In July 2021 I wrote about the potential of the ‘silent killer’, that being inflation. I had an inkling that an abundance of cheap money and the rising cost of supplies may land us in the perilous position we are in now. Depending on your economic view, you may believe our current inflation rate is transitory, while others believe it is here to stay. Irrelevant of who is right, one thing we know is that prices never really drop, do they?
This month we look at the flow-on effects of inflation in the property market and why buyers are now talking ‘low ball’.
You can tell when the market has moved based on the changing attitude of buyers. The current crop has little to no knowledge of the heady days of the post lockdown market and base their decisions on what is happening right now. The language we are hearing now includes;
“That’s my best offer and if they don’t want it, I’ll find something else”
“I’m looking for a bargain”, I’ll low ball the offer”
“It needs too much work”
“I’m in no rush”
“Lending costs have gone up so my offer is lower”
These statements indicate a lack of urgency from buyers who believe that the current market allows them the luxury of time. And it probably does. An experienced agent will have the ability to create urgency when the market won’t, so ensure you add this to your list of questions when interviewing your next agent.
The Problem with Statistics
The issue one has when it comes to sales statistics is that no one collects data on the properties that fail to sell. This is the main flaw with online algorithms. For example, if you have ten houses for sale, one sells and nine vendors receive offers but choose not to accept the market at that time, then the data does not truly reflect the overall market position.
Most online assessment tools were developed during a good period in the market. Now that the market has changed, they are consistently, and sometimes significantly, out of line with market reality. So much so that we have had to implement a step to ensure the advertised range on portals such as homes.co.nz, are in line with relevant appraisal ranges. A step we implemented in response to poor open home attendance with buyers citing over inflated electronic values. I am aware Homes.co is working to address the issue with others no doubt doing the same.
‘Subject to Sale’
The changing market has seen the return of ‘subject to sale’ conditions. Buyers are keen to upgrade but uncertain about what they will achieve in the new market, or if their home will sell at all. This reduces risk for the buyer but ‘subject to sales’ have an impact on the natural flow of people upsizing, downsizing or entering the market. The transaction will often span months and can cause a bottleneck. Delays push out time on the market and if the subsequent sale cannot reach the pre anticipated level, it can lead to deals needing to be renegotiated or fall over.
If you’re on the market and considering an offer subject to sale, make sure you insert a cash out clause which will allow you to accept a more appealing offer from an alternative purchaser.
I say to all my clients it’s important that the market doesn’t take control of the sale. To avoid this you need a well-considered plan which allows you to make moves at the right time using market feedback. I see a lot of properties for sale using a hybrid of approaches which leaves little room to move should the approach not work. An example would be
For Sale by Tender – BEO $1,000,000 if not sold prior
With about one in three properties selling during the initial campaign, it would be foolish not to consider plan b from the outset. As the old saying goes, even a broken clock is right twice a day.
The Wellington Market
Early 2022 was a tough time to be on the market. Stock levels were through the roof, mortgage rates rose (and continue to rise), and new buyer sentiment kicked in. The market does appear to be leveling out now with transactions becoming more consistent and predictable and more buyers able to secure finance after the nightmare implementation of the CCCFA. The challenge this year will be money, in particular the servicing of debt. This relates to how the Reserve Bank tackles inflation. A little like the pandemic, the days of high inflation was something we thought only existed in the history books. Hopefully this passes us by soon.
Wellington market quick stats
What’s on this May in Wellington?
Eat Drink Play Festival, Various locations, Wellington, 6 – 29 May
Following a cracker first festival last year, the Eat Drink Play Festival is back in 2022. This year promises to be bigger and more playful, filling up the month of May and showing off the best the capital has to offer. The festival challenges venues to take hospitality to the next level, with food and entertainment that would fit right in on the world stage. The multi-venue event puts a spotlight on local beverages, culinary delights, talented performers, top tier accommodation, and the city’s nightlife. It brings together expert chefs, bartenders, baristas, hoteliers, musicians, wine makers, craft brewers, artists, and bakers to share what they do best.
Cringeworthy – The 80s, Circa Theatre, 1 Taranaki Street , Te Aro, 14 May – 11 Jun
Cringeworthy – The 80s recreates classic hits you know and love with energetic arrangements and fun styling. Bop along to music from artists such as Dave Dobbyn, Sharon O’Neil, The Mockers, and Dance Exponents. The colourfully costumed cast performs each number with style and flair in four-part harmony, while weaving through a wise-cracking narrative. Reflect on the way life used to be, and break out the shoulder pads, leg warmers, mullets, and power ballads.
Fastlove: A Tribute To George Michael, The Opera House, 111-113 Manners Street, 22 May
The music of George Michael lives on to this day, with the singer’s iconic tracks still loved and listened to around the globe.
Starting out with Andrew Ridgeley as Wham! before going on to a successful solo career in his own right, Michael proved to put himself on the map as a popular singer and songwriter known for soulful ballads and catchy tracks.