Job worries take centre stage

Housing Market Written by Tony Alexander, May 8 2024
Guest Post by Tony Alexander

Guest Post by Tony Alexander

I’ve just completed and distributed my writeup of this month’s survey of real estate agents which I’ve been running for exactly four years now. The survey has revealed some extra weakening of the residential property market and the virtual disappearance of FOMO (fear of missing out).

Only 3% of agents now say that buyers are worried about missing out on a purchase. This is actually lower than the poor readings through 2022 into the middle of 2023 and well below the 40% readings for August and September last year. Buyers feel no urgency and believe that time is on their side.

Why might they feel this way?

Partly because of the 23% rise in the number of properties on the market for sale between July last year and the end of April. There is plenty of stock to choose from. But at the same time as the supply of purchasable property has gone up, buyers have stood back from the market.

A net 37% of agents have just reported that they are seeing fewer people showing up at open homes and a net 31% say that fewer people are now appearing at auctions. In January a net 57% were seeing more open home attendees and a net 22% more auction numbers.

Why are buyers backing away at a time when more vendors are appearing?

It is not because of increased worries about interest rates. Concerns there are on a slow downward drift though from a high level of angst. It is not because of new worries about access to credit. The 63% of agents saying that buyers worry about getting a loan is almost right on the average reading for the past four years.

Instead, the thing which has changed is perceptions of job security. A record 50% of agents report that they can see buyers are worried about their incomes. In January this proportion was only 14% which is about equal to the four year average reading.

Why have these new job worries suddenly surfaced?

Fewer than 70,000 people are core public servants so the near 2,000 layoffs so far recorded can’t be the reason. Discussion of the redundancies may be however the true cause is revealed in the Household Labour Force Survey results recently released by Statistics New Zealand.

The unemployment rate has risen from 3.2% to 4.3% which is still below the three decade average of 5.3%. But jobs growth has been almost zero since the middle of 2023. People no longer have as many employers chasing them and no longer feel that should they lose their job they will get another one on similar terms relatively quickly.

This loss of job security has made potential property buyers wary of making a purchase.

This is something likely to be especially damaging to multi-unit property developers who are already facing difficulties gaining pre-sales of planned developments. The way things are going the number of consents for new dwellings to be built this year risks coming in substantial below the 32,000 picked by MBIE in their post-election briefing document to the incoming government. Fewer than 28,000 may be issued.

Coming at a time of much faster than average population growth this is going to set the scene for a period of firm house price rises down the track — but not until interest rates have fallen perhaps by 1% and employment worries start to ease off.

When might that be?

By the end of the March quarter next year is my current best pick. Until then, the level of activity in real estate is likely to fall away a bit further while prices continue in the relatively flat pattern which has set in over the next 3-4 months.

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