The return of FOMO in New Zealand's housing market is real, according to a new survey of real estate agents, but it's still down on last year's hive of activity.
As housing prices skyrocketed last year off the back of record-low interest rates, the removal of loan-to-value ratios (LVRs), the COVID-19 pandemic forcing Kiwis home, and the continued lack of supply, a sense of fear of missing out (FOMO) sunk in.
However, that fell away earlier this year off the back of measures introduced by the Government to stabilise the market by reducing investor demand and tilting the market to first-home buyers. The Reserve Bank has also reinstated LVR restrictions.
According to a survey of real estate agents by economist Tony Alexander, fewer than 50 percent of agents felt FOMO was in play for buyers in May, down from above 90 percent in the latter half of last year and the start of 2021.
But in the latest survey released on Tuesday, that's increased back to 60 percent, with a report released by Alexander and the Real Estate Institute of New Zealand (REINZ) saying FOMO "is starting to reappear in strength once again".
"Almost all of the indicators which we report on here have shown increasing strength or decreasing weakness in the residential real estate market around New Zealand over the past month," it says.
"Some measures have now been improving for two months, and some are back to levels of strength seen late last year."
The survey found net 53 percent of agents are observing rising prices in their locations, the strongest result since March. It's up from net 30 percent recorded at the end of April and net 32 percent at the end of May.
The report says that's an example of an "improving trend after the initial shock engendered by the March 23 tax announcement" by the Government.
"The extent of price gains seen is not as strong as during the residential real estate market’s most frenzied period between August and March," it says. "But the result gels with a growing volume of anecdotal reports suggesting prices have not been dented downward by the combined effects of the tax changes and return of Loan to Value Ratio rules."
At the same time, net 23 percent of real estate agents report seeing fewer people attending auctions.
"At a net 23 percent negative this proportion is the least negative in three months and as the graph here shows, an improving trend appears to be in place.
"This does not suggest that buyers are as yet returning to the market, just that their speed of withdrawal is slowing down as time passes since the March 23 tax policy change announcement and media continue to report market strength and rising prices around the country."
A net 4 percent of agents report seeing fewer home buyers in the market. However, that's the least since the Government's housing measures were announced and down from net 17 percent in June.
"These mainly young people are continuing to exercise caution as they take on board a great number of new factors such as questions about the impact on investor buying and selling of tax and LVR changes, and predictions of rising interest rates," the report says.
In comparison, a net 52 percent of agents report seeing fewer investors in the market.
The report says the Government and Reserve Bank changes "accentuated an easing trend of investor demand" which began back in October, according to the surveys.
"This is the most negative of our numerous reported and behind-the-scenes measures and unlike most of the indicators already discussed this month, one cannot reasonably state that an improving trend is yet in place.
"In a number of surveys investors have indicated that they have low levels of plans to purchase extra property in the near future."
The report says it will be interesting to see the improvements being seen in other indicators eventually translates "into more investors dipping their toes back in the water".
Real estate agents also report seeing no improvement in the number of enquiries being received from overseas and buyers' main concern continues to be a lack of listing.