Speed is of the essence

Real estate agents never want to say the words "falling market". But markets do rise and fall - and inevitably there will be home owners who have to sell when circumstances change.

That's not to say that a few months of slight decreases in property values means Auckland is in a falling market.

However, vendors always need to keep their wits about them, and no trend (up or down) lasts forever.

It can be difficult to identify a falling market. A downward price movement, such as seen in Auckland in recent months, could just be a blip rather than the start of a trend.

A month or two of lower prices could simply be because of the stock on the market, interest rates that may have risen, or potential sellers are finding it difficult to buy something else (and so are reluctant to go to market).

Sales statistics can be viewed in many different ways. On one hand, residential property values across the Auckland region increased 12.3 per cent year-on-year to the end of March according to QV.

Quarterly growth had decreased by 0.2 per cent over the past three months.

One figure that prospective sellers can consider in planning for their sale is the "days to sell" statistic released by the Real Estate Institute of New Zealand.

The most recent numbers available for Auckland date back to February. In a year, the number of days to sell has risen from 31 to 43.

The number of days to sell has gone to more than 60 in the past decade, and can be a precursor or indicator of a falling market.

Homeowners do need to be cautious with all data. In this case "days to sell" is with the agent, not the total time a median house has been listed for sale. Figures spiked into the 60s in both 2008/9 and early 2011.

Speed is of the essence if you're selling. Paul Foster, senior sales partner at Iron Bridge Property Group, says that while time is your friend in a rising market, selling in a static market makes it more critical to get your pricing strategy right.

"Price the property right and you should still attract multiple buyers and therefore obtain the highest price," says Foster. "Even in a buyer's market, when you price accurately there is a power shift away from the buyer towards the seller."

In a falling market, the longer you leave your property on the market unsold, holding out for yesterday's price, the more likely you will have to drop the price to stimulate buyer interest after it has gone stale, he says.

"Again, pricing right will be key to generating the right interest early enough to avoid attracting only bargain hunters after the good buyers have moved on to realistically priced properties."

While Auckland property prices may only be stabilising, one day there will be price drops. No market has continued in one direction forever.

Once markets do start falling, sellers disappear for a number of reasons. The simplest reason is that they want to hold out for better times when the market is going up again, or at least prices rebound, and auction rooms are full.

Psychology is also important in a falling market. Home owners can be paralysed from selling by the fear of buying a property that will lose value.

The behavioural economics concept of "loss aversion" comes into play here. Psychologically, humans see less pain in losing capital on the home they own now.

It has probably risen in value since they bought it, so a paper "loss" over top dollar isn't as emotionally painful as the idea of losing money from the purchase price of another home.

If you can overcome that, the advantage of selling in a falling market is that the property you are buying is falling in price as well.

One way to help speed a sale along in a falling market, is to prepare a seller's information pack with paperwork to help the buyer make a decision fast.

If the buyer doesn't have to get their own LIM or building report, they might move faster.

It's a great promotion tool.

Sometimes revealing the warts-and-all face of a property in these packs can make a buyer more confident that they know what they're getting into.

It's a good idea to take all offers seriously. If the price of the house you will buy is also falling, it can make economic sense to cut and run with an offer that is not as high as you were hoping for.