How Buyers and Renters Are Gaining Market Power

The nation’s property market continues to shift in favour of buyers and renters, albeit at a snail’s pace. The proportion of properties resold for profit declined even further in the second quarter of 2024.

CoreLogic NZ’s latest Pain & Gain report shows that in Q2 2024, 92.1 percent of properties were resold for more than the original purchase price, down from 92.9 percent in 2024’s first quarter. It’s this statistic’s lowest figure since the third quarter of 2015.

CoreLogic NZ Chief Property Economist Kelvin Davidson said the shift in market conditions, driven by still-high mortgage rates, stretched affordability, and a surge in listings, highlights the growing influence of buyers in price negotiations.

“Although most property owners continue to make a gross profit at sale, the recent softening in the market has shifted the balance of power away from sellers and towards buyers to some degree,” he said.

“The volume of listings on the market is already sitting at multi-year highs and is possibly set to rise further as some investors who are now Brightline Test-free bring forward their cashflow-negative properties for sale.

“Buyers, particularly those with job security and sufficient financial resources to manage mortgage repayments, could gain further leverage in price negotiations. That means the resale performance achieved by current property owners could remain subdued in the next few quarters.

“The slower housing market in the past couple of years has simply required some owners to hold for longer to achieve their goals.

“However, it’s likely in other instances that longer hold period simply reflects weaker housing sentiment and greater caution, and a desire among property owners to ‘ride out’ the current soft patch before testing the market.”

“That said, the second half of 2024 could still prove challenging for the property market, given that the worst isn’t over yet for the labour market.”

Rental listings up 40 percent

Earlier this year, data from realestate.co.nz showed that rental numbers increased by 40 percent nationally over the April to June quarter, but the number of rental seekers increased by just 2.5 percent.

The website’s data showed Auckland listings up 40 percent, Wellington 56 percent, and Canterbury 35 percent over that quarter. If the trend continues, landlords will consider decreasing rental prices and lengthening leases to stimulate interest.

“Total stock increased during July by 32.3 percent year-on-year to 30,556 properties for sale,” realestate.co.nz reports.

“New listings were also unseasonably high, up 31.3 percent year-on-year, breaking a seven-year trend of low listing levels in July. Adding to the property market’s winter chill, 10 of our 19 regions experienced a slower-than-average rate of sale last month.”

Consumer confidence drives trends

CEO of realestate.co.nz Sarah Wood notes that supply was unusually high for July, with almost 7,500 more total homes for sale than this time last year.

“Buyers have ample choice and time to decide, but this will be a competitive market for many sellers. They should research local market trends and be prepared to negotiate to meet the market.”

“Consumer confidence and interest rate adjustments will likely be key drivers of future market trends,” she adds.

Buyers took their time in July. 10 of the country’s 19 regions saw a slower-than-usual rate of sale in July, signalling that the market is moving more slowly in these regions.

The rate of sale measures how long it would take, theoretically, to sell the current stock at the current average rates of sale if no new properties were to be listed for sale.

For example, in Auckland, realestate.co.nz calculations show that it would currently take 40 weeks for all stock to be sold, compared to the long-term average of 23 weeks. Auckland saw the biggest slowdown of all regions during July.

“The high stock levels we have seen throughout 2024, combined with slower sales, could provide opportunities for buyers. However, this depends on individual circumstances. High interest rates and new debt-to-income ratios (DTIs) could impact their ability to purchase.

“For sellers, understanding current market conditions is crucial. Staying informed, getting advice from your local agent and being flexible can make a significant difference in navigating this slower market,” Sarah explains.