Will Auckland house prices start falling this month? The ultimate guide for first-home buyers in a buyer’s market

Across all 1180 completed property transactions, the average sale price was just over NZ$1,230,000, up 3.2% on the February average and 11.4% year on year. He believed it was too early to conclude that house prices had fallen in March, as sales activity this March was broadly consistent with the same time in previous years, when sellers and buyers typically return to the property market after the summer holidays.

However, he expected prices to fall slightly in April. Comparing the company’s auction data over the past four months showed that the number of properties going to auction had begun declining steadily in March. Since the start of this year, the proportion sold on auction day had remained below 50%, with the clearance rate falling to just 25% over the past three weeks. He believed buyer and seller numbers were becoming more balanced. Buyers had more choice, so sellers could not expect higher prices and needed to adapt to the market.

The data shows that although the current auction clearance rate is less than half of last year’s peak of 70～80%, around 2/3 of the properties sold last month were sold through negotiation after auction. He noted, “Auctions are our preferred method of sale, but bank lending rules have changed, making it difficult for buyers to obtain the mortgage funding needed to bid unconditionally. Meanwhile, the government’s red traffic light restrictions continue to constrain normal business activity, and some people are “too frightened” to view properties for sale or attend auctions in person.”

Peter Thompson’s prediction soon found support in the results of REINZ’s monthly real estate agent survey, conducted by independent economist Tony Alexander. It showed that 66% of salespeople reported lower auction attendance, while 69% said attendance at open homes had also declined. Alexander believed buyers had lost their FOMO, or fear of missing out, while caution over the rapid spread of Omicron had also prompted them to step back from auctions and the property market. In addition, more buyers were concerned about being unable to secure sufficient finance, and around 64% were worried about future house price falls.

So here is the question: as the housing market cools and many buyers and investors temporarily withdraw, the seller’s market of last year has rapidly given way to a buyer’s market. With more homes to choose from and sellers no longer holding excessively high price expectations, does this mean the market has entered a “springtime for first-home buyers who need a home to live in”？

Lesley Harris, director of the New Zealand First Home Buyers Club, took a different view. She believed first-home buyers still faced considerable obstacles in the current market, such as securing sufficient finance. Once they overcame that hurdle, however, achieving their home ownership dream would become easier. In a cooling property market, less competition and more listings give first-home buyers greater choice. More properties are failing to sell at auction, where the highest bidder wins, and are instead being sold through post-auction negotiation. Increasingly, properties are also advertised with an asking price. This gives buyers more bargaining power and allows them to make conditional offers. Harris advised buyers to negotiate for the best outcome rather than wait for prices to fall further. She then offered the following advice for people preparing to buy their first home.

What do buyers need to know before attending an auction?

Harris believed that, as the market cooled rapidly, steadily falling auction clearance rates meant post-auction negotiation was becoming more common in property transactions in 2022. Property Apprentice investment coach Debbie Roberts said: “I think attending an auction to observe is a very good idea for first-home buyers. It can be intimidating, and auctioneers and real estate agents use a lot of specialised terminology.” Buyers first need to settle on an auction strategy they are comfortable with, to avoid getting carried away by emotion. One of her favourite strategies is to open with a bid above the auctioneer’s starting figure. “For example, if you think the market value is NZ$750,000, the auctioneer might start at NZ$650,000. You could open your bidding at NZ$700,000. That NZ$50,000 increase might scare some people off at the outset.” Other advice includes:

• Be aware of the psychological games at auctions. Agents and auctioneers act for the seller, so they want to achieve the highest possible price and keep buyers bidding.
• Bring an experienced bidder who can offer advice or step in and tell you to stop if necessary.
• If there are several bidders, avoid being the first to bid. Wait until the others begin to feel the pressure before entering the bidding.
• Bid confidently. Other bidders usually assume that a confident buyer can afford to go higher. Avoid appearing too agitated.
• Watch out for agents who try to pressure buyers with urgent language.

Buyers can request changes to the agreement in the auction documents before the auction. These could cover the deposit, settlement date, access to the property for renovations before settlement, or other matters. Sellers can accept or reject these changes, but shifts in the housing market may make some more willing to agree. Of course, many first-home buyers find themselves excluded from auctions because they may need final bank approval, a property valuation or a building report. In practice, they may be unable to obtain approval in time for the auction.

{ad}

How can buyers gain the upper hand in negotiations?

As discussed earlier, a cooling market means more properties are likely to pass in at auction and need negotiation to secure a sale. The first negotiating strategy is to have loan pre-approval, building reports and other due diligence information ready beforehand. This allows buyers to make an offer quickly, while sellers are also more willing to accept conditional offers. The best approach is to ensure the contract conditions are not too demanding. Conditions such as finance or a building report should have short timeframes, such as a few days. Roberts believed buyers should ask the agent about the seller’s circumstances. “Sometimes the settlement date may be more important to a homeowner.” They may accept a lower price in return for a quick settlement.

Andrew Duncan, a real estate agent with Agent Monday, said the key was knowing how many potential buyers there were. Negotiating as the sole buyer would be different from negotiating over a home attracting several buyers. “If yours is the only offer, don’t be a ‘jerk’ about it.” Try to be realistic. If an offer is too low, the seller may refuse to consider it, say “absolutely not”, and simply decline to counter-offer. Instead, try to work with the other party. A common approach is to offer something other than money, such as a quick or delayed settlement. Where circumstances allow, the seller can relax conditions, for example shortening the timeframe from 10 days to 5 or 3 days as an incentive. When making an offer, buyers should try writing down more than one offer amount and crossing out the lower figures, so the homeowner thinks they have already increased their offer.

For example: $800,000，$825,000, $870,000. Duncan said: “Then move in small increments with each counter-offer. Buyers should remain wary of salespeople.” For example, buyers should not tell the agent they are about to make an offer. Without advance notice, the agent cannot use that time to drum up competing offers. His final advice was not to let pride get in the way of completing a deal.

Disclaimer: The advice above reflects personal views only. YIJU accepts no legal liability.