Sales of Bay of Plenty residential and lifestyle properties have fallen by 41.6 per cent in a year and some real estate developers have exited the sector because of the “difficult” market.
A rapid rise in interest rates is believed to have had a major impact, with the head of the Bay’s largest agency said properties took longer to sell and prices had dropped 10 percent. Another likened it to “the bubble bursting”, but said it could benefit first-time home buyers, who need less money for a deposit.
A OneRoof-Valocity Year in Review report released today shows that in the year ending October, Bay of Plenty residential and lifestyle sales fell 41.6% to 4,130. Included in those figures were 1,173 first-time buyers and 1 182 investors, with those categories that buy 32.2 percent and 49.6 percent less properties, respectively, in the same time periods.
A snapshot of Tauranga showed the average house price fell $135,100 from a high of $1.25 million in April to $1.23 million now. The biggest sale was a house on Oceanbeach Rd in Mount Maunganui in May, which sold for $11 million, while the lowest was an apartment on Durham St which sold for $316,500 in July.
Mount Maunganui also had the highest average property value in a suburb at $1.5 million, while Parkvale was the lowest at $692,000.
The director of Realty Group, which works Eves and Bayleys, Heath Young, said that the recent rapid increase in interest rates to fight inflation has had a great impact on property buying and selling volumes.
“This has resulted in properties taking longer to sell and prices coming back around 10 percent compared to values a year ago.”
He said all traditional sectors were still buying and selling, with a significantly higher number of first-time home buyers replacing reduced investor activity.
“If youare looking to sell and buy in this market with a view to expanding, downsizing or relocating within the region, this is certainly a good time, as any decrease in value on your own property made in the sale is matched by the fact that it also costs less when you shop.
“In all our branches, we are 10 to 20 percent back in traded volumes compared to last year.”
Young said there were certainly agents leaving the industry.
“It is clear that the agents who have recently entered the sector in the last two years have a higher representation when looking at those who are leaving the sector at this time.”
Anton Jones, director of Tauranga Tremains Real Estate, said the market had changed dramatically and “faster than I’ve ever seen it”.
He said that higher interest rates were a factor and banks had tightened lending because of the Consumer Credit and Financing Contracts Law, which was introduced in December last year and later amended.
“Finance is currently a big challenge within the industry. The market has also gone up and up and of course the higher it goes, the bigger the drop.
He said that over time many homeowners had invested, which led to the “bursting of the bubble.”
“It was pretty clear in January and February that things have changed. And immediately it became harder to sell property. They weren’t selling fast enough, so a lot of people were waiting and that affected property prices.”
He said there weren’t as many people getting into the real estate industry because everyone knew it was harder.
“You tend to find when the market gets crazy, people say ‘oh, I might as well go into real estate because I’m going to kill it’. There’s going to be a lot of older agents, maybe more experienced, who will say, “I can’t be bothered to go through another one of these slumps…it’s too hard and I’m leaving.”
“If you don’t sell, it’s difficult.”
Jones said this could be a good opportunity for first-time home buyers to buy before the next boom.
“That’s a chip siding component … There’s less competition and those who are in trouble may have to sell faster and take a little less and a little more realistically than they think.”
Sales numbers were down 20 to 30 percent, although that fluctuated and while last month was a great month, this month was busy, Jones said.