By Greg Ninness
The downturn in the residential property market that began in Auckland late last year has now spread throughout the country, shaving $100 million from real estate agency commissions in the second quarter of this year.
Interest.co.nz’s latest quarterly estimates of market activity and real estate industry commissions (based on REINZ’s published sales data) shows that there were 19,113 residential properties sold in the second quarter of this year, almost unchanged from the 19,064 sales in the first quarter.
However that was down by 25% compared to the second quarter of last year when 25,507 residential properties were sold.
That sharp downturn in the number of properties being sold has had a flow on effect on the amount of sales commission being earned by the real estate industry.
Interest.co.nz estimates that the real estate industry earned around $367.8 million in gross commissions from residential sales in the second quarter of this year, down by just over $100 million (-21.6%) compared to the estimated $468.6 million that was earned in the second quarter of last year when the market was still in boom mode.
Auckland agents hit hardest
The Auckland market has borne the brunt of the downturn, with the number of sales in the region down by just over a third, dropping from 8731 in the second quarter of last year to 5756 in the second quarter of this year, a decline of 2975 (-34%).
There was a corresponding drop in the estimated sales commissions earned by the industry in Auckland, which declined by $71.4m million (-32%), falling from $223.4 million in the second quarter of last year to $152.9 million in the second quarter of this year.
But the downturn has spread well beyond Auckland with sales throughout the country well down in the second quarter of this year compared to the same period of last year (see table below).
In the Waikato and Bay of Plenty sales in the second quarter were down 26% and 31% respectively compared to the second quarter of last year, which also pushed the estimated industry commissions much lower in those regions.
Even regions such as Wellington and Otago, which remained in boom mode long after the market subsided in Auckland, have seen sales decline substantially in the second quarter of this year compared to the same period of last year.
While it is too soon to say whether the current downturn has run its course or the market has further to fall, there are tentative signs it may have bottomed out.
Average sales rates at the major Auckland auctions are still running at less than half of what they were during last year’s peak, however over the last few weeks they appear to have stabilised at around 30% to 40%.
And there are increasing signs that vendors are accepting that the market has softened and are starting to be more realistic in their price expectations, which will help expedite sales.
However buyers are increasingly prepared to play hardball on price, and some investors who over-extended themselves and took on high levels of debt during the boom will be starting to feel squeezed. Others that aren’t feeling the pressure yet are likely to be getting nervous.
The overall sentiment in the residential property market is one of heightened caution and in the near term at least, the market is likely to remain tough.
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