We are approaching winter now, but the news about the property market seems to be heating up, not cooling down. Overall the news is positive about property throughout the media. Prices are rising, supply is being outstripped by demand, and interest rates remain very low. First home buyers (and their very vocal supporters) are screaming “UNFAIR” because it ain’t easy to buy their first home.
But over 90% of the price rise is accounted for out of the Auckland and Christchurch markets. So what is happening here in Wellington, and what does it mean for you in the market place?
WELLINGTON MARKET UPDATE
For a full report on the market click HERE
. In general terms, the market in Wellington can be characterized as follows…
1. Asking prices are stable – going sideways. This may be partly seasonal, as vendors tend to be pretty optimistic in feb/march, and expectations may be settling down as we head out of summer and toward winter.
2. New listings down slightly – the number of properties coming to the market for sale is down very slightly from a year ago.
3. Low inventory – supply (relative to sales volumes) remains 10-20% below long term averages, and certainly below a year ago.
4. Prices are increasing (only gently so far) – we are not experiencing strong price increases like our friends in Auckland and christchurch. Probably because uncertainty remains in the labour (jobs) market.
5. First home buyers active – this is the busiest segment of the market – helped by kiwi saver funded deposits.
In Wellington, the market is firm and healthy, but by no means out of control. It is better than it has been for about 5 years for sellers. But it will not really get moving until the government announce they are done cutting jobs.
The following graph shows the level of inventory has been steadily declining, and we are now well under-supplied, indicating a sellers market overall.
FIRST HOME BUYERS – get amongst it, but keep your cool and be realistic
Although you might think it is hard to get your first home in today’s market, it is not going to get easier. If you wait for prices to fall, for example, I think you better be very patient, and you will probably find that they are gonna go up quite a way, before they fall again. My recommendations:
- do not over extend yourself – interest rates could increase significantly in the next few years. Buy something small, buy in a cheap suburb, or buy an apartment/townhouse. This is your first home, not your dream home.
- if you can not handle a (say) 2% increase in the mortgage rate for a period, consider fixing your mortgage for 3-5 years. You will pay a premium over short term rates, but the security could help you sleep well. And sleep is good!
- but do not wait for prices to fall. I personally don’t think they are gonna.
- OR stay renting. Nothing wrong with that, folks.
INVESTORS – buy now before prices and rents head North
- rents have been soft in Wellington for a few years – most notably in the suburbs.
- when the labour market strengthens, rents will also firm, but not as much as house prices. House prices are already on the rise, but rents (especially suburban) show no real sign of rising in Wellington on the whole.
- get in now before the hoardes do, and enjoy less buyer competition, healthy yields, low interest rates… and then sit back and enjoy rent increases when they eventually come.
SELLERS – decent houses are now selling well
- if you have been wanting to (or if you tried to) sell but have been afraid or unable to do so in the past few years, times are different now, there is a good chance you would now enjoy decent demand and therefore can sell.
- so if you are putting your life on hold waiting for “a better time”, then the better time may well have arrived. Don’t be scared – talk to a good agent about the saleability of your property.
Whatever you are doing in real estate – good luck, have fun, and please let me know if I can help.
Adam – 021 409 637
May 16 2013 | Uncategorized | No Comments »
For much of the time since late 2007, when the market slowed down with the recession, it has been quite a difficult market for sellers. Demand dropped away, as people were concerned with possible falls in value, job uncertainty, tightening credit and the like. But 2012 has brought consistent improvement in the market, and in recent months the market has been in better shape than it has ever been since the previous peak in 2007, in my view.
Prices have recovered in several of the main centres, with Auckland leading the charge, and Christchurch not far behind. Wellington prices have increased gently.
The main difference, however, is the ability of vendors to sell when they want to. Many vendors have tried – unsuccessfully – to sell their property in recent years, only to be disappointed with a complete absence of sensible offers, and sometimes no offers at all.
But that has now changed. Demand over the past 12 months or so has consistently increased, to the point where it now clearly exceeds supply in most cities around New Zealand. My favourite graph is the following, which shows that the level of inventory on the market around NZ, relative to demand, has steadily reduced to the point we reached in November, where the market is approximately 25% UNDER-SUPPLIED.
Inventory – Nov 2012 (realestate.co.nz)
On average, over the past 5 years or so, we have had 39 weeks worth of supply on the market in NZ. In November, we had just under 30 weeks worth of supply.
What Does This Mean for Buyers and Sellers?
Essentially, this means there are more buyers for every house on the market, than there have been for about 5 years. The balance of power in the market, which has been with the buyers for much of the recession, has now shifted balance, so there is more power sitting with the sellers now. In other words, it is a “Sellers’ Market” again. If you have wanted to sell your house, but have been unsuccessful, or have been afraid to try because “the market has been bad”, then now is the time to sell again. There is good, robust demand, for real estate in the cities across New Zealand again, and Wellington is no different.
Why Has This Happened? Is It Just a Random Fluke?
For some time now, the “fundamentals” of the property market have suggested that the market should be improving. People finally seem to be realising this, and taking action accordingly. For example:
- Prices have not fallen drastically, as some commentators predicted. They have levelled, they are approximately back to where they were at the previous peak, and significantly ahead of this level in Auckland. People are confident again that values are not likely to fall in the near future.
- Banks are lending again. For some time, it was difficult to obtain mortgage finance. It is now easier again.
- Mortgage rates are lower than they have been for many decades. And it seems likely they will stay low for a year or so yet.
- Unemployment is predicted to start falling.
- The economy is growing, albeit slowly.
- Houses are more affordable than they have been for many years.
- Building consents are low, so the supply of housing is not keeping up with the growing population.
- Migration is increasing again, so demand for housing is increasing with it.
- Council compliance costs are increasing, meaning it remains very expensive to supply new sections for building.
- Building materials costs are also increasing, so the cost of building a new house is increasing as well.
All these factors are conspiring towards the same result – more demand and insufficient supply, meaning buyers have to fight harder to get a house.
This is great news for sellers! If you have been wanting to sell, now could be a great time to get your property on the market, and make your next move.
If I can help with anything real estate – please let me know.
Meanwhile, have a wonderful and safe Christmas!
December 17 2012 | Uncategorized | No Comments »
Hey there property people
The gurus at realestate.co.nz have released their monthly report for July recently, and it holds no great surprises (click HERE for the full report, including video interview between Bernard Hickey and Alistair Helm, CEO of realestate.co.nz). Times are still pretty good for vendors here in NZ. I wanted to give a Wellington perspective from “the coal face”, using this hard data to back up my personal experience.
Here are the Wellington figures from July (click on the image for a larger view):
- Asking prices were higher in July than the previous two months. Is it possible that vendors are increasingly confident because they have seen approximately 9-10 months of reasonable selling conditions, or is it just a one-off? I am not seeing any noticeable difference (since say 6 months ago) to be honest. Most vendors with decent properties know that they do not need to sell at discount prices: the demand is robust so there is no need to sell cheaply, interest rates are low so they can afford to hold if need be, and most people still have their jobs so income continues to flow. Genuinely motivated vendors (relocating, separating, downsizing etc) need to accept market value, but discounting should not be required as long as the property is marketed well and the campaign is managed by a competent and hard working agent.
- Number of new listings is typically low during winter months, which makes it a good time to sell (unless your property receivesparticularly poor sun, which becomes blatantly obvious during winter, whereas it can go somewhat unnoticed during summer). Interestingly, the number of listings coming to the market this past July was even lower than last July, by 7%. There is therefore no sign presently that the supply is easing.
- Inventory continues to be relatively tight, meaning good conditions prevail for vendors, especially those with decent quality property – good locations (close to services and facilities), decent sun, reasonable access, no compliance issues, good maintenance / presentation etc. Wellington’s inventory has eased slightly from June (when it was the tightest we have seen for about 4 years), but it still remains slightly in favour of vendors, at 20.6 weeks, compared to long term average of about 22 weeks.
So, in my assessment, it remains a pretty good time to be a vendor in Wellington. If you want to sell a property, you should be able to get it sold at full market price, as long as you implement a quality marketing campaign, and you have a competent and hard working agent to manage the process for you.
If I can be of service with anything property, please let me know.
Mean time – happy buying and happy selling to you!
Adam Cockburn – Wellington Real Estate Agent – 021 409 637
August 08 2012 | Uncategorized | No Comments »
The latest Property Pulse reports are out from realestate.co.nz. I always find it interesting to check out these data reports, and compare the “hard facts” with my “on the ground” experience in the trenches, here in the Wellington marketplace.
Here is the summary data for the Wellington region, for the month of May 2012 (click HERE for a larger image):
Let’s have a look at the individual numbers one-by-one.
At 661 sales for the month of May, this was a increase of 23% over the same month last year. This is a considerable increase. However, looking at the previous two months, March and April saw very similar sales volumes compared to last year. So is the increase in volume during May a one-off, or is it a trend? I believe volume of sales for the past 12 months are higher than the previous 12 months, so I think there is an overall trend, although the data from month to month can of course vary considerably. In my own experience, there has certainly been more demand over the past 9 months than throughout the rest of 2010 and 2011, when demand was more anaemic.
To me, this is the best single indicator of the state of the market. At 25.3 weeks worth of stock on the market in May, Wellington’s inventory of property for sale is steadily rising again. In 2011 it peaked at approximately 29 weeks before heading down again towards the end of the year. Since then, it has floated around 20-22 weeks, compared to a long term average of around 22-23 weeks, meaning the market was fairly balanced between buyers and sellers, or slightly in vendors favour, compared to the long term average. But to me it felt like there were actually two markets:
- Good quality property – well located, decent sun, well maintained property. This type of property was well under-supplied compared to levels of demand. Consequently, open home numbers were huge, auction clearance rates were high, and prices were firm. Vendors in this category were in control.
- Poor quality property – badly located, poor sun, difficult access/parking, compliance issues, cladding concerns – these properties have remained very stick indeed, sometimes taking long periods of time to sell. Hence the demand / supply balance remains in favour of buyers in this sector of the market. This represents an opportunity for those buyers who are able to resolve some issues, as many buyers are not willing to take such risks.
So it is interesting to see inventory on the way up again, meaning the market is moving gently back in favour of buyers. The next few winter months will be interesting, as new stock coming to he market tends to slow down in winter.
Stratified median house price
What can I say – prices are stable. Although volumes are increasing, indicating more confidence from buyers, this is not yet translating into higher prices. Buyers are still being very very sensible, making sure they are not overpaying for property. This is consistent with my experience – buyers are out there, but they are staying very cool indeed. Prices will continue to go sideways until the government indicate and end to job losses and a focus on growth. In my opinion.
Number of new listings
The past couple of months have seen an increase in new stock coming to the market compared to last year. This may indicate some confidence on vendors’ behalf that houses are more saleable now, which I agree with, subject to quality considerations. If we continue to get more stock, it may soften the market and put buyers back in control.
Asking price of new listings
Gently increasing asking prices again may indicate increasing confidence on behalf of vendors. Slight decreases in asking prices in the past few months may also have contributed to the increased levels of sales recently – vendors being a little more realistic. No great insights here.
The market remains relatively balanced, with some signs that buyers may once again be starting to have the upper hand. The exception, as usual, is in relation to good quality stock. If you have good property, it will always be in demand. Then it is just a question of what price you will get for it. This, of course, depends on many other factors, and I shall blog about that in another post later this week.
Feel free to be in touch regarding anything property.
Adam Cockburn – Wellington Real Estate Agent – 021 409 637
June 19 2012 | Uncategorized | No Comments »
If you are based in grater Wellington, you may well have read the article in the Weekend edition of the DomPost today (Saturday 09 June 2012), headlined “Record mortgagee sales near six a day” (read the full article HERE). The article states (among other things of course) “With 41 foreclosures, Wellington recorded a 71 per cent jump compared with the first quarter of 2011″.
So what does this mean? Does it mean that the market in Wellington has just fallen off a cliff? In my humble opinion, not at all! There are several reasons why I don’t think property owners / buyers / investors need to worry about this particular report, including:
- Mortgagee sales are the end of quite a long process: It is the final culmination of typically (in my estimation only) 1-3 years worth of trying to make things work, reverting to interest only, taking mortgage holidays, taking a second job… or whatever else is being done between the financier and the owner to get back on top of things. There is no doubt that times have been tough over the past few years, and many (or most or even all) of the recent mortgagee sales will be the result of these tough times. But the increased volumes of mortgagee sales does not mean that, all of a sudden, the market in Wellington (or NZ) is a whole lot worse than 3, 6 or 12 months ago.
- The Data May Be “Skewed”: in the last 12 months, Terry Serepisos has been made bankrupt. Terry was a major property owner in Wellington. Although I don’t have any hard data available on this, there will have been many mortgagee sales lately in Wellington, as a result of this one bankruptcy. Does this mean the market has suddenly taken a turn for the worse? No, of course not!
- Recent Facts Suggest The Market Is Balanced: the NZ Property Report for May by realestate.co.nz indicates that the property market across NZ is fairly balanced overall. Some places (Auckland in particular) are experiencing a strengthening market with prices increasing, many provincial towns are still struggling with lots of inventory and slow sales, and other places (Wellington included) are experiencing a fairly balanced market, where the supply and demand between sellers and buyers remains fairly even. The full report can be read HERE.
So Where is the Wellington Market At?
The key Wellington data from the May report above is as follows (click the table for a larger image):
This data shows that asking price are roughly stable, the number of new listings coming onto the market is slightly higher than normal, and consequently the level os stock on the market in Wellington has been increasing recently, although it is currently similar to long term averages for Wellington. From this data, backed up by my “on the ground” experience, my assessment is that the Wellingon market is fairly well balanced.
The following table of the REINZ House Price Index for Wellington also shows that – although the market has hardly been on fire!! – the prices have been pretty stable, which again does not suggest the market has suddenly run into trouble.
Therefore, my conclusion is that the recent increase in mortgagee sales in Wellington does NOT indicate that the market is suddenly “in trouble”. In my opinion, the market is fairly balanced – there is stable demand for decent housing, and there is currently sufficient supply to meet the demand.
What About The Future?
As soon as the Government indicate that the job losses have come to an end, the sentiment in the labour (jobs) market will increase significantly, and this sentiment will drive the market in Wellington into its next growth cycle. This is of course my opinion only, and there are definitely still downside risks worldwide, but this is still my opinion of what the future holds for us Wellingtonians.
Happy house hunting, happy investing, and happy selling!!
Adam Cockburn – Wellington Real Estate Agent (REAA 2008) – 021 409 637
June 09 2012 | Uncategorized | 1 Comment »
Wow!! Have we got an interesting market out there, or what??? It ain’t necessarily easy, but it is anything but boring, and I believe if you look into it pragmatically, the fundamentals strongly suggest NOW is a great time to be buying in Wellington!
Let’s have a look at what is happening in the market, and then I will explain why I firmly believe that the people who buy now will be the winners in the not too distant future…
Wellington Market Update
If you have been reading some of the news about the NZ property market in the last few months, you could be forgiven for thinking we are on the edge of another “boom”. However, while it appears that the Auckland market is looking pretty strong lately, and Christchurch (although for different reasons) the same, Wellington is quite a different beast all together.
www.realestate.co.nz have recently reported the following key statistics for the Wellington market in the month of April (click on the image to enlarge):
Here are my observations in respect of these key metrics:
- Asking Prices: are not increasing! However, asking prices tend to firm during peak summer months (Feb / March), so this recent easing may just be seasonal.
- Number of New Listings: are declining compared to Feb / March, but again listings peak during the summer months so this is normal. When you compare April listings with April last year, we actually had more stock come to the market last month than during April last year.
- Inventory – Number of Weeks: this measures the number of listings divided by the rate at which they are selling, to express the amount of property on the market as a number of weeks worth of inventory.
In my opinion, the last statistic (inventory) is the most relevant one. For the last 6 months, Wellington’s inventory has been 20-23 weeks. The long term average is 22 weeks. In 2011 the inventory reached as high as 29 weeks, indicating that there was much more supply relative to demand than there normally is. Therefore, our market is completely balanced at present, in the sense that the balance between supply and demand is consistent with long term averages.
However, the averages do not paint a true picture… in reality we have a two speed market.
- The quality properties (well located, well presented, well marketed, well maintained, without compliance or other such issues) are in high demand, with multiple offers being received – indeed, I have had auctions with 10-20 registered cash bidders this year, competing fiercely for good quality properties.
- But risky property is a different matter – if a property is poorly presented, poorly maintained, has bad access, poor sun, or risks such as construction issues (leaky or potentially leaky cladding) or compliance risks, this type of property can be extremely difficult to attract interest.
This makes sense – people are much more wary of risks in recent years than during boom times. There is a “flight to quality” during these risk averse times. Hence there is unusually high demand for the quality stock and comparatively low demand for risky property.
When it comes to PRICES we see more evidence of a stable market undergoing no growth to speak of (data from REINZ House Price Index – click the image to see a larger version):
In Wellington, prices have essentially gone NOWHERE since 2007. That’s a long time. The bottom has not fallen out of prices, as many predicted would happen, but it’s hardly blazing new ground in terms of prices either!!
WHY IS THE MARKET SO LACK-LUSTRE AND BORING?
This can be explained – in my opinion – by two words: Government Lay-Offs (is that two or three words!?!?). The Wellington labour market is being held back by the uncertainty of more Government job losses. In reality, most people have NOT lost their jobs. But they are WORRIED that they MIGHT. Confidence remains shaky. And the market is all about confidence:
- Young 18 year olds want to leave home and rent, but they are worried they won’t find a job, so they stay home for a few more years…
- 20 year olds would like to leave their 5 bedroom flats with their mates and rent a nice 2 bed apartment with their partner, but they are worried about their job security so they stay put until they have more money saved up just in case…
- 25 year olds want to buy their first home, but they are concerned they will not get a pay rise for years, or they might lose their job, and what if mortgage rates go up… so they continue renting and try to save a bigger deposit…
- 35 year olds are concerned about their cashflow, especially on one income, so they stay at their 2 bedroom home, even though they now have 2 kids with a third on the way… so they keep paying down the mortgage and wait for better days…
And on and on it goes! These major life events have continued on, but people are staying put, just in case they lose their jobs.
Hence the demand side of the market has been suppressed for a number of years, and it remains that way, for the mean time, in Wellington at least.
WHEN WILL THE MARKET IMPROVE & PRICES INCREASE AGAIN?
As soon as the government indicate that the job losses are over, all these people who have wanted to move to the next step on the housing ladder but have held back due to concerns over their job and income security, will come out of the woodwork. We will have 5 years (or more) worth of pent-up, artificially suppressed demand for housing, from tenants AND home buyers.
Hence rents will be driven up, as the supply of rental property is pretty static at any one time. Similarly, prices will be pushed upwards as house hunters develop confidence in their future income stream and finally commit to upgrading their homes.
THAT MEANS THAT NOW IS A GREAT TIME TO BUY!!
In my humble opinion, the market today is presenting a perfect storm for investors and home buyers looking to buy well now and settle down for great returns in the future. Here is why…
- Cheap Debt: you can borrow money at such low interest rates today! The banks have relaxed their criteria somewhat, meaning it is easier to borrow now than it was during 2008 & 2009, and the consensus is that rates will remain low for the rest of this year and then start increasing sometime next year. So get in now and borrow at 6% pa for 3 years. Click here to see today’s mortgage rates.
- Static Supply: building consents are still at very low levels, meaning the supply of property is not growing quickly enough to keep pace with natural population growth. When demand does increase again, it takes a year or two for new projects to be planned and built, ready to occupy. And the supply of tradespeople is being absorbed by Australia and Christchurch, so the ability to supply new housing is going to remain suppressed for a while yet, meaning supply can not easily be increased to meet the increased demand.
- Increasing Demand: our population is growing (slowly but surely), which gradually puts pressure on the existing housing supply. In addition, when the labour market does strengthen (when the govt stop shedding jobs), the demand will increase dramatically as detailed above. This increasing demand, in an environment of static supply, will ultimately lead to increasing rents and prices.
- Buy Well at the Bottom: if we are not at the bottom of the market now (in terms of rents and prices), then we are damn close to it! Rents will come under pressure, producing higher yields, and then prices will increase, once confidence returns to the labour market. Then those who buy in 2012 will be laughing.
- Yields are Strong: it is quite possible to buy property in good Wellington locations and earn yields of 8.0% or even higher. This means that, if you lock your debt in for 3 years at 6%, your property will easily pay for itself, even at 100% debt. If you put some cash into it as a deposit, your property should actually pay you each month. Own property AND get paid for it. Property investor heaven!!
History has shown that good old fashioned real estate increases in value over time. We have had a brief respite from increasing values for almost 5 years now. But if you look at the above fundamentals, it appears that rents and values are going to start increasing again at some point. If you buy property during these times, I do not doubt that you will be laughing all the way to the bank in the not too distant future.
Happy investing and happy house hunting!
Adam Cockburn – Wellington Real Estate Agent – 021 409 637 – email@example.com
PS I need more houses to sell!! If you know anyone thinking of selling, I would love to talk to them about how to get full market price for their property. Please let me know – I promise I will take great care of them.
PPS A GIFT FROM ME: My friends at Property Tutors Wellington have generously offered some of my friends and clients complimentary tickets to their MASTERS event in Wellington on May 27th. If you haven’t been to one of these events before, grab yourself a ticket (and one for a friend) by clicking HERE and using the voucher code AdamC, and they will send your tickets straight to you! Click HERE and use the voucher code AdamC. It’ll be a great day, I’m sure you will love it and learn something too!
May 14 2012 | Uncategorized | 2 Comments »
I sometimes get approached by clients, friends, potential clients etc, because they have agreed to purchase an apartment off-the-plans (before it is built), settlement is now approaching, and they want advice on what to do.
Often they want to sell it before they settle, hence avoiding the need to even raise a mortgage.
Remember the Good Old Days?
Many of these apartments were bought and sold in 2006-07, when the market was in full feverish swing, and everybody knew somebody who had made a “quick $50k” by buying an apartment and on-selling it, without even needing to raise a mortgage and settle on it in the first place. This seemed like heaven… a quick $50k for doing nothing.
The Good Old Days Are Over!
Sad, but true… it is no longer realistic to expect to on-sell your off-plan apartment (bought at the peak of the market) prior to settlement and make a profit.
What Happens When A New Building Settles?
When the settlement date approaches, there will be several groups of people among the buyers, including…
- Some buyers never intended to settle, and are in no position to do so.
- Some buyers planned to settle, but their position no longer permits them to do so.
- Banks’ lending rules have changed significantly, meaning some buyers no longer qualify for finance, even if their situation has not changed materially.
Bottom line is that, both before and shortly after settlement date, there will be a number of buyers who are very anxious to sell. If you want to sell during these times, you will have to compete on price… in other words, you have to offer your property cheaper than everyone else. And, when some buyers are VERY motivated to sell (because they can not raise the finance required to settle), competing on price is going to be VERY painful. Don’t bother trying, unless you have to.
Similarly, there is a good chance that the developer has still got some units available for sale. This only increases the competition.
Settle On Your Apartment If You Can
If you plan to sell in the near future, rather than compete with extremely motivated vendors around settlement time, I recommend you settle on your apartment if you can.
The next issue to deal with, is getting it rented… there will be LOTS of apartments available for rent in the building… so how do you attract the tenants to yours, over and above the competition?
Firstly, the best quality units will go fastest. This is obvious, but it is amazing how many investors overlook this when buying the apartment. They go for the one with the highest theoretical yield. In other words, the shittiest one!!! But when the tenants come to rent, the ones with good sun, more generous spaces, good balconies, unobstructed outlook… these ones go first.
Whichever one you have got, there are two things you can do to get it rented as fast as possible:
- Be realistic on rent. Do not wait for AGES in order to achieve full rent. Take a 10% cut in income, and get it filled up. Receiving 90% is better than holding out for 100% and receiving nothing for 10 weeks!!
- Offer something extra… a flash new TV on the wall, nice whiteware, a stereo, some nice art or a mirror etc. This costs very little and will buy you valuable peace of mind as it helps rent your apartment out faster.
Once you have your tenants in there, locked in until Jan / Feb the following year, you can sit back and forget about it until then…
Sell When The Building Has Settled Down
When the tenancy is approaching renewal time, perhaps Nov / Dec, take advice from your preferred real estate agent about the situation.
- Have the highly motivated vendors in the building exited the market?
- Have the values in the building settled down to establish a “norm”?
- Has the number of apartments available to rent in the building reduced to sensible levels?
Once the building has settled down, bedded in, and established normal patterns of healthy supply & demand, you can consider selling at sensible levels. Get your apartment rented at full rents for 12 months and sell (if it is a good investment apartment with healthy income), or sell to the owner occupier market (either empty or with tenants in situ on periodic tenancy).
Trying to sell around the settlement date will be painful. Unless you have to sell immediately (typically at great cost), rent it out for a period, wait until the supply & demand in the building settles down, then engage a good agent to extract full market price for you.
November 09 2011 | Uncategorized | 2 Comments »
Summary of the NZ Market Overall
The most recent monthly report from www.realestate.co.nz demonstrates a continuing trend in the real estate market across the country – it is starting to favour sellers more than buyers. For the full report, or to download a pdf version of the report, click here.
The main results for NZ as a whole include:
- Increasing volume of transactions: 24% increase in average monthly sales in the 3 months to July vs the 3 months to February.
- Continued tight supply and reductions in the levels of inventory: number of properties on the market has fallen by 15% across the same time. And inventory has reduced to under 37 weeks, the lowest level seen since 2009, when prices firmed noticeably (certainly in Wellington).
- Overall the market is favouring the sellers: 12 out of 19 regions below long term average levels of inventory.
Summary of the Wellington Market
“On the ground”, my experience of the local Wellington market is still not straight forward. The hardest parts of my job at present include:
- a shortage of good stock (getting good new listings); and
- caution on behalf of buyers, coupled with continued high expectations of vendors, meaning that getting deals done can still be a drawn out process of negotiation. Inventory levels are still low, but this is yet to translate into overall buyer urgency.
Here is what the data shows us for the Wellington market in particular:
- Asking Price steady at $422k: price expectations remain broadly stable from recent months.
- New Listings still tight at 701: an increase on last month, but still lower than the same time last year. In other words, stock levels are not increasing once adjusted for the normal lift in listings as Spring approaches.
- Inventory reduces further to 19 weeks: continued reductions in inventory, from as high as 29 weeks earlier this year, compared to a long term average of 22 weeks. In other words, buyers have less to choose from than normal, and WAY less than over the past 18-24 months – this is a huge reduction in inventory levels.
What Happens Next?
Normally, when supply is tight, and demand is stable or increasing (as demonstrated by increasing volumes of transactions), the price rises and the duration to sell decreases. What is in fact happening now, is that prices have been decreasing slowly, but are now showing signs of levelling off, and days to sell remains high at 44 days for Wellington. How can this be, when stock levels are so tight? In my opinion, it is because buyers remain very cautious, due at least in part to threats of further public sector lay-offs. Once this cloud has cleared above Wellington’s market, there will be lots of pent-up demand unleashed, and prices will come under pressure again.
But who knows how long that will take!
How Do We Sell Our Property For A Good Price In This Market?
Although the market is improving for sellers, as I comment above, it is still not easy. This is still a market that sorts the wheat from the chaff. In these conditions, you have to stick to the fundamentals relentlessly, including:
- Price: a good agent is an expert at extracting the best price from the market on the day. This is different from being a magician!! Property almost NEVER sells above true market value on the day. Trying to accomplish this is a waste of time. Therefore price expectations need to be realistic.
- Presentation: it does make a difference! Have your property presented nicely, and you are far more likely to achieve a full market price.
- Promotion: your property must stand out to the target market(s) in order to attract maximum interest from buyers. This means a comprehensive marketing campaign.
A competent agent should be able to use their skills to extract the full market price for your property, as long as the above basic rules are followed (it’s not quite as simple as that – but leave the other important details to your agent!). Then it is your decision, as the vendor, to accept the market price, or not.
Here is a good example of a well executed campaign recently, where we had over 150 viewings of the house, and 10 offers at tender time, resulting in a full market price being accepted by my client:
When Is The Best Time To Sell This Year?
This year we have an unusual number of major distractions, the main ones being:
- Rugby World Cup – it’s going to be difficult to get rugby fans to visit open homes during this competition!
- Election – a general election normally causes a little bit of uncertainty, and this can distract buyers from making big decisions.
Therefore, you need to plan your timing carefully, to take these events into consideration. Talk to your agent about the best timing for you and your property.
If you are considering selling your property in Wellington, or if you just want to discuss any aspect of real estate, please give me a call – I am happy to help!
Adam Cockburn – Licensed REAA (2008) – 021 409 637
September 14 2011 | Uncategorized | No Comments »
The latest report from realestate.co.nz (click here for details – the video blog in particular is an excellent summary of the market) clearly shows a recent shift in the property market across the country, being led by Auckland. The main trend over the past 3 months has been:
- a slightly increased volume of sales
- plus a significant reduction in new listings coming to the market
- resulting in a reduction in the overall inventory of property on the market.
We have been in a buyers’ market for about two years now. In July the level of inventory reduced below its long term average, to 39 weeks, for the first time in about two years.
In particular in Wellington:
- the number of new listings is significantly lower than a year ago
- and our inventory has reduced from 29 weeks in April to 21 weeks in July. The long term average is 22 weeks. This is a HUGE reduction in stock!
- so in Wellington, we have just entered a sellers’ market – just
What Will Happen Next?
Traditionally, when you have increasing demand and reduced supply, this produces increasing prices. Interestingly, we are not seeing increasing prices, in fact asking prices have been reducing. This may be responsible (in part at least) for the increased number of transactions – more realistic prices.
However, if this low level of inventory continues, in my view we can not escape the result – prices will edge upwards.
Buyers – Get Amongst It!!
I continue to be of the opinion that we will not see better buying than we see today. Do not wait for buying to get better. It won’t in my opinion. When you find a property that meets your requirements, buy it! Click here for my reasoning as to why first home buyers in particular are becoming more active in the market.
Why Isn’t My Property Selling?
If we have entered a sellers’ market, some of you vendors who have not managed to sell, may rightly asking this question: “Why Has My House Not Sold?”
Selling property always comes down to:
- Presentation – well presented property will always attract more buyer interest.
- Promotion – you can not expect good buyer interest and competitive buying process without robust promotion across multiple media.
- Price – the market will only offer what they think the property is worth. Holding out for more is often fruitless. Realistic price expectations are important in achieving a sale.
The last thing I would mention is that, although we are just entering a sellers’ market, not all segments of the market are equal. In particular, the apartment market in Wellington is not under-supplied. So apartments are certainly not selling as well as traditional houses.
Similarly, if your property has problems or issues that are difficult to understand or resolve, this will probably cause difficulty. For example, the following types of issues will be a barrier for buyers:
- Lack of a Code Compliance Certificate – this is not uncommon. If a CCC was not obtained for a small alteration, this may not be too problematic. But if the entire property has no CCC, this will scare away inexperienced buyers in particular.
- Earthquake Strengthening – if a building requires strengthening and there is no clarity around the likely costs of this strengthening, this introduces significant uncertainty.
- Leaky Building – if a property is leaking, and the costs of making good are uncertain, this again will introduce significant uncertainty, hence putting off many buyers and reducing the chance of a properly competitive situation.
A property that is presented well, promoted properly, with realistic price expectations and without serious issues or uncertainty, should sell.
I Am Short Of Stock!
As is often the case in markets with tightening inventory, I now need more houses to sell. Please let me know if you know someone considering selling. Now could well be a better time to sell than in the Spring, when lots of sellers traditionally list their property. The World Cup and the General Election are also likely to act as major distractions for house buyers.
Happy house hunting, and happy selling!
Adam Cockburn – Wellington Real Estate Agent
021 409 637 – facebook – twitter
August 02 2011 | Uncategorized | No Comments »
Is it just me, or is the first home market heating up a bit??
There are good reasons why I think the first home market is showing more signs of activity, including the following…
- Interest Rates Are Low, But Will Be Increasing Soon… we still have very low interest rates by historical standards, and rates will probably be increasing soon. So it makes good sense to get in sooner rather than later, to take advantage of the low rates.
- Affordability… houses are at their most affordable for 7 years. The combination of slightly lower prices and inflation means house prices are more affordable now than they have been for many years. Compared with rents, for example, prices are comparitively low. Compared to recent years, that is.
- More Relaxed Lending… for some time, since about 2007, banks have been very conservative about lending. This has kept many buyers, who would otherwise be looking to buy, out of the market. More recently, many banks have relaxed their criteria, some offering mortgages of 90-95% of the purchase price again, in particular to first home buyers with good incomes. Therefore, lots of buyers who previously could not buy, can buy now… these buyers are coming into the market and putting the existing stock of first homes under more pressure.
- Low Supply… the amount of properties coming to the market continues to be low. So the increasing number of buyers looking at the same number of homes puts pressure on the good ones in particular.
- Improving Confidence… there are many indicators that suggest our economy is improving. GDP growth was higher than expected in Q1 this year, companies’ hiring intentions are the highest they have been of about 15 years, and business confidence is very strong. Our future is looking brighter, and when people are more confident, they get on with life!
- People Are Sick of Waiting!! For several years, lots of people who have wanted to buy a home, have delayed their decision because they have been unsure of their job and income security. Lots of these people are now sick of waiting. As soon as they feel more confident in their job and income security again, more of these people will think “I’ve had enough” and get on with house hunting.
For these reasons, I believe we will continue to see more activity in the housing market, especially the first home sector of the market.
By way of example, here is a home that I brought to the market last weekend, and I had 25 groups through at the first open home!
CLick here for more details about this gorgeous first home.
If you are thinking of selling your property this year, do not wait for Spring. We have the Rugby World Cup and the election, both of which are likely to be major distractions for house buyers. And although many people think winter is a bad time to sell, it is not. According to realestate.co.nz, there are approximately 5% fewer house hunters looking to buy during winter, but a whopping 15% fewer homes on the market. Therefore, competition from buyers is actually hotter during the colder months, according to this data.
So if you want to sell – don’t put it off!!
Adam Cockburn – Wellington Real Estate Agent
021 409 637 – facebook – twitter
July 29 2011 | Uncategorized | No Comments »