Madness in the Current Market
28 Sep 2020, Lynette McFadden
Every now and then (think maybe once or twice in a decade), I’ve been witness to a form of general real estate madness. Good madness, but madness nevertheless – unforeseen and unexplainable.
Against every prediction, including the predictions of expert economists and bankers, and despite everything that has happened, real estate sales (both in terms of volume and value) are exceptional right now.
There’s an incredible hunger to purchase, to push higher than expected when buying, to compete and to utilize auction.
Unlike in other periods, this phenomenon doesn’t restrict itself to one particular price point or demographic: it’s every price point and over a great variety of locations.
We have had spectacular results in our auction rooms, and it’s a sure sign that the market is favouring owners when they request an auction campaign for their property rather than challenging the idea.
So, here are some personal observations:
July, August and September, so far, have been extraordinary, with July’s figures showing the highest number of sales in five years nationwide. I’m expecting this to be no different for August and September, with our own company seeing lofty sales records exceeded and then superseded.
Interest Rates and Interest Returns
Yes, interest rates are low, in fact, they are tiny in comparison to anything any of us (including those with memories of up to 21% in the ‘80s) have ever had.
And this is giving people the chance to upgrade, get on the property ladder and make lots of property decisions, e.g. why rent when I can buy for the same, if not less, weekly outgoings?
It’s also creating a massive dilemma for those with bank investments who are seeing changes to their life and retirement choices pushing them into property purchases. This group is looking to create returns that, whilst lower from a yield perspective, are still better than the banks.
This pool of buyers sitting on savings or large equity in their properties is buying in force and it’s easy to see why.
Is having no discernible effect on people’s property decisions.
And if that’s a surprise, it’s supported by a recent study undertaken by Trade Me, where 82% of the 1,700 survey respondents said the timing and result of the election had no bearing on their decision to buy or sell.
As I told someone recently, who asked, ‘is it true expats are coming home and buying?’, I can only reply ‘yes’ and ‘yes’.
Even with border restrictions, Statistics NZ has reported that up until June, annual migration showed a net 79,400.
What are they looking for? It appears to be location, which is everything. New is preferred, proximity to schools, cafés, the parks and city centre is desired, and they are shopping with big sums. Family members are often scouting and advising first.
Less Available Listings
Which feeds the elements already mentioned, pushing prices – and, sometimes, tempers – and generally adding to the current state of ‘madness’ in the current market.
My final observations are probably the most important. Despite the current climate, most buyers are still tough on compromised properties, those poorly presented and with title or structural issues.
And please work with professionals rather than risk underselling. Just one of our recent success stories had owners enjoy a campaign that saw them sell for 68% above RV, creating a new local record.
For results, or even just a conversation about real estate, please don’t hesitate to contact me.
Summer is on its way!