more areas than other types of property (ie 3 or 4 brm) with 68% trending down in price, 26% stable and the remainder up (the latter in Auckland and Tauranga only).

•       In the three-bedroom property market 41% of regions reported prices as stable, 51% were trending down in price, and 8% trending up since October.

Greatest influence on Buyers:
•       40% of agents said the main reason holding back buyers is vendors not pricing to the market
•       37% blamed a general lack of confidence
•       Remainder included natural disasters hampering buyers (mainly recovery from Christchurch earthquake and floods in the North Island) 6%, and employment worries (9%).