Sellers dropping prices as market hits tipping point

Photo / Herald on Sunday

Sellers are being forced to cut their asking prices as a glut of unsold properties produces sluggish sales in the residential sector.

The average asking price for sellers fell 3.6 per cent to $407,349 during May, while the number of sales dropped by more than 1000 in April when compared to the same time last year, latest figures from Realestate.co.nz's NZ Property Report show.

The current asking price is five per cent below the peak of the market in October 2007.

The change indicated sellers were finally starting to drop asking prices to solicit more interest from buyers.

Realestate.co.nz chief executive Alistair Helm said sellers with new listings recognised the need to be aggressive on price with the large volume of property available.

"While we've not seen a deluge of cheap property for sale, it does appear that we've peaked on price and there's an opportunity here for buyers.

"Sellers are hunting them out using price as leverage to beat the competition."

Of the 19 regions, seven showed an increase in asking price during May, although these were outside the three main centres of which Auckland set the mood, with a 2.5 per cent fall when compared to the three months earlier.

However, the number of unsold houses, as measured by the number of weeks of sales necessary to clear properties on the market, remained high at 46.9 weeks.

It would take 46.9 weeks to clear the 51,980 unsold houses on the market at the end of May, the report says.

Helm said the market had reached a tipping point in May, where both high inventory and prices were unsustainable.

"Last year we were in a similar situation, but it was the volume of sales that decreased. This year it's price," Helm said.

Central Otago/Lakes was the only region to produce an inventory level lower than the long term average, indicating a slight shift to sellers being in the box seat in the region, the report says.

Interestingly there was no evidence to show the asking price on properties had been affected by the May 20 budget.

"In fact new listings slowed considerably in the last week of the month and the truncated mean asking price of those listings was not significantly different from earlier in the month," the report says.