'First home buyers are tired': Report shows interest in open homes and auctions drops

Open home image and Tony Alexander economist
Economist Tony Alexander said some of the feedback from real estate agents was first-home buyers were tired of looking at open homes and wanted a break. Photo credit: Getty/Supplied.

Real estate agents are seeing a drop in attendance at open homes and auctions, indicating either demand for property is cooling - or buyers just need a break. 

A REINZ and Tony Alexander survey of over 369 nationwide real estate agents during early  December shows that for the first time since July, there was a fall in attendance at both. 

The biggest monthly change was attendance at open homes, where a net 38 percent of agents reported seeing more people, down from a net 59 percent in November. The drop was most noticeable in Auckland, where less than a quarter of real estate agents (a net 17 percent) said more people were attending open homes.

There was also a slight drop-off in people going to auctions - a net 42 percent of real estate agents reported more people attending auctions, down from a net 47 percent last month. Overall, there was less interest from first home buyers, with around half the real estate agents surveyed seeing more activity - the lowest since May.

The report said as surging house prices and unaffordability were a concern, and loan-to-value (LVR) restrictions will be brought back to reduce higher-risk lending, the slight decline in buyer interest is encouraging.

Economist Tony Alexander said anecdotal feedback from real estate agents showed first-home buyers were taking a break.

"Some of the agent feedback is that first home-buyers in particular are feeling a bit tired and aren't attending any open homes," Tony Alexander said. 

"Some people are indicating they're going to take a rest but it looks like they'll be back in the market again in January and February," Alexander added.

By late November, ASB, BNZ, ANZ and Kiwibank had already moved to put LVR restrictions back in place, limiting the number of first home-buyers able to borrow over 80 percent of the purchase price (over 70 percent for investors). This could be another reason for the slight drop in buyer presence - but could also be temporary.

"History shows that when the 30 percent minimum deposit requirement was first imposed in Auckland-only late in 2015, the impact on turnover and price movement was relatively short-lived. Only when the 40 percent minimum deposit (60 percent LVR) was imposed nationwide effective from July 2016 did a sustained impact on house price inflation occur," the report said.

Over three-quarters of real estate agents surveyed (a net 88 percent) said house prices were still rising in their area. Prospective home buyers had renewed confidence in job stability, with only 12 percent of agents reporting this as a concern, down from 48 percent in June.   

The report also showed a slight increase in the number of prospective buyers having difficulty getting finance at 49 percent, up from 43 percent in November. 

Barfoot and Thompson auctions manager Campbell Dunoon told Newshub that COVID-19 has created an inward-looking focus. This has resulted in a flight to property, which he expects to continue through Christmas.

The company's auction sales were up 35 percent this year compared to 2019, with 6055 auctions held from January to the first week of December. With no international holidays this year, Dunoon expects buyers to continue looking at property online.

"The general feeling with our salespeople is that moving into 2021, there's going to be a lot of pent up demand.  I think we're going to have a stronger January and February than we've traditionally seen in the past," Dunoon said.