Has the property market begun to turn? FOMO, the fear of missing out, may be back!

Westpac senior economist Satish Ranchhod recently said New Zealand house prices could experience a fresh upswing regardless of which party wins this year’s election
House price falls are easing: has the property market begun to turn?

 

Westpac senior economist Satish Ranchhod recently said New Zealand house prices could experience a fresh upswing regardless of which party wins this year’s election.

Percentage changes in house prices across New Zealand’s main regions over the past three months (Source: QV)

 

The latest market data from CoreLogic shows that house price falls have slowed, while data from property information company Quotable Values shows prices have begun rising in some areas. Hamilton, New Plymouth, Christchurch and Invercargill recorded increases over the past three months, with Christchurch and Invercargill posting the largest gains. Nationally, the average house price fell 1.5% in the three months to July. This decline was smaller than the 1.8% in June and 3.5% in May, as well as the respective figures of 4 and 3.4%.

 

QV operations manager James Wilson said modest house price increases in some main centres were primarily driven by first-home buyers purchasing out of necessity. These markets had two characteristics: 1. First-home buyers accounted for a slightly larger share of purchases than in surrounding areas; 2. Investors accounted for a larger share in other markets. Although the investor share currently appeared to have declined slightly, the overall share of first-home buyers in those areas had never matched that of investors.

 

 

 

“FOMO (fear of missing out)” returns to the property market

 

Another economist recently said buyers’ fear of missing out had returned to the property market as signs of slowing house price falls became increasingly clear.

 

Most commentators believe the end of a recession does not herald a boom, and economic recovery will take time. However, most homebuyers appear to have noticed the property market’s changing direction.

 

Independent economist Tony Alexander’s latest survey of real estate agents found that, for the first time since November 2021, buyers worried about missing out outnumbered those worried that prices would keep falling after they bought. Of the 447 respondents, 34% said they had seen buyers showing signs of FOMO, or fear of missing out, in July. Alexander said that although this figure remained below the average for the past three years, it reflected significant growth in recent months. Three months earlier, only 9% of agents believed FOMO was present in the market. At the same time last year, the figure was just 4%, while 73% of agents believed the market was gripped by FOOP, or fear of overpaying.

 

 

Tony Alexander’s latest survey of real estate agents found that 51% of respondents reported seeing

more prospective buyers at recent open homes.

 

Alexander believed that although these survey findings did not mean house price falls would stop, they did show buyers felt there was less room for further declines and were returning to the market. The rise in prospective buyers attending open homes represents a fundamental shift from November, when 48% of agents reported falling attendance.

 

Meanwhile, 30% of agents said auction attendance had increased last month. Alexander said his survey found that 58% of agents reported clear signs of an increase in first-home buyers in July. He found that although first-home buyer interest had already become consistently very strong in February, it still rose substantially in the May survey.

 

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Slowing house price falls, rising wages and soaring rents have combined to convince many prospective buyers that there is little point in waiting any longer. More importantly, these buyers want to act while prices remain reasonable and before property investors return, to avoid being caught out again by a rising market.

 

Alexander also found that increased buying activity was concentrated at the lower end of the property market, largely driven by active first-home buyers. The survey also showed an increase in homeowners asking agents to appraise their properties. In July, 33% of agents reported this, a significant increase from 13% the previous month.

 

Is the market really turning? Share your thoughts.