OPINION: The residential property market never ceases to surprise.
In February, the Auckland market was facing a log jam of property for sale, with the number of homes on the market reaching an 11-year high.
Sales were showing no signs of gathering momentum and had been that way for two years. The prices being paid for property over the previous six months had been slowly climbing and economists were forecasting only modest price increases through to the end of 2024.
At the end of February, when announcing no change to the OCR, the Reserve Bank even lowered its forecast for house price growth for 2024 to 3.4%.
Then, out of nowhere, the Auckland market literally skyrocketed in March, awaking from a two-year hibernation.
Our sales in March increased by two thirds on those for the previous month to 1061, the first time we have exceeded 1000 sales in a month for two years. To put March’s sales into perspective, we sold the equivalent of 34 homes every day in the month.
And those sales were at prices which are at an 18-month high, with the median price for the month reaching $1,050,000.
Based on our sales data, which represents at a minimum 40% of all Auckland sales, the median sales price in Auckland in March is up 5.2% on what it was for the full 2023 year.
It’s fair to say it’s not only the Reserve Bank who has been caught off guard by March’s sales spurt. Bank economists, most commentators and even the real estate profession never saw such a major turnaround coming as what we witnessed in March.
Whether the rest of the country has caught the same ‘buying bug’ will become clearer later this month when the Real Estate Institute publishes its monthly report.
Possibly, March’s result may turn out to be a rogue month, and that the sales activity was out of character with where the market is heading in 2024.
Regardless, a conclusion that can be drawn is that buyer confidence is returning, and a solid core of buyers has reached the decision that at current prices property does represent value for money, and that they are prepared to live with home mortgages into the foreseeable future at current levels.
Another notable feature of March’s trading was that the high number of sales made did not put a dent in the total number of homes for sale as new listings nearly doubled sales.
While we sold the equivalent of 34 homes a day in March at the same time we listed the equivalent of 63 homes a day.
Result is that the number of homes for sale at the start of April is still at an 11-year high with the market remaining a buyers’ market.
As I have commented on numerous occasions, I leave forecasting to the economists, but based on March’s sales I feel sales activity in Auckland is likely to be strong through autumn.
However, having broken the shackles of a two-year downturn in terms of prices and sales numbers, it’s to be hoped that the market will not repeat the surge that occurred in 2021 when prices across a 12-month period raced ahead.
Then, the accelerant was the availability of cheap finance. That is not the case today.
Buyers and the economy will all benefit if prices increase at a modest pace and that the ultimate rate of price increase by the end of 2024 is close to Treasury’s forecast rate of 3.4%.
Naturally, vendors will be delighted with the upturn in prices, but not if they are rebuying in the same market.
Only time will tell where the market heads from here but there are certainly grounds for believing that the next 12 months are likely to be more positive than we have experienced over the past year.
Peter Thompson, Managing Director, Barfoot & Thompson
