When a property market changes there’s always a lag between that point and when market participants figure it out. Interestingly, participants never figure it out at the same time, which always creates tension. And tension is just another word for opportunity.

I reckon vendors and agents are always the first to realise that house prices are rising, BUT they’re much slower than buyers to admit that prices are stagnant or falling. Why would you admit your house is worth less, right?!

The reverse is also true, and that’s where we are at right now. If you’ve read anything recently about auction clearance rates you’ll know what I mean…

In July and August nearly everyone I spoke to was picking the customary slowdown that occurs around a General Election. This year it coincided with school holidays which was a further drag on activity, but as for a return to a frenzied pace in spring, well it hasn’t really happened.

It’s true that you get more listings in spring (and that has happened), but the overall level of listings is down, and that’s created a new normal. Stepping away from the property market furore of the past five years, people are now aware that the market has changed, even if some don’t want to admit it. It only took them 12 months to realise…

One client took his house to auction two weeks ago but failed to attract a bid. And that ain’t unusual anymore. They’re now in the throes of negotiating with a buyer, but that seems to be taking longer than everyone expected. Also, not unusual – and for me a clear example of market participants not figuring the changes out at the same time.

It makes me wonder why the agent didn’t just sell the house by negotiation in the first place. Slap a price on the house and go from there. They’re obviously not in touch with their very own auction clearance rates!

A piece of real estate wisdom I heard some years ago springs to mind: They say that there are only two reasons for a property not selling – it’s marketed badly or it’s incorrectly priced.

In this case I think there’s some truth to the latter. I suspect my clients are holding out for $30,000 to $40,000 more than the market is now willing to pay. Sounds like a lot to give away but when the value of the house has risen by at least $250,000 over the last 3 years, reviewing their expectations might be a useful step to allow them to move on.

I reckon the big inner-city apartment sales specialists must be feeling it too, despite their usual upbeat position on such things. With overheads on smart inner city offices and clever support staff, their break-evens probably require sales volume of close to one apartment a day. And I’m not sure that’s happening. I’ve even heard one office is closing thanks to a lack of sales volume. Tony Alexander (BNZ chief economist) recently suggested that a heap of real estate agents will be looking for new jobs in 2018 – looks like he might be right!

The upshot of all this is that I reckon there is an opportunity for active buyers to drive a reasonable bargain from vendors who, while not desperate (yet), are totally realistic or at least becoming more motivated by the day.

In this context bridging finance is damn near impossible to get unless you’ve got equity and income to burn. Fact is that banks are reluctant to give bridging finance for the same reason you want it – no one really knows how long it’s going to take to sell.

So, a game plan…

  • Sellers – Market your property by negotiation, maybe even with a price, but tread carefully if an auction is suggested as the method of sale. Also, be wary of an over-inflated appraisal from an agent just to get your listing – make sure they back up all they say with RECENT sales prices of similar properties. A flashy price might look pretty on paper, but the reality is a six week waste of time and dosh. Last and most important thing, get an unconditional sale before falling in love with a new place.
  • Buyers – You might not get a bargain as such, but don’t be scared to make hard offers. The ball is in your court, especially if your finance is pre-approved.

So what’s in store for the property market in 2018? I reckon the current situation will prevail into winter at the very least, unless a significant and sudden change occurs in the market. I’m sorry to say that the easing of LVR restrictions from 1 January 2018 is not a significant or sudden change. So buyers, that opportunity is waiting for you.

Need a hand getting into gear? That’s exactly what we do, at no cost to you, so get in touch.

About Campbell Hastie

Cam is one half of Auckland based mortgage brokers, The Go 2 Guys.

He makes a living by sharing what he knows about mortgages with people, arranging mortgages for people and then insuring people.

He doesn't claim to know everything about mortgages himself which is why he teamed up with David Mercer — hence the ‘2’ in Go 2 Guys.

He writes posts regularly on his blog and has been told he has an ability to share his knowledge in a simple and sometimes memorable way.

Feel free to comment and ask any questions. Contact Campbell Hastie m: 027 697 7789.

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