Christchurch Market Update - June 2022
The release of the latest data from the Real Estate Institute of New Zealand (REINZ) provides us with the most recent information on the state of the market, not only here in Christchurch but across the country.
Kiwis have long had a huge interest with our property market, and consequently we tend to actively look for and seek commentary about this national fascination. The REINZ data is the most accurate and up-to-date information available on what our market is actually doing, also the REINZ house price index is the best and most reliable indicator of where the market is likely to head in the short term.
The state of the current market across the country is best summed up by the words of Jen Baird, the CEO of REINZ with the release of the latest data:
“Over the course of 2021, house prices soared, largely due to supply not being able to meet demand, supported by historically low interest rates and access to capital. Measures introduced by Government — including the reintroduction of LVRs and changes to the Credit Contracts and Consumer Finance Act (CCCFA) — and the Reserve Bank OCR hikes, have affected market dynamics and we are now seeing the reverse playout. The price growth of last year is receding.”
While the comment above is a reflection across the whole of NZ, the fact is the effects of the above are now starting to be felt across all regions to different degrees. As a consequence, sales are slower to complete, property is staying on the market longer and the upward pressure on prices is easing.
There is no doubt that the interest in the market is still high, and this is reflected in the high traffic still visiting the online portals. This indicates that there is still an underlying desire from a lot of NZ to own their own home, however the market is now acting a lot more cautiously and, as mentioned above, the measures put in place by the Government are dramatically slowing down the time it takes for a deal to happen, which in turn means the time on the market statistic starts to increase as property is on the market longer.
Looking at the number of sales, the 571 recorded for May is 13% higher than the number recorded for April and still on par with what can be considered a typical average month for Christchurch City. Christchurch, in a regular and steady market, used to typically average 550 sales, give or take 50. As an example, over 2018 the average number of sales per month in Christchurch City was 584 and over 2019 the monthly average was 556, so the volume of sales we are currently experiencing is on par with what I would say was the usual “normal” for Christchurch pre-Covid.
There is no doubt that the majority of the market is being transacted by owner-occupiers trading up and down, but the interest from the first home buyers’ market is definitely still there and anecdotal evidence indicates that with the easing of pressure over the market in general, this section of the market is now finding it easier to purchase. Additionally, from June 1, the first home buyer applying for a First Home Buyers Grant will see a lift in the regional house price caps of $50,000, enabling them to purchase better property that was previously unattainable to them. I think these aspects, along with the new ability of the banks to have a bit more discretion in their application of the CCCFA rules, should help underpin our sales volumes over coming months, with the only fly in the ointment for this section of the market being interest rates.
The drop in median sale price this month – down from $710,000 in April to $687,000 this month – is a definite indicator that the upward pressure on prices is easing. To further support this, the House Price Index (HPI) for Christchurch has eased back 2% in comparison to April. So, while the median sale price drop looks substantial, the small alteration to the HPI makes me think we had a smaller volume of high value property transacted in May, however I don’t have the data to substantiate that theory. Regardless, the indications are now showing that the pressure on values has eased in Christchurch as well, and as a seller in this market, you will need to be realistic in your expectations and realise that the peak has passed.
For Harcourts in Christchurch, the volume of available stock is slowly growing, but we are still not seeing the larger surplus of available stock as reported in other regions. Over May, Harcourts brought 518 new property listings to the market compared to 517 in May last year, so not much has changed there. Our overall supply of listed property is slowly increasing to the extent that we now have about three months’ trading supply on hand. While this is up on last year’s two-plus months of supply on hand, it is still substantially lower that the four-plus months we used to see in pre-Covid times. So, the available supply of property is still a little limited in Christchurch and is a possible reason we haven’t seen prices drop away further.
A big talking point in the media is a focus on how the auction market has changed and whether auctions are “dead” in the current environment. Let me put the record straight. In the Harcourts camp last month, 239 of our 518 listings were auctions. Why? Because as a company and a brand, we recognise and believe it is still the best and fairest method of sale across all markets.
The auction system has a number of benefits and, depending on the prevailing market conditions, they can alter. For example, for the last year or so, the main benefit to a seller was the ability of the auction system to achieve a premium, and this was amply demonstrated week-in week-out in the auction rooms over the past 18 months.
In this current environment, achieving a premium is definitely still a major benefit, but sitting on equal billing is the chance and/or ability to actually have a confirmed sale within your specific time frame. For some people, actually achieving a definite sale is of increasing importance. We know that around the country sales volumes are slowing, time on market is extending and the ability to finance a deal is harder, amongst other things. In this environment, property transactions that are conditional on the purchaser arranging finance are starting to take longer to confirm and, in some cases, fall over and force a start-over. The conditional real estate contract can sometimes just be an option in favour of the buyer while they sort themselves out and see if they really can afford your home.
In any market, regardless of the economy, there are always cash buyers out there. The auction is specifically designed to target the cash buyer first and give them the opportunity to purchase. If your property attracts an interested cash buyer during its allocated period of marketing, it will likely get sold. If there is no cash buyer interested over that specific marketing period, it will not sell and will be passed in.
But interestingly, over the three weeks of promotion, anyone interested (cash or otherwise) will still have seen your marketing. If a buyer is actively in the market and looking, they will have seen your property listing. They might not be in a position to bid on the day, but they will definitely have viewed the home online and probably still gone to the open home out of interest. That is why we find so many of the non-cash buyers are typically there, waiting in the wings on auction day to submit their written offer if the property is passed in.
The reality is, whether you choose auction or the deadline sale process, the marketing chosen and time frame are typically the same. With the deadline-type process, at the end of the three weeks of marketing, offers are submitted from any interested conditional buyers, and you sit and wait hoping the conditions in the contract are confirmed.
With auction, cash is king, and an unconditional deal could be the result. If there is no cash buyer or no deal and the property is passed in, any interested conditional buyers are then free to submit their offers just like the deadline style process. Hence, in this market here at Harcourts, we see auction as offering a seller two equally good options. The wise sellers who are still choosing to use us to auction their property know they can have a foot in both camps so to speak; there is an extra advantage to the seller.
In summary, a passed in property isn’t a fail as the media and non-auction people might profess. It just means that over that specific marketing period, there wasn’t a cash buyer interested enough to buy that particular property at that particular time. Any and all conditional buyers have still seen the marketing and can now get their chance as well, that is why so many of the passed-in auction properties will be placed under contract within 48 hours of the day of auction.
That is why Harcourts and consultants who really know what they are doing understand that auction works in all markets. It is still the best and most advantageous option available and that is why the best consultants will still recommend it as an option now for you to choose from. It literally offers the best of both worlds.
Finally, every month I refer to the Harcourts advantage: our size, training, processes, systems and auctions give our sellers that advantage, and each month we provide you with the information and data, so hopefully the choice for you becomes obvious.
The sales figures for Christchurch City for May were:
Median $687,000 Average $774,477
Median $729,000 Average $829,042
If you are thinking of selling in this current market, Harcourts provides you the best of options. It is your decision whether or not to use the Harcourts options to maximise your advantage.
By Jim Davis
Christchurch/South Island Regional Manager
Harcourts Group Ltd Licensed Agent REAA 2008