Buyers and sellers in a tug-of-war

The latest confidence survey from the Bank of New Zealand illustrates how buyers are waiting for house prices to drop further, while sellers are refusing to lower asking prices.

Thursday, May 8th 2008, 4:05PM

by The Landlord

The survey reveals conditions remain very poor with little evidence of investors sniffing out bargains. Purchasers are still around, but as lending criteria tightens, only those with cash to spend are looking and are much more discerning.

''Investors are a little thin on the ground as it seems to be that many investors’ attitudes are, ‘let's wait and see where the market is heading', as one participant commented.

The buyers that are out there are holding back for lower prices. This can be attributed to the ‘promised’ 30% drop in value, which many buyers still believe will happen; ‘Buyers are just looking, waiting for prices to drop.’
However, the tone of the survey suggests that the market has already bottomed out at a 5-10% decrease in value and that it will not drop again substantially.

’Maybe we are through the worst of the correction. Now we are working through a period of consolidation,’ another comment says.

The survey also revealed vendors are increasingly withdrawing properties for sale and are renting them out as an alternative.

'With houses not selling, more owners are opting to rent them out giving us lots of rental stock and cooling the rental increases.’

The following are some selected comments that highlight what is being reported.

Real estate residential
A much more proactive approach is required than has been needed in the past five years. There are still purchasers around but they're much more discerning these days when they don't have to borrow to buy. Some vendors are realistic price-wise and welling to sell even if it's below purchase price, but also realise it allows them to reduce debt and move on. We have had almost a sale a week since beginning of the year and mostly to our own database. Generally the people who are predicting absolute doom and gloom seem to be the journalists trying to make a reputation for themselves or real estate agents who need to find an easier job!

Problems with obtaining finance appear to be much more difficult than previously thought. There appears to be a large gap between vendors and purchasers price expectations.

Property development and investment
Obviously it's become slow and difficult to sell, price reductions have had no effect at all, and patience and effective marketing are getting results. We have put our prices back to pre-Christmas levels and put more effort into marketing things and things are moving slowly. With my long-term investment hat on I'm reasonably optimistic, prices have drifted down a little, still damn hard to find a genuine bargain though.

Real estate sales in Marlborough
The market has slowed down in last six weeks, with less activity and buyers know they have the upper hand. I believe prices have reduced by 5% in the last three months and seem to be stabilising at that level. But you can feel the nervousness in the market. We need to see interest rates fall at least back into the 7-8% area.

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