Useful tips for home buyers and sellers in a turbulent year

Real estate is often “top of mind” with large sections of our populace and is certainly a topic that gets more than its fair share of media attention. In a nation where homeownership is the goal of most people this is hardly surprising though we are at times, receiving mixed messages about the market. We are constantly getting advice, opinions, and comments about likely future market trends from those qualified to comment and from armchair observers. From our perspective at Tommy’s, there has certainly been a change to the tempo of the market in recent weeks and this has been widely reported. Some economists and market commentators are predicting a significant downturn in market activity, but is that a realistic assumption?

There are enough changes to reliable market indicators recently to tell us that the buoyancy of the market that we have witnessed in the last couple of years is unlikely to continue through 2022. Our market has been exceptional but can hardly be seen as being normal and there had to be some measures put in place to arrest the trend of rapidly increasing house prices. We are seeing that happen now! Recent upward movements to the Official Cash Rate have already triggered an increase in interest rates and this appears to be just the beginning of a trend that is likely to continue in the next few months.

There is a degree of nervousness among home buyers, home sellers and even those who have purchased and have the task of servicing large mortgages. It will be a long time (if ever) before we once again see interest rates as low as they have been for the last year or two. Whilst the monetary component of a buying or selling decision is a major factor, we are firmly of the belief there is always light at the end of the tunnel, and sales will continue to take place without any suggestion of there being a fire sale or a major reduction in prices.

From our experience, most house sales are triggered by changes in family circumstances rather than market influences. Houses will continue to sell at a steady rate in and around Wellington City due to work transfers, people relocating for educational reasons, family circumstances creating a need to upsize or downsize or perhaps when there is a relationship change. These factors are ongoing and will continue to drive our residential market. This is evident by the fact Tommy’s city office alone, despite Covid restrictions and a softening market negotiated better than 3 sales per day in the month of February. Some within our industry can recall the years when interest rates where in the range of 20% and above. Houses were still bought and sold, and homeowners have usually been repaid with significant capital gains over a period of time.

Meantime, we offer what we hope will be some useful suggestions to home sellers and buyers.

HOME SELLERS:

Houses are not selling as quickly as they were last year. Allow a little more time when making plans to relocate and don’t be surprised if your agent seeks a slightly longer agency period.
Don’t expect to receive five or six offers. This may happen but is less likely than previously.
Treat any offer seriously if the price is in the targeted range. Be prepared to negotiate and to allow a little time for any conditions to be satisfied provided they seem realistic.
Loan applications and local body Land Information Reports (LIM Reports) are taking longer to process so be prepared to take this into account. Your prospective buyer may need extra time to satisfy any due diligence requirements.
Economists are predicting a fall in prices of up to 10%. This won’t apply to every property but be prepared to face this eventuality should you be faced with a lower offer than expected.

HOME BUYERS:

You currently have a greater choice with more properties for sale than there were last year. Study the market, attend open homes, and form an opinion of your own as to what represents value for money. Your agent will assist you with this exercise by providing details of previous sales of comparative properties.
Make your offer as clean as possible to make it more attractive to the seller. This should not be through taking shortcuts or at the expense not completing a thorough due diligence programme, if necessary.
Interest rates are rising. Look ahead and allow a buffer for possible increases in the next 2 – 3 years.
Have your finance pre-approved to strengthen any offers you make.

Well intentioned friends are a common source of real estate advice which may not always be supported by what is actually happening in the day-to-day market so buying or selling, align yourself with a reputable agent and seek their guidance. We are in a changing market and further changes seem likely in the coming months.