In a recent statement, Jen Baird, Chief Executive at REINZ, said that the market, having benefited from an exceptional boost during COVID-19, has seen a shift and is now settling into a contracting phase of the sales cycle. Prices are easing, and the market is returning to a more settled pace.
"While we continue to see prices increase annually, the rate of growth is slowing, sales activity is down, and the median days to sell is up. We're seeing the market moderate as people settle into this phase of the property cycle.
“The impact of tighter lending criteria, LVRs, and increasing interest rates coupled with inflation continue to reduce the pool of buyers who are willing and able to pay market prices. The increase in interest rates over the past months presents one of the greatest impacts to the market."
The day before Baird released this statement, the Reserve Bank increased the official cash rate by 50 basis points — to 1.5%. In response, she commented that this double rate hike would do little to alleviate concerns and instead see the market slow further as buyers reassess their ability to meet higher mortgage repayments should the dial be turned up further, tempering their spending.
“House prices tend to be more sticky when decreasing than increasing, which is what we are seeing now. While market sentiment has quickly shifted, vendors are slower to adjust their price expectations. As demand drops, vendors tend to wait longer to sell their property rather than sell below those expectations. Those who must sell often have to drop their price to meet demand. That tends to be the general experience at this stage of the property market cycle where the market power is leaning towards buyers," observes Baird.
Despite auctions seeing less attendance and fewer bidders, it remains a popular method of sale, and many vendors are receiving unconditional offers once they are priced. Auctions continue as a positive option for prepared and cashed-up buyers.
“The auction process is an effective way of selling in any market," notes Baird. "However, the dynamics change. Through 2021, demand-side pressure caused an urgency to 'buy now or miss out later', and activity in auction rooms reflected this buyer sentiment. Comparatively, the volume of stock on the market paired with current market headwinds have eased competition as buyers step back to consider their options — decreasing the number of sales by auction.
"In the current market, quality counts. Buyers are still present and bidding for the right properties in the right price range. Sellers with desirable properties, or properties ripe for development, can still achieve competition at auction," Baird concludes on a high note.