What’s happened to the property boom in Rotorua?
As we gear up towards Spring, traditionally the most popular time to get a property on the market and sold, there are a lot of questions amongst buyers and sellers about what has happened to the real estate market in Rotorua.
- Has it gone from BOOM to BUST?
- Is this the end of the UP-cycle?
- Is it just winter and politics?
There aren’t as many people buying compared to a year ago, both locally and nationally. Real estate agents are desperately trying to convince the market that the slow-down doesn’t mean anything and the Real Estate Institute of NZ is trying to convince the Reserve Bank that lending restrictions should be eased or lifted all together.
Here in Rotorua, there is still an abundance of buyers, but there is a change in their attitude. A year ago, buyers rushed into the process because there was a fear of missing out. At times, buyers would not carry out their due diligence and make really high offers to beat other buyers. This happened with all types of properties in most price brackets.
Today, buyers are taking a more sensible and balanced approach. Well maintained and presented properties are still attracting very good activity and often multiple interested parties as long as it has the right marketing campaign. We have sold several properties in recent weeks with multiple willing buyers and even when there was a contract in place for the sale, multiple willing buyers as backup interest.
With the number of properties currently on the market still being very low, and buyer activity high, you would expect there to be a continued increase in property values and activity. So why is it that sales volume has almost halved?
That’s the next point>>>>
Stock levels low
Old stock vs new stock and seller expectation
Why is it that some properties seem to sell overnight and others aren’t selling or taking a long time? There are three reasons why we are seeing properties on the market for a longer period now.
Buyers aren’t feeling the risk of “missing the boat”. Some buyers see the drop in sales volume as a sign that things will slow down and there is less pressure on time frames. Some even thinking that property prices will fall – the chances of this happening in my opinion are very small, but not everybody will have the same opinion.
“Only if we would have a similar financial crisis like we had a decade ago, will we see property prices in Rotorua go down. With the introduction of much “safer” lending restrictions (Loan-to-Value Restrictions now and maybe Debt-To-Income ratios in the future) it is very unlikely that we’ll experience another major financial crisis. Although a drop in prices may be more likely elsewhere, Rotorua is still relatively affordable and hasn’t increased as much as other centres.”
For other properties, the next point might be more relevant…
Sellers’ and real estate agents’ expectations are still based around the activity level of 6 months ago. This can create an expectation of price that may be higher than what buyers are prepared to pay right now because they’re not feeling the pressure as described in my previous point. Properties where the price expectation is too high, might sit around for longer.
Finally, in a buoyant market with very few properties on the market, it is a perfect time to sell a “mediocre” or “less-than-desirable” property for a reasonable price. We see that some of these properties traditionally would sell at a lower price and/or sit on the market for longer, due to its condition/characteristics in comparison to other properties. In a market where buyers are “Picky” because they can be, these properties sit on the market for longer.
The 'Lockdown' Effect
Where we are now
The reason why property sales are down in Rotorua is because homeowners are affected by the “lockdown effect”. There are plenty of willing sellers who want to sell, but many aren’t in a position to do so.
I come across lots of people through open homes every week, and many home owners are asking me: “Is this still a good time to sell?”, or “Mrs W from XYZ Realty told me it’s a great time to sell. Do you think it is a good time for me to sell?”. Remember every real estate agent will tell you that it’s a great time sell regardless of the state of the market because this is their livelihood.
With approximately 120 real estate salespeople in Rotorua alone, there are plenty of people who go through a month without selling anything (remember, there were only 83 sales in July).
The more important thing is whether this is the right time for you to sell? Many homeowners want to sell, but are afraid of not being able to find something in time because there are so few properties on the market. At the same time, home owners are wary of committing to the purchase of a home and then being on a tight timeframe to sell their current house before they take over the new house. The most sensible solution to this is buying a property “Subject to the purchaser’s house selling”. We’re seeing a few more of these types of contracts, but most home owners are not interested in a lengthy condition like this and for nicely presented houses there will always be another purchaser around the corner who doesn’t need to sell their house. This is what is causing the “Lockdown”.
So if “Subject to house sale” doesn’t work at the moment, what is the solution?
What to do if you’re “stuck” to your house?
If you’re stuck because, like so many others, you’re not wanting to sell without having found your next home and you’re not sure how you’ll have a fair chance to buy when you finally find the right house, consider the following:
You need to get some really good advice about your property and its value so you know exactly what your financial position is. Not on the basis of what your house “Might be worth” but on the basis of what you’ll be able to get with absolute certainty. A good marketing campaign will take care of the rest and find the best buyer for your house.
Get as ready as you can get so that when you see the right house, you are ready to make a move. Getting ready means having your finance organised, but also getting your house ready for the market.
Have a good plan in place so you know how you are going to make this work, and you have a solid Option B in place. You can’t rely on one solution every time without risk, so having a good second option will give you more confidence.