Paul the Octopus shot to fame for his ability to predict the outcome of football matches during the 2010 Football World Cup. Paul had no real insight. His picks were driven by food. Paul had a 50/50 chance of getting it right and simply hit a lucky streak. If Paul was alive today (fun fact: the tentacled sea creatures only live 2-3 years), perhaps he’d be able to predict the property market. Because it seems a whole lot of self appointed experts seem eager to have a crack. This month’s Barometer looks at where we are at and the impact on the market.
The life cycle of the buyers
Buyers are influenced by their surroundings. During the boom, hopeful buyers attended open homes to find fifty parties ahead of them in the queue. While the frustration of purchasing in a competitive market was evident, FOMO kept buyers engaged. Fast forward just a few short months and it’s a different scene. In the new market buyers may be one of only a few open home attendees. The average buyer secures a property within 4-6 months. Their thoughts about any given market are shaped by media and time in the ‘field’. It’s easy to understand the lack of urgency from buyers as choice increases and competition dwindles. Today’s buyers know nothing of the post lockdown market. They only know current conditions. Unfortunately, it is time to accept our new reality.
In a fast market most homes will sell at the deadline. In Wellington that is generally around 18 days. Given the time allowed to secure finance and complete due diligence, in a fast moving market it is easy to overlook issues or miss them entirely. Now that the market has slowed buyers have more time to investigate a potential home. Things which may have once been a non-issue, sometimes things as simple as a lick of paint, have become major problems in the eyes of the buyers. And problems mean money. If a problem is raised whilst a property is under offer, this will often mean a renegotiation on the purchase price or a reason to crash a deal completely. Buyers are reluctant to take on even the smallest jobs because as well as the cost, securing tradespeople has never been more difficult.
It is what it is
Weather waffle is a great Kiwi pastime. How hot it is. Cold. Wet/Dry. For those with a rural connection, weather chat can fill a whole day! The thing is the weather is just the weather. Just as the market is just the market. But here in NZ we are simply not used to a market in decline, or property losses. In fact, I think most people assume if you own property you will make tens of thousands every year. While this may have been the case since 2016, it certainly was not between 2007 to 2015. Take it from someone who purchased at the 2007 peak. There was a long period of negative gearing before the market recovered its value and started to move again. But as with any investment, time in the market is kind.
That was fast
Market falls happen quicker than the gains. Eagerly watched Kiwisaver balances edge slowly up over months only to lose their value overnight. This market fall seemingly came out of the blue. Starting with the CCCFA and declining ever since. But rest assured. All markets swing back around. When that will be is anyone’s guess. For people looking to buy and sell in the same market, the perceived losses are irrelevant. If you sell your house for less than expected, it is likely that you will be able to buy your next home for less than anticipated too. It’s only if you’re cashing up that timing is more important. For most people, a property is a home. So choose well and enjoy just that.
The Wellington Market
With winter just around the corner we head into the annual real estate slow down. As we touched on above, we are operating in a very different market to last year. Time on the market has doubled as have the properties for sale. The rental market has also ballooned as vendors with unsuccessful sales enter the rental pool in the hope that time will bring a favorable change. We know it’s tough out there, with high inflation, interest rates on the rise and an overall feeling of negativity. Hang in there. Things will get better. They always do.
Wellington Market Quick Stats
What’s on this June in Wellington?
The Wedding Singer Musical, Opera House, 10 – 19 Jun 2022
From the Broadway creators and the writer of the Hollywood smash hit comes The Wedding Singer Musical, headed to Wellington in June.
The theatre production brings the easy, fun atmosphere of the 1998 Adam Sandler and Drew Barrymore flick, but with all of the music, lights and dancing comes a good musical.
Japan Festival, TSB Arena and Shed 6, 18 Jun 2022
Japan is rich with history and culture, from delicate tea ceremonies, mesmerising kendo swordplay, deft taiko drumming, and the refined arts of haiku poetry and origami. You can explore all of this and more at Wellington’s Japan Festival, free to enter and running for the full day on 18 June 2022.
Gazley Volkswagen Wellington Marathon, Sky Stadium, 19 Jun 2022
A highlight on the capital’s calendar for more than three decades, the Gazley Volkswagen Wellington Marathon is back this June after a pandemic-related two-year hiatus.
From Sky Stadium, the event follows a flat, fast and scenic tour of the harbour bays that is popular amongst both serious and recreational runners and walkers. Race options include the classic Full Marathon, a Half Marathon, a 10k and the Kids’ Magic Mile.
Every finisher wins a medal and participants can use their participation to raise funds for the New Zealand Heart Foundation.