Nervous investors may hand Auckland house buyers an opportunity
Young buyers wanting to get into the Auckland market may be about to get their chance, BNZ's chief economist says.
Tony Alexander said prices were likely to stay flat over the near term as buyers pulled back from chasing "anything and everything" and their fear of missing out (FOMO) subsided.
He said young people should look for price declines in lower socioeconomic areas that had been heavily targeted by investors.
"The large subdividable sections they have purchased cannot be subdivided and built on in the next few years despite the Unitary Plan changes because either no builders are available or more likely no developer can get finance. There is no shortage of subdividable sections any longer," he said.
"Some of these investors will get more and more nervous and will right now be looking to get rid of their purchase. It is in such areas which young first-home buyers might want to start looking – but without being in a hurry.
"Once the first few reports emerge of prices easing in these specific locations FOMO will kick in with owners looking to sell before prices decline even further. That is where I would be looking were I a struggling buyer."
He said buyers should ignore reports of a property price collapse. Many were fearmongering, he said.
"In Auckland when some suburbs which have been driven by investors start showing price 'busts' of 5 per cent, the media will run stories about markets collapsing. These stories will accentuate the decline as owners panic and look to sell before prices fall much further.
"That is when the professional investors who hold large portfolios and have been around for yonks will start showing up at auctions again. They have been sitting out of the Auckland market for two or three years now. They will be looking to take properties off the hands of panicked investors at bargain prices. The question however is this. Will young buyers show up as well?"
He said young buyers would probably convince themselves that it was not worth buying because they could see a fall in their net wealth on paper – "as if movements in such things are the key consideration when establishing a base for one's family".
Alexander said that was what many did between 2009 and 2012, which turned out – in hindsight – to be a good time to buy.
If it was only wealth growth that people wanted, he said, they should buy shares because it was possible to do so without needing a deposit.
But he said buyers would do well to move against the crowd. "People move with the herd. That is why markets can rise and fall quickly, and it is awareness of that behaviour which helps drive the successful investment strategies of professionals who have seen it all before many times."