The last two months have seen a significant slowdown in the property market,
across the country. Yes, we are now experiencing the chill of winter, but
this is more than just that.

The first evidence comes from our measure of buyer demand. There was a surge in activity during late February and early March, which is normal for that time of year, and usually carries through until Easter.

However, this year, the demand started to dive three weeks before Easter.

With Easter and Anzac falling on consecutive weekends we expected activity to drop over those two weeks. And, indeed it did.

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But since then, demand hasn't rebounded as much as normal. Year-on-year demand is much lower in Auckland and across the rest of the country is more or less flat.

Flat doesn't sound too bad - but, given the strength of the last 12 months, the lack of buyers now out on the streets will be noticeable.

Falling demand means falling sales, and we've definitely seen this. The number of sales over the past three months compared to last year has fallen 31 per cent in Auckland.

In Hamilton and Tauranga sales volumes are down about a quarter. Further south, the year-on-year drop is less significant, but this is a nationwide drop.

The Reserve Bank's latest lending restrictions have in part been targeted at investors. So has this drop in activity been at their expense? Yes, but so, too, for other types of buyers.

In Auckland, the number of first home buyers has dropped to the lowest level for many years, lower even than during the recession in 2008.

The number of people moving house in Auckland has also dropped markedly - not quite as low as during the recession, but not far off.

The number of investors purchasing with the help of a mortgage has also fallen to similar levels, while investors paying in cash have remained unchanged, as they have over many years.

Across the rest of the country there has been a similar drop in the number of investors using mortgages, but people moving house have also been knocked back hard.

The fall in first home buyers isn't as much as in Auckland. So, although their numbers have dropped, they now make up a bigger slice of the sales pie as the investors and movers are pushed back.

Dropping demand and dropping sales usually means values take a hit, and that is happening, too.

In Auckland values are slowly sliding backwards, as they have since last July. It's not a rapid decline, something in the order of 0.5 per cent every three months, but that is quite a change from a year or two ago.

One contributor is that there are now 50 per cent more properties for sale in Auckland than a year ago, meaning more choice for buyers.

In Hamilton, values dropped from July to December but have since rebounded and over the past nine months are more or less flat.

Almost everywhere else in New Zealand has seen the previous rate of value growth slow considerably. The major exception is Christchurch where values are also slowly dropping.
What's the cause of this weakness?

It's a combination of things. The Reserve Bank lending restrictions, banks being much tighter with who they lend to, interest rates sneaking up a little, and the upcoming general election with housing issues front and centre making people nervous.

My call? I'm expecting activity to slow down further over winter and things won't pick up again until after the dust of the election has settled and we know how any new Government will treat migration, property investors, and of course, the tough task of building more houses.