House prices likely to remain soft as vendors drop their price expectations to meet the market
The gap between the asking prices and selling prices of homes continues to reduce as vendors increasingly get more realistic about what their properties are worth and drop their price expectations to meet the market.
Interest.co.nz monitors the difference between the average asking price of homes advertised for sale on Realestate.co.nz each month and compares that with the median selling price recorded by the Real Estate Institute of New Zealand (REINZ) the following month.
Although averages and medians are calculated differently, the trend over time provides a worthwhile comparison.
And that trend is very clear.
Since October last year the gap between asking price and selling price has been steadily declining, dropping from $139,636 in October last year to $71,688 in June this year. (July’s asking price will be compared to August’s selling price when those figures become available next month).
The trend of a reducing gap is very clear in the first graph below.
There has been much talk recently of the housing market hitting the bottom and showing nascent signs of a pending upturn. Some market commentators may see the closing of the gap between what vendors expect to receive for a property and what buyers are prepared to pay, as a sign of an improving market. But they would probably be wrong.
Because the figures also show that the biggest movement in prices since October last year has been the downward movement in average asking prices.
In October last year the average asking price on Realestate.co.nz was $947,636 and that steadily declined to $835,292 in July this year, a drop of $112,344 (-11.9%).
Selling prices also declined over that period, but not by nearly as much.
In October last year the REINZ’s median price was $820,000. By July this year that had declined to $770,000, a drop of $50,000 (-6.1%).
So asking prices are declining at a greater rate than selling prices and that is the main driver narrowing the gap between the two.
That trend is also clear, as shown in the second graph below.
That suggests there could be continuing downward price pressure in the market, which may be softer than many commentators believe.
This suggests that without some meaningful interest rate relief, it’s likely the housing market will remain subdued for some time.