Are We There Yet?
13 Apr 2022, Lynette McFadden
Our two sons used to ask that very question whenever and wherever we travelled as a family. Mile after mile, they would look for clarification about what direction we were taking and we would look to reassure them with the odd fact and more than a little bit of parental fiction.
If any of this sounds familiar, it’s probably because collectively as a nation we’ve been on a very long journey, a two-year journey that seems to have us coming out the other end.
We’re hopefully wiser, kinder, a little (or a lot) more resilient, and ready to face the new environment.
That environment, from a real estate perspective, looks different. Not necessarily worse, as some would say, but certainly different.
ANZ Chief Economist Sharon Zollner, and I quote her because she’s readable and doesn’t try to bamboozle with statistics, says: “house prices in New Zealand have risen more than 40% since covid-19 first hit and they were problematically high to start with.”
She goes on to write that “this year is looking like a year of normalization” and that feels like an appropriate term. Her final comment being “we are forecasting a 7% price reduction but right now the risks are looking like a harder or faster landing,” with which I agree.
And here’s what I’m seeing daily at a coalface level: house prices are steadying, which means reflecting more realistic current values, not the dazzling figures of last year.
Auction clearance levels are mostly now comprised of a 45 – 60% clearance rate on the day, followed by a 10 – 20% clearance immediately after, when many properties are being priced to engage new interest.
The ‘immediately after’ requiring owners to realize that the raging market of the last 18 months has been replaced by a calmer, more measured one, and that realization also includes the knowledge that buyers have a much greater number of properties to select from. For some, that transitional thinking has been really difficult and there’s disappointment around not having come to the market earlier. For others there’s a different picture and an acceptance that selling and then buying on the same market brings with it an equalizing effect.
So, let’s get back to whether or not we are there. Without a doubt, it’s an uncertain time: there’s the prospect of significant interest rate increases and inflation, as well as a higher cost of living.
It’s scary, but for those of us who own or hope to own property it’s still a wonderful long-term investment and a great time to prudently purchase.
For owners, it’s also worth considering the gains that have already been accumulated over a time that we will one day look back upon with absolute wonder.
Finally, I think we’re not necessarily there yet, but I believe that being here, right now, in this time and in this country, we are still pretty lucky.
I can’t help but think about the places and countries throughout the world who aren’t.