It’s no secret. Kerikeri and the Far North are on track to experience one of the lowest volumes of open market real estate sales in a calendar year for 20 years. Average timeframes to sell have quadrupled since the peak of 2021 and unless you are the top one or two value propositions in your price bracket, you are going to have to sit it out and wait longer until the buyer who just loves what you have on offer comes along.
It’s no wonder some vendors are losing patience and asking where are the buyers? The quiet period after the Global Financial Crisis from 2008 to 2010 saw similarly low numbers but that was when the town was much smaller, accentuating the poor results of this last year. So, what’s behind the slow down?
1. Normal cyclical correction to the extraordinary hype of activity in 2020 to 2022.
The Covid bubble drove property sales activity and prices in Kerikeri to unsustainable levels. There had to be a correction, not just here but right across the country. Kerikeri median prices have held up well, so far, dropping around 10%, compared to other markets where prices dropped 20 to 25%. This makes Kerikeri’s prices more expensive for people planning to move from other areas and could give them reason to pause their plans or look at other attractive provincial towns, until the gap closes again. We are hearing about prices rising in Auckland and Wellington so the gap is already starting to close.
2. Section sales are way down to their lowest levels on record.
The appetite for building new homes dropped away because of escalating land costs, construction costs, compliance costs and challenges with the supply of materials. All this uncertainty means that people have favoured staying where they are and renovating or buying an existing home versus building.
3. The rise of the retirement village.
Over the last four years there has been a significant rise in retirement village house package offerings at reduced prices to the open market on a license to occupy basis. There is no doubt that people choosing these packages over open market homes has resulted in lower sales volumes in the open market. However, we understand that even retirement village sales are significantly slower in 2023 than previous years.
4. Fewer people moving to Kerikeri.
People often say to us they move to Kerikeri for the warmer climate, the accessibility to Auckland and the lifestyle offered with boating in the Bay of Islands and access to Far North beaches. Unusual, severe weather patterns and road closures have put a damper on all of these over the last year. The normal flow of people travelling to the north to visit or in search of a new home has been disrupted. Boats have sat in safe harbour for most of the year and the weather has left many of us wondering if we should be renamed the summer-less north. For those worried about catching up with the grandkids in the city, this recent spate of weather has presented hurdles they were not anticipating.
Additionally, slower growth in the construction sector has meant that fewer “tradies” have moved into the area than during the construction boom of the last few years. Last, but not least, most people need to sell elsewhere before they move here. If sales are slower where they live, then the result is things slow down for us here. That’s the market in a small provincial town when you rely heavily on inward migration for growth.
Typically, these trends are temporary. Once our feeder markets pick up, roads are open permanently again and weather patterns settle back down people adapt and life gets back to normal.
The recent change of government offers a glimpse of hope as policies come into play that favour the property market across New Zealand. However, it takes time for these policies to be implemented and have an effect. The first positive signal of change is the number of new listings across the country rising by an extraordinary 20% over the last month. People who had put their plans on hold leading into the election are finally acting. It is simple maths, that the more properties on the market, the more people will move around, and some of them will start to look at moving here again.
Vendors can try various strategies to sell more quickly in the current market such as increasing their exposure through higher marketing budgets, or lowering their prices to be more competitive, or spending more money on their properties to make them more attractive or even changing their agency. All of these come at some additional cost, and none are guaranteed to bring a better result unless you are prepared to give your property away. The fact is that buyers are not coming as fast as they were. This is the nature of a cyclical market folks and neither you nor any agent, no matter how clever or experienced they are, can greatly influence that.
The truth is, it is the time to be patient, trust your agent to be doing their job, out there everyday promoting your property. The market is turning, the buyers are returning, your property will be sold.
It’s just a matter of time.
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Apr 9, 2024
Best Time To Buy
More houses for sale, the prospect of lower interest rates, and the likelihood of improved capital gain make this the optimal time to buy a home in Kerikeri. The Kerikeri market is experiencing a unique moment in time right now. Prices have settled into their new normal, lots of new stock is coming to the market and increased buyer activity is resulting in multi-offers. Some economists are suggesting that interest rates will start to decrease sooner than expected and predicting house prices to increase over the course of 2024. I have a view that the Reserve Bank has over-crunched the economy and will play catch-up policy easing from late this year. So, if I were borrowing at the moment, I would probably take a mix of 6 and 12 month rates. “Tony Alexander Economist. For buyers, this means that for the first time in years it will likely get easier to service a new mortgage over time rather than harder. This combined with expected capital gains, means now is a great time to buy. More stock means more competition for vendors. Presentation and pricing are more important now than ever. The ones that do, are likely to see a successful marketing campaign with possible multiple offers that will result in the best possible price in the current market. We expect the current market conditions to remain steady while the economy is correcting itself. First home buyers are back and this is a welcoming sign for a healthy property market. There is always a reason why someone wants to either move up or downsize. In a steady market you will find that the gap between what you are buying and what you are selling isn’t as huge. It doesn’t matter where you are, good houses always seem to find buyers, no matter what’s happening in the market. Right now is a sweet spot for buying. If you want to find out more about how our unique, high-performance system can help you achieve your property goals please give us a call or pop into our office anytime. We would be glad to show you around and make you a coffee while you are here.
Mar 7, 2024
Market Update: February 2024
A busy start to the year! It has been a surprising start to the year for us, with massive numbers of appraisals and new listings, a slow but steady increase in buyer enquiry and a fair amount of time advising and reassuring vendors that things will get back on track. We have recorded 16 conditional sales in February but more than half of these rely on other sales chains to complete. 75% of these are under $1million. Looking back REINZ reported 12 unconditional sales for January compared with 14 in December. This is a result of the typical lower levels of buyer activity in December leading up to the Xmas period. The outlook for February at the time of writing this report looks similar to January. Record numbers of new listings and appraisals On the reverse side, the number of appraisals and new listings coming onto the market so far this year has broken all records. The paralysis caused by the uncertainty leading up to the election, the delays with forming a government and then Xmas has led to a herd of sellers coming to the market at once. Consequently, inventories have shot up with latest numbers approaching 400 listings on TradeMe up from 340 just a few months ago. This is good news for buyers and sellers. It provides more choice for buyers than they had previously except in the lower price brackets where inventory is still slim. In time, it stimulates more activity across the whole market. More inventory and fewer buyers are shifting the higher price brackets firmly into the buyer’s market category. Inventories in the over $1million bracket would take over 2 years to clear at current sales volumes and motivated vendors with deadlines are seeing the writing on the wall and reducing asking prices to meet the market. Price outlook Our feeder markets are showing signs of an upswing with Auckland prices on the rise although sales volumes are still relatively low and 70% of auctions are being passed in. Most economists are predicting that the higher interest rate levels will continue to hold the New Zealand property market at bay for at least the next 6 months of 2024. Our observations are that most of our buyers are planning to make a sideways move to Kerikeri from another area or wish to downsize. Only a few are looking to upsize. This is a sign of our economic times in New Zealand. At our current price level, even people from many Auckland suburbs find it hard to move here and release equity to live on as they have been able to in the past. Until the price differential widens again (either increases in our feeder markets or further decreases here) then some people may choose to move to more affordable parts of the country. With the majority of buyers looking to downsize, the higher demand is for lower priced properties resulting in lower inventories and leaving high inventories in the higher brackets where demand is lower. First time homebuyers remain mostly non-existent which ties to our higher than NZ average prices, lower than average wages and a challenging lending environment. Investors appear to be sitting on the fence although a few seasoned, cashed up investors are starting to play their cards as opportunities present themselves. As reported in December, much of our sales activity depends on stimulus from Auckland and other centres. Usually a major shift in these markets takes 3 to 6 months to impact on ours. We watch with interest as these markets change over coming months.