Crystal Ball Real Estate
14 Jul 2021, Lynette McFadden
I’ve had to be many things in the course of a very long career. From sales consultant to business owner; a manager and a mentor. I’ve been a confidant, a real estate historian and a trendsetter, but now the requirement to be a magician and a mind reader – as well as a futurist – reflects an even greater level of expectation from the public.
This market is beyond statistical analysis.
How can you possibly rationalize the sale of a local property for $740,000 more than it sold for one year earlier?
Or the sale that was brought forward for a brand-new property (meaning the owners accepted a pre-auction unconditional offer at a level they would happily sell for) on an offer of $1,040,000 – only for it to then travel an additional $225,000 in the auction room, ultimately selling at $1,265,000.
Finally, another property that was listed on behalf of, their term, 'career private sellers'. Having decided to sell their property on Trade Me for what they thought was a hefty figure of $725,000, they engaged a real estate team and sold at auction for $865,000 instead.
Rather than overwhelm you with a longer list of incredible results, let’s pause and consider the origins of these unusual times.
We’ll start with May 2021, it was during this month that prices nationally were on average 30% higher than the same time last year. 30% is an enormous difference and obviously represents a windfall to those selling and the need for a strategic rethink by those purchasing.
Low interest rates coupled with low bank deposit rates also creates an ideal formula for property purchase, although the prospect of these rates increasing is just starting to get some traction. I’ll be interested to see if recent reports of increases next year will play out. But these aren’t the only reasons for our current market frenzy.
Let’s look at some additional elements:
1. Listing numbers have contracted, creating a 'buy now' scramble amid a fear of not being able to get on the property ladder if you wait. FOMO is real. Ask any of the multiple groups attending open homes, auctions and new build seminars. A tip for anyone waiting for spring to list their home: consider moving earlier on your intentions if you want the chance of an exceptional price. Beat the crowds, in other words.
2. Tony Alexander has highlighted the prospect of potentially one million expats wanting to return having the effect of increasing local Kiwi’s desire to buy now before the market changes to accommodate this influx. And think of the word ‘changes’ as meaning ‘goes up’. Though a recent adjustment to this theory is the pull of a stronger labour market and higher wages in Australia, meaning we may also lose people to migration.
3. Money usually diverted into travel is now finding its way into property investment and renovation. This is the category that I personally fall into at the moment.
Now I’m going to quote Tony Alexander one more time: “before the 1990s household debt in New Zealand was less than 60%, today the ratio is near 165%.” It goes without saying that this could be a very vulnerable place for some. What’s the answer? As I said, I’m not a clairvoyant, I’m just one party in this incredible place we all refer to as The Market. But here’s some simple advice: think carefully, get counsel from skilled experts not uninformed mates, and if you think you could find yourself in a tight spot through overcommitting, then rethink and adjust your wish list.
In the meantime, stay warm and here’s to happiness.