Gill South: Baby steps on the road to recovery

Carey Smith of Ray White Realty. Photo / Geoff Dale

The property market last year left a lot of amateurs and professionals scratching their heads in puzzlement as the expected failed to happen. Real estate agency heads give their reading of the housing market in the first quarter of 2011 - their predictions cautious but optimistic, with rising rental prices seen as a positive indicator for the sector.

Carey Smith, chief executive Ray White NZ

The early signs in 2011 are of a real estate market that is showing decidedly more activity. There has been an increase in the number of new listings being presented to the market and this in turn will increase buyer activity as the traditional sales months come upon us.

There are a number of key indicators which influence the decision-making of buyers and sellers. The OCR has remained at 3 per cent for a number of months and it is expected to remain at this level throughout 2011. This in itself allows buyers to borrow with confidence and to know their borrowing capacity will be maintained.

Immigration is also a factor in the sales that occur throughout New Zealand. Immigration is expected to show small positive signs throughout the year as New Zealand remains an attractive place to live.

Prices for the most part will remain stable. The election in November may be favourable towards the real estate market if incentives are put in place for the first-home buyer. With the recent increase in rental prices across Auckland, this may provide more confidence in the investment market, which could boost activity in the overall sales number.

Peter Thompson, managing director Barfoot & Thompson

A dearth of new listings is the factor that has the greatest potential to affect the Auckland housing market in the early part of this year. In December, new listings fell to their lowest number in a decade and, although they recovered some lost ground in January and early February, they were still running at a quarter less than we would anticipate in a normal year.

There are buyers in the market and the prices being paid across all price and geographical areas are holding up. Other important factors such as mortgage availability, low and stable interest rates and an improving economy are looking positive.

Although collectively the majority of the market appears to have adopted the attitude that it will "put off moving home" during late 2010, seasonal growth through the warmer months will increase market activity, with the potential for a real lift in the third quarter if the economic recovery continues.

A fact that receives minimal comment is that the region's population continues to grow at a steady rate, while new house stats remain extremely low. This is increasingly placing demand on the existing housing stock. We are already seeing its effect on rental accommodation, where rents are rising. It is only a matter of time before it flows through to house prices.

Hayden Duncan, chief executive officer Harcourts Group

The theme for the NZ real estate market throughout last year was slow and turbulent. The start of 2011 has commenced with some cautious optimism in the air.

Based on our January results, there has been a welcome change in the activity levels, both from sellers listing and buyers acting. Although the outlook remains uncertain, there are signs that prices could start to firm as a result of dwelling scarcity.

Dwelling consents in December for new-home construction were reported as the lowest number since 1965 and already we are seeing the effects of a housing shortage in the main centres, where rental properties are in strong demand. The increase in rental prices because of bidding wars between tenants may also see a return of investors to the market. Banks have eased lending criteria and are working with borrowers with less than 20 per cent deposits, causing some tenants struggling to find rental accommodation to actively pursue purchasing.

There is always the ability to provide balance to a positive outlook, but with buyers tired of waiting and the Reserve Bank likely to keep the official cash rate unchanged until September, the waiting for sellers could be over.

Mike Bayley, managing director Bayleys

The overwhelming feedback from Bayleys' offices around New Zealand representing the residential sector is that a level of positivity had permeated through to the housing market as far as enquiry levels are concerned.

Reflecting this positivity, the official cash rate - and by consequence, mortgage interest rates - is forecast by the banking economists to remain stable well into 2011, sometime around June or July, with Reserve Bank Governor Alan Bollard confirming this in his first address of the year. A comparatively low OCR gives some degree of security and certainty to home buyers calculating the level of mortgage finance they have access to, and their ability to service repayments. This should underpin demand in the short term.

The nervousness about ongoing job security may induce some first-home buyers to stay on the sidelines for a few months more to come. The latest round of employment figures for the final quarter of 2010 showed a small rise in the number of those out of work.

We are predicting, in line with the overall economy, that any growth in the volume of house sales over the coming months will be gradual rather than sharp.

Keith Niederer, general manager LJ Hooker and Harveys NZ

In the next six to 12 months our industry will be steady as it goes. There will be no records set as far as numbers of sales or prices are concerned, but the steady market will present wonderful opportunities for sellers, buyers and real estate agents.

If you are waiting for the right time to buy a home or investment property, real estate across the nation - residential, rural, lifestyle and commercial - will never be cheaper than at present. With the Canterbury earthquake rebuilding programme, the price of petrol, timber, concrete, steel and other building products will all be going up, not to mention labour costs.

Many properties available for sale in New Zealand are for sale for less than it cost the owners to buy or build. The banks are also becoming more accommodating as they compete for market share. Demand for rental property is at unprecedented levels, with a shortage of quality rentals available in many areas, and this demand will mean rising rents and better yields for landlords.

If you are thinking of selling, many sellers who have recently invested in the marketing of their home and have listed with a set sale date and no price have been pleasantly surprised with the whole process and results achieved.

John Wills, head of sales and business development, Custom Residential

There will be more activity for buyers and sellers in the next month or so. We think that there will be a significant selection of new listings coming to the market during this period, which is great news for the frustrated buyers out there. A lot of the new listings will be attributed to a traditional seasonal increase, but we also believe that there will be a slight catch-up phase from a very tight listing market in 2010.

Moving on from March, we are anticipating a tough and tight "normal" market where new listings slow up again, and supply and demand is firmly in favour of the seller. We believe that supply on to the market will continue to be slow this year because of new build costs being almost prohibitive, with materials, taxes and council fees cutting too far into builders' profits. it's been said that Auckland needs around 25,000 new dwellings a year to keep up with demand and the past three years have seen around 15,000 new consents issued each year.

Long term, there is a huge housing shortage looming, but for 2011 we see a flurry of activity and opportunity early on, then a year very similar to 2010 from there.

Barry Thom and Grant Lynch, directors, Unlimited Potential

As a company we enjoyed a relatively buoyant December and this has carried through to a strong start to 2011. The Reserve Bank's commitment to hold rates at least until late in the year is translating into an increasing number of buyers in the market.

Homeowners, meanwhile, are coming to the market in increased numbers. Consequently, we expect an increase in activity and we don't expect a further softening in values, at least in the preferred suburbs of Auckland we serve.

We are very aware of large numbers of people who have sold in previous months or years and are holding, waiting to pick the bottom of the market. It may be this attitude which has added to the shortage of supply of rentals. Similarly, open home numbers are up - no doubt some are doing the cost-to-rent versus the cost-of-money equation and deciding now is probably a good time to buy.

Nicola Kelland, managing director Kellands Real Estate

The year has started well, with plenty of activity from both buyers and sellers right from the beginning of January.

This is in stark contrast to the same time last year, when activity was very quiet in January and only increased when we were well into February. We believe that this year will be stronger than last year in the numbers of sales, but prices will remain conservative.

There was a strong increase in sales volumes in the very high end during 2010. We expect this to continue, as the cost of building has not reduced significantly and therefore it is more cost effective to buy than build. The market between $800,000 and $1.5 million in areas like Grey Lynn and Mt Eden has seen remarkable growth in sales and values. There is some room for price growth in Remuera and Epsom, too.

The weather is often important in the first quarter, but more importantly the Government's financial reports for the periods up to the end of December and January, to be published in February and March respectively, will have a bearing on confidence in the market.

Graeme Fraser, general manager Premium

The first quarter of 2011 is shaping up to be more of the same - steady but unspectacular. Interest continues to be strong from overseas - Britain and Asia in particular - with sales taking longer to eventuate, although early indications are that February is bucking the trend. Apart from people transferring or immigrating, there is little panic from buyers and no urgency from sellers to list, with buyers taking their time to consider their options and make decisions.

When there is interest in a property, it often results in multiple offers or keen bidding at auction. Our offices are running good numbers of auction campaigns; this has become the selling and buying method of choice for many. It provides an unconditional offer for the seller, a time frame in weeks for all concerned to make decisions and buyers who seem happier to do their due diligence, knowing they can be the new owner if they are the successful bidder on auction day.

There is the realisation that the most and best interest comes when the property is fresh to the market. For those who have been on the market for a while, perhaps it's time to review the strategy.