Mark Lister, 29 May 2019

The results of the latest ASB Housing Confidence Survey made for some very interesting reading, and the sentiment shift suggests the tide has turned in favour of buyers.

ASB said that the number of respondents expecting house prices to increase over the coming year fell to the lowest in eight years. This waning optimism was a nationwide story, although it was more acute in Auckland.

In our biggest city, price expectations turned negative for the first time since 2009. A net 12 per cent of respondents now expect prices to fall, rather than rise.

It’s not surprising. The market has been slowing in most parts of the country, most notably in Auckland. It now seems there is a Mexican stand-off taking place, with buyers no longer willing to pay over the odds but some sellers stubbornly refusing to accept that things have changed.

This comes through loud and clear in the days-to-sell statistics we get each month from the Real Estate Institute. In February the median number of days-to-sell for Auckland houses blew out to 57, the highest since 2009, and it’s remained at elevated levels since.

The number of properties sold last month was 11.5 per cent lower than the same month last year, with the overall volume for April the lowest in five years. In Auckland, 16.3 per cent fewer houses changed hands, making for the weakest April since 2008 (when the country was in recession).

Maybe things will pick up. The recent cut to the Official Cash Rate will have had some impact at the margin, although mortgage rates are already very low. We also need to watch how the bank capital proposals play out, with some suggesting these could put upward pressure on borrowing costs.

The ruling out of a capital gains tax (CGT) is also being touted as a reason the market might take off again, but I'm not so sure. I think that was a much bigger issue for small business owners than it was for homeowners.

After all, the family home was always going to be exempt anyway, which means the majority of houses would have been unaffected. The Tax Working Group itself even suggested that house prices were unlikely to be impacted much by a CGT.

So what should we expect from the housing market over the coming year? Probably more of the same.

While there have been a couple of developments that point to a resurgence in prices, there are also conflicting factors at play. Growth is slowing, migration is past its peak, and a few unfriendly policy changes are still in the pipeline.

Capital city house prices in Australia have fallen 9.7 per cent since the 2017 peak, while Sydney prices are 14.5 per cent lower. Auckland has followed, although the 4.7 per cent decline since March last year has been much more modest.

Now prices in some of the regional hotspots have come off the boil. Prices in Tauranga, Napier and Queenstown are all slightly lower over the past three months.

A Sydney-style meltdown is unlikely here, but at the same time, hopeful buyers need not be in any rush.

Take your time, prospective homeowners, and hold your ground against some of the unrealistic sellers out there. The balance of power has shifted in your favour and that’s unlikely to change dramatically over the coming months.