Among the ups and downs caused by Covid-19 the country’s real estate market has remained buoyant – especially so given the traditional dip in activity during the winter months.
However, the issue of setting a fair sale price, which is always difficult at the best of times, has become even harder.
There are three key reasons for this. Broadly speaking, the buyers have changed, from investors to first-time homebuyers, including people returning home from working off-shore. They are ready to buy – not having a property to sell – and are supported by historically low-interest rates that have underpinned the market.
It seems this set of circumstances has led to an increase in auction activity, particularly in Auckland, which is a real estate auction hot-spot when compared with the rest of the country. But things are changing.
Independent Auckland auctioneer Robert Tulp of Apollo Auctions says this winter has been his busiest period in 28 years.
“People want quality results and 70% of properties are selling under the hammer, or shortly afterwards, because sellers are being realistic and buyers have access to cheap money due to our low-interest rates,” says Robert.
“Statistics show that the auction process significantly reduces the time to sell a property when compared to the private treaty process.”
“The fact is there are lots of bidders at auctions. People are selling to follow the job market, to trade down and move to the regions and others are off to lifestyle villages. They’ve been locked in due to COVID, in a home that may be too big for them, and they are deciding to reduce the pressure and enjoy life. We have an aging population.”
Robert says buyers are confident at auctions, “they arrive prepared to buy, and sellers benefit from this”.
Hamish Drumm is a real estate agent with Ray White in Petone, Lower Hutt, and says auctions are starting to take off in the capital – a sea-change, he says, that’s helping vendors sell quickly.
“For the first time since the 1990s you can buy an entry-level home and it’s going to cost less than renting it,” says Hamish.
“Property is actually cheaper, and some people will find that hard to get their head around. But those that have got their head around it are opening the bidding at my auctions.”
Hamish is a big supporter of auctions saying that most agents, “if they are honest with themselves, they would prefer buying at auction.” It is a fair and transparent process.
“If there is more than one house for sale and a bidder misses out on the first one then, so long as there are builders’ and LIM reports available, you often see them at the next one. Auctions are a great way to sell because you are dealing with unconditional buyers first – which most vendors love.”
Harcourts estate agent Mary Turnbull is based in Papanui and says more people are leaning toward auctions, particularly as Garden City house prices start to rise.
“The market is quite strong and it is hard to ascertain a value as prices are going up,” says Mary. “The market has bottomed out and people are buying in the $400,000 to $600,00 price bracket while they can.
“First-home buyers are bidding at auctions, and I always provide a builders’ report and the LIM with every auction listing – so everything is provided for buyers – there are no surprises.”
Mary says both sellers and buyers like the transparency of auctions and says selling by negotiation with conditions attached can cost weeks and result in the sale falling over.
“Once I explain the benefits of going to auction to my clients they almost always agree to sell using that method. They can see the benefit.”
Bindi Norwell, CEO at the Real Estate Institute, gets to see all the sales data from across the country and says the strong confidence people have in the market has been “clear for all to see in auctions rooms across the country, with the market going from strength to strength each week”.
Bindi says auctioneers reported competitive bidding resulting in good prices for vendors during July and says there were more auctions held in July than in June.
“There are no signs yet of this confidence dissipating, it’s not something we would have predicted a couple of months ago,” she says.
“Furthermore, the median sales price to valuation ratio has returned to where we saw things pre-COVID, with properties selling on average for 13% above CV across the country and the median number of days to sell a property is slowly coming down.
“Kiwis returning home to New Zealand from offshore destinations continue to play an important role in the market, with some agents reporting family members here in New Zealand visiting open homes on behalf of overseas family members. Other agents say expats are buying properties sight unseen.”