Market shows signs of cooling down

A slowdown in activity on the property market might mean it is a good time to buy.

We are well into October and this is traditionally the time of the year when activity is really accelerating in the property market.

But we are seeing quite the opposite in recent weeks with the market showing definite signs of cooling, especially in Auckland. So what's the evidence for a slowdown?

First let's consider the number of properties being newly listed for sale. According to figures sourced from Trade Me the number of new listings surged in Auckland in early August. This looked like the beginning of a very healthy spring market.

However, since late August the number of new listings has steadily dropped. That is a very unusual trend for this time of year when new listings would usually continue to climb through until mid-November. The rest of the country is showing a similar trend with a slowdown in new listings.

Next is the number of property reports being run by banks, home buyers and sellers on our various websites. In Auckland this was again showing a healthy seasonal increase up until mid-August after which it has been dropping away.

Part of the explanation for the weakness in Auckland did seem to be the very strong activity in many other parts of the country. This was particularly in Tauranga and Hamilton where Aucklanders are increasingly moving to or investing in. However, even these other areas dipped sharply in the first week of October; much more so than can simply be explained by school holidays.

As yet there is no sign of a slowdown in values but if this slowdown in activity persists, then values are likely to respond also.

So why might activity have slowed? Several reasons. As of October 1, there is a capital gains tax on investment properties re-sold within two years. The banks are shortly going to require Auckland investors to have a 30 per cent deposit. So investor activity may have slowed.

Foreign purchasers are also now required to have a NZ tax number and bank account. Furthermore, the Chinese stock market wobble of a few weeks ago has led to less money flowing out of China and fewer Chinese at open homes and bidding at auctions.

The new rules aren't well known or understood by many people so it is possible they are sitting back to see if the market responds before acting. And as I've said previously, a lack of confidence could be very contagious and self-fulfilling. Is that what we are now seeing?