'Four Ds' driving property activity

NICK KRAUSE
Last updated 05:00 29/07/2012

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Real Estate 101 - death, divorce, debt and desire are our key drivers to buying or selling homes.

Known as 'The Four Ds' they have consistently driven residential property movement.

BNZ-Real Estate Institute of NZ survey data in the last 18 months shows the main reason people buy is to trade up or down, because they are shifting regions, think the timing is right price wise, or because of a relationship breakdown. The key factors for selling are needing the money, trading down or a relationship breakdown.

Institute chief executive Helen O'Sullivan said there was now less speculation in the market than before the global financial crisis, and more transactions were based on normal life reasons.

"People need a bigger or smaller house, or one without that person they've suddenly decided they dislike intensely," she said.

"They are all important reasons that drive buying behaviour, as opposed to buying and selling for speculative purposes."

BNZ's chief economist Tony Alexander said the reasons for people buying and selling didn't seem to change that much over time "from what I've been seeing for the past year".

Bayleys research manager Gerald Rundle said The Four Ds were an industry yardstick.

"Desire is about trading up, perhaps from a first home to a bigger one as the family grows, or the return to work of a second income earner. Divorce is about personal circumstances, and often people sell the matrimonial home to make a clean start, and move into a smaller property. Death is self-explanatory, but it's a similar motivation to divorce."

Debt, and the decision to sell, were common when the family home had been used as security for a business loan. A sale might be forced if the business required capital, or the bank called in its loan after the business failed.

Market ratios for death and divorce factors have remained fairly constant, but after the global financial crisis began to bite in 2008, debt became a bigger selling factor, with mortgagee sales increasing. And that impacted on desire, which had trended down in the past three years as householders paid down debt and stayed put.

O'Sullivan calls the trend a shift to "financial conservatism" post global crisis.

"It's part of the whole deleveraging that the Government's trying to change."

Many Kiwis had chosen to remain in their homes, affecting sales supply. But a more favourable market meant others decided to downsize and pay off mortgages.

"There's a lot of people who see that as an appealing option," O'Sullivan says.

"The trading down figure is reasonably substantial, and remains so."

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- Sunday Star Times

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