First-home buyer activity has plummeted and real estate agents are seeing fewer buyers at auctions and open homes, a new survey shows.
In a late November survey carried out by the Real Estate Institute of NZ (REINZ) and independent economist Tony Alexander, a net 56 percent of real estate agents reported seeing fewer young buyers, up from a net 2 percent in October.
Referring to the "sudden change" in first-home buyer presence, the report acknowledged that while higher mortgage interest rates are partly accountable, feedback from agents showed tightening of credit availability is the bigger cause.
First-home buyers are pulling back for a variety of reasons, Tony Alexander told Newshub.
"That's a huge turnaround and will reflect not just the rising interest rates, but the CCCFA [Credit Contracts and Consumer Finance Act] changes, LVRs [ loan-to-value ratio restrictions] and DTIs [debt-to-income ratios,] all at the same time," Alexander said.
Cancellation of bank pre-approvals is another factor, he said.
Fear of Missing Out (FOMO), which persisted for property buyers as recently as August, has dropped to the lowest level since April 2020.
A net 39 percent of real estate agents reported seeing evidence of FOMO in November, down from a gross 69 percent average over the last 19 months.
Attendance at auctions and open homes the weakest on record
A net 46 percent of real estate agents reported seeing fewer buyers attending auctions - substantially more than a net 10 percent in October.
The result is weaker than following the March 23 Government housing announcement when survey results showed fewer investors turning up to auctions and open homes.
A net 61 percent of real estate agents reported seeing fewer buyers at open homes, both results the weakest on record.
A net 11 percent of agents reported seeing more property investors stepping forward to sell, similar to a net 12 percent following the March 23 announcement.
Fewer real estate agents expect prices to keep rising
The drop in attendance at auctions and open homes is reflected in lowered price rise expectations.
A net 18 percent of real estate agents said they expect prices in their area to rise. That's down from 60 percent in October, and is lower than the average survey reading of 56 percent.
Jump in property appraisals signals more choice coming for buyers
A jump in property appraisals is an early sign of more properties coming onto the market.
A net 32 percent of real estate agents reported more requests from homeowners to appraise their properties, up from 27 percent in October.
Low listings and high demand has been one of the drivers of skyrocketing house prices. In August, realestate.co.nz reported the lowest level of housing stock on record. Its October data shows a turnaround, with national listings up 9 percent, and stock up 5.1 percent year-on-year.
"As vendors pull back from unrealistic expectations, vendors who have wanted to sell will lose their fear of not buying," Alexander said.
"They will sell and buy again, bringing more listings."
Property buyers were most concerned about difficulty getting finance, followed by fear of overpaying, the report showed.
Given the strong labour market (unemployment dropped to 3.4 percent in the September 2021 quarter), Alexander doesn't expect property prices to fall.
"I like to think the market is ending the unusual period of the price boom, rather than starting a sustained decline," he said.
The REINZ and Tony Alexander real estate survey is based on collated responses from real estate agents across the country and is an early indication of market activity.