Inflation, rising interest rates and tighter controls on the supply of finance have caused property sales to fall sharply under the hammer, a new report shows.

The Real Estate Institute of New Zealand (REINZ) said more terms.
They were subject to sale or financing and buyers were becoming more confident in negotiating property prices.

Bay Auctions said the auctioneer’s role had changed but that the declining numbers were “a blip on the radar” and that more sales would soon begin to happen under the hammer.

New REINZ figures show 16 properties sold at auction in the Gulf last month, representing 4.9% of total sales.

Compared to 157 properties (34.7 percent) in July 2021.

The lowest number of auction sales since April 2020 or January 2010 excluding months affected by the Covid-19 lockdowns.

Just 11 homes sold at auction in Tauranga in July, representing 6 per cent of all sales, compared to 129 (49 per cent) in July last year. A total of 180 homes were sold in July.

In Rotorua, auction sales were down slightly to three, representing five per cent of the 65 total sales in July. By July 2021, five sales, six percent, were at auction.

The region’s declining number of auction sales follows a national trend, with 458 properties sold under the hammer in July, representing 9.8 per cent of total sales.

REINZ chief executive Jane Baird said inflation, interest rates and the availability of finance meant buyers were being cautious and buying less cash.

“We’re seeing more contracts for buy-to-sale or finance, and buyers feel more confident entering into negotiations.

“This change has seen a decrease in the number of vendors choosing to go to auction and the number of buyers participating in auctions.”

However, Baird said auctioning is still an effective marketing method.

“Auctions are unconditional, which means that contracts exchange quickly and for certain sales at the fall of the hammer.”

REINZ regional director Neville Falconer said attendance at open houses was mixed due to school holidays and bad weather.

“According to local agents, the properties at the top end of the market were the best found.”

But Falconer said sales contracts in Rotorua were increasing and conditional contracts were falling.

“Sellers understand the current market dynamics and are adjusting their pricing accordingly.

“Pre-approvals are still a big hurdle for buyers, especially as illness and staff shortages further slow down the application and approval process.”

Falconer said properties were taking longer to sell, with the median days to sell rising to 57 from July 31 last year.

Tauranga-based Baileys & Ives auctioneer Grant Child, who has called more than 10,000 bids in his career, said the atmosphere in the auction room was definitely quieter.

“In the previous market we would see multiple bidders on one property.

“Now most of the properties have one bidder. The atmosphere and the attendance numbers have declined.”

Son said most people can’t afford to buy until they sell their property first.

“There are obstacles on the way, they can compete in the bid to get themselves into the money space.”

It means that the role of the auction has now changed, he said.

“Before, it was about getting a premium price for the supplier and giving people an equal opportunity to bid.

“Now, auction calling gives unconditional cash buyers the first opportunity to work with the sellers.

“It gives them a 15-minute head start on conditional buyers.”

Son said the declining number of sales at auction is “a blip on the radar” and that more sales will start happening under the hammer soon.

“The market froze. It was out of control.”

But many people have started listing their properties for auction, he said.

“People have got the winter blues. Many sellers are waiting for spring.”

Rotorua Professionals McDowell Real Estate auctioneer Steve Lovegrove said some sellers were unsure whether going to auction was the right choice for a vendor in the current market.

Lovegrove said the auctions were not the “flavor of the month” with many bridges for buyers to cross to secure financing at first.

But that will soon change.

Properties take longer to sell and auctions draw a line in the sand for sale.

It is ‘decision day’ for both sides.

“It is a meeting point where both buyers and sellers meet to discuss the price.”

Lovegrove said that for an auction, buyers must be willing to buy and sellers must be willing to accept where the market is.

“Sellers have begun to understand the price level six months ago is not there now and if they want to move, it is to meet the market.

“There’s no better way to see what the market is like than when buyers put their hands up in the room.”

Heath Young, managing director of The Realty Group Ltd, which runs Eves and Bayleys, said the property market had done “okay” as all market conditions had an impact at the same time.

Young said the number of residential sales between April and July was at a “long-term low.”

“This is a market byproduct that needs to be reassessed in terms of prices, interest rate hikes and credit availability.

“We’re seeing an increase in buyer activity in early August, which is good for typical fall market activity.”

Ray White Rotorua business owner and principal Jacqueline O’Sullivan said fewer people at open houses and contracts for sale had kept many sellers from opting for the “very open forum” of auctions where cash sales are required.

“If you have no financial interest, it’s not a very good feeling to be on a date with no interest.”

O’Sullivan noted the rise in sales contracts and the collapse of conditional contracts.

“The other property was a few that didn’t sell after several extensions and eventually stayed where there were no other drivers such as people moving due to job transfers.”

O’Sullivan said few sales and properties are still taking longer to sell, with some “cheeky” bargain hunters still out there.

“But I feel like the first home buyers and investors are coming back.”

Many properties will be temporarily listed for sale at cost until the market stabilizes, she said.