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  • Writer's pictureParry Singla

Tony Alexander: We’re now in the endgame for falling house prices

In last week’s column, the final sentence I wrote was this. “Food for thought as you contemplate the housing market’s progress into the start of 2023 when things will likely look quite different, especially now my survey of mortgage advisers with mortgages.co.NZ tells us that first home buyers are re-entering the market.”

What I was referring to was the net 8% of brokers saying they are now seeing more rather than fewer first home buyers stepping forward looking for advice. In February, a net 64% saw fewer first home buyers, and the latest result is the strongest since February 2021.

Based on that result, plus many other indicators, I recently called that we have now entered the endgame for this period of falling house prices. Prices have further to go down, but we are well on the way directly towards the cycle bottoming, then prices rising again some 5% to 10% over 2023 and probably similar over 2024 and 2025.

The latest indication of things getting close to turning upward, perhaps before the turn of the year, comes from my monthly survey of real estate agents undertaken with REINZ. The full results will be out next week, but what I can say for the moment is that for the first time since February 2021, a net positive proportion of agents say that they, like the mortgage advisers, are also seeing more first-home buyers in the market. The concerns buyers generally have about high-interest rates, access to finance and prices falling after they buy remain high. But all of these concerns are now weakening. FOMO (fear of missing out), however, is as low as it has been since February this year, with hardly any buyers expecting prices to rise if they delay their purchasing decision.

But I don’t take the FOMO reading as an indication of where prices are headed, just a gauge of what state the market is in. Another gauge is a similar vein that comes from the ASB’s quarterly housing survey. They have found that a net of 31% of people nationwide and 28% in Auckland expect house prices to fall.

You will read this and think it means prices have a lot further to go. That would be wrong. This measure changes after actual changes in prices and the value I take from it is as an indication of what vendors will do. The net 31% is the worst reading since 2009 and it tells me that vendors are now going to capitulate to market realities.

Most will stop holding out for a price they could have got late in 2021 and will now meet the market so they can get on with their lives. At this capitulation point in the market turnover can go up and with spring almost upon us, the cyclical recovery in real estate turnover from winter lows may be robust.

But the following point still needs restating. We remain solidly in a buyer’s market with many people standing back in the shadows fearful of buying then seeing prices go down further, which they assuredly will for a few more months. The focus of the people holding back is on avoiding feeling silly, or maximising capital gain if they are investing.

But perhaps the message I’ve been delivering to first home buyers for some months now is getting through according to the survey results. As a first home buyer you have to ask yourself what the most important thing to you is. Is it squeezing the last 5% out of the house price cycle? Or is it taking advantage of a doubling in stock listings, capitulating vendors and a buyer’s market to secure a property denied you a year ago for raising a family over the coming decades?

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