According to the data supplied each month by REINZ, average house prices rose in seasonally adjusted terms by close to 0.7% in each of the months of June, July, and August this year. Prices are rising and the three main cities are leading prices up, probably partly because the migration boom currently underway is boosting their populations more than those in the regions.
I can get some insight into what is happening right now from my monthly survey of real estate agents, sponsored now by NZHL, for which I sent an invitation to respond on September 26. With most of the responses received we can see that whereas six and three months ago a net 59% and 8% of agents respectively said that they could see prices falling, now a net 39% say that prices are rising.
This is the strongest result since October 2021 just before activity and prices were slammed by the credit crunch and quickly rising interest rates.
The survey also shows that whereas six and three months ago 67% then 39% of agents said that buyers were worried about prices falling after potentially making a purchase, now only 13% say this concern is out there.
This is my FOOP measure — fear of over-paying — and it is at its lowest level on record.
I find that interesting. In the past when this measure was below average (42%) there were lingering concerns that maybe the surge in prices underway was not well founded and some sort of a reality check might happen. Now there is a feeling that there is greater solidity to the price gains which are being registered.
Maybe that helps explain why when I ask the real estate agents what the factors are which are motivating investors to buy, 26% say expectations of prices rising. Three months ago this reading was 17%, while six months ago this was 7%. Investors have quite quickly changed their tune in the face of solid evidence that prices are now heading upward.
In fact, whereas six and three months ago 49% then 41% of agents respectively said investors had no interest in buying, now just 24% say they see this lack of interest. The average level for this measure is 35%. There is now below average disinterest by investors in making a purchase.
I also ask the agents if they feel buyers are concerned about the level of prices.
Only 18% have said they see such a concern compared with a peak of 77% early in 2021. Again, this suggests that buyers are not of the view that price gains to date have taken prices to levels which are ridiculous.
Putting all of these measures together and noting that FOMO is about average with 40% of agents seeing buyers display it, it is unsurprising that the net proportion of agents saying that they are seeing more investors now sits at 14%. Three months ago a net 7% said they were seeing fewer investors while six months back a net 46% were seeing fewer investors.
The residential real estate market in New Zealand bottomed out on average in May.
Price changes have now entered the upward leg of the house price cycle, and the demand coming from first home buyers which has created this situation is now being boosted by investors returning to the market.
My real estate agent shows that many potential vendors are holding off selling until the general election is out of the way, suggesting a boost in supply to the market lies just ahead. But the comments from agents saying this lies in store are comfortably exceeded by those saying buyers are waiting for the election to be out of the way and then intend returning to the market.
The various indicators available to us paint a fairly clear picture. We are into month four of the upward leg of the house price cycle, and October will be month five.
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