Fewer properties are selling under the hammer, according to new data. Photo/Getty Images
Inflation, rising interest rates and tighter access to finance have led to a dramatic decline in properties being sold under the hammer, according to a new report.
The Real Estate Institute of New Zealand (REINZ) has declared more contracts
were being sold or financed and buyers were becoming more confident in negotiating house prices.
A Bay of Plenty auctioneer said the role of the auction had changed but the falling numbers were just a ‘point on the radar’ and more sales would soon start to happen under the hammer.
New figures from REINZ revealed 16 properties sold at auction in the Bay of Plenty last month, representing 4.9% of overall sales.
This compared to 157 properties (34.7%) in July 2021.
This is the lowest number of auctions since April 2020, or January 2010 if the months impacted by the Covid-19 lockdowns are excluded.
Only 11 houses were sold at auction in Tauranga in July, representing 6% of overall sales, compared to 129 (49%) in July last year. A total of 180 homes sold in July.
In Rotorua, auctions fell slightly to just three, representing five per cent of the 65 overall sales in July. In July 2021, five sales, or six percent, were at auction.
The decline in the number of auctions in the area followed a national trend, with 458 properties going under the hammer in July, representing 9.8% of overall sales.
REINZ chief executive Jen Baird said inflation, interest rates and access to finance meant buyers were cautious and fewer buyers were cash buyers.
“We are seeing more and more contracts put up for sale or put up for financing, and buyers are more and more confident to enter into negotiations.
“This change has seen the number of sellers opting into auctions and the number of buyers participating in auctions decrease.”
However, Baird said the auction was still an effective marketing method.
“Auctions are unconditional, which means that contracts are exchanged at the fall of the hammer, which allows for a faster and more secure sale.”
REINZ regional manager Neville Falconer said attendance at open houses has fluctuated due to school holidays and bad weather.
“According to local agents, properties at the top of the market had the best footfall.”
But Falconer said in Rotorua there was an increase in contracts put up for sale as well as conditional contracts that failed.
“Sellers understand the current market dynamics and adjust their price expectations accordingly.
“Pre-approvals are still a significant hurdle for buyers, especially as illness and staffing shortages further slow down the application and approval process.”
Falconer said properties were also taking longer to sell, with the median number of days to sell dropping from 31 in July last year to 57 last month.
Tauranga-based Bayleys and Eves auctioneer Grant Child, who has called more than 10,000 auctions in his career, said the atmosphere in the auction room was noticeably calmer.
“In the previous market, we saw several bidders on a property.
“Now the majority of properties have only one bidder. The vibe and footfall have gone down.”
Child said many people were unable to buy until they sold their property first.
“There are hurdles in the way, being able to get into a cash position to be able to bid at auction.”
This meant the role of the auction had now changed, he said.
“Before, it was all about getting the best price for the seller and giving people an equal opportunity to bid.
“Now, the triggering of an auction gives hardcore cash buyers the first opportunity to work with sellers.
“It gives them a 15 minute head start over conditional buyers.”
Child said the drop in the number of auctions was just a “spot on the radar” and that more sales would soon start happening under the hammer.
“The market slowed down. It had to, it was out of control.”
But more and more people were already starting to put their properties up for auction, he said.
“People have the winter blues. There are a lot of vendors waiting for spring.”
Rotorua Professionals McDowell Real Estate auctioneer Steve Lovegrove said some sellers were unsure if the auction was the right choice for the seller in today’s market.
Lovegrove said the auction hadn’t been the “flavor of the month” with more bridges for buyers to cross to secure financing first.
“But that will soon change.”
Properties have taken longer to sell and an auction is drawing a line in the sand for the sale.
“It’s ‘decision day’ for both sides.
“It’s a meeting point where buyers and sellers can meet to discuss the price.”
Lovegrove said that for an auction to take place, buyers had to be ready to buy and sellers had to be ready to accept where the market was.
“Sellers are starting to understand that the price levels of six months ago are not there now and if they want to move, it’s about meeting the market.
“There’s no better way to see what the market is like than if you have buyers in the room raising their hands.”
Heath Young, chief executive of The Realty Group Ltd, which operates Eves and Bayleys, said the property market had performed “correctly” given all the market factors impacting simultaneously.
Young said the number of residential sales between April and July was at “long-term lows.”
“This is a by-product of the market that needs to reassess itself in terms of pricing, rising interest rates and availability of credit.
“Increasingly, we are seeing an increase in buyer activity in early August, which bodes well for typical spring market activity.”
Jacqueline O’Sullivan, owner and manager of the Ray White Rotorua business, said fewer people in open houses and more contracts being sold had stopped many sellers choosing the “very open forum ” of an auction where a cash sale was required.
“If you don’t have cash interest, it’s not very nice to be exposed, so to speak, without interest on the day.”
O’Sullivan said there had been an increase in contracts being put up for sale and conditional contracts failing.
“There were a few where the other property wouldn’t sell after several extensions and ultimately people stay where they are if there aren’t other driving forces like having to move due job transfers, etc.”
O’Sullivan said there were fewer sales and properties were taking longer to sell with some “cheeky” bargain hunters still out there.
“But I feel like the first home buyers and investors are coming back.”
She said until the market stabilises, more properties will come up for sale with a price at this time.
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