More Buyers Using Escape Clauses

First National New Zealand: More buyers using escape clauses

Buyer interest is high but commitment is low in a gloomy property market, First National says.

The group’s regular monthly office survey (this time December and January) measures key indicators including open home attendance, website enquiry, listings and numbers of contracts signed.

First National Group (NZ) general manager John Stewart said of the networks 70 offices nationwide, around half reported healthy levels of buyer enquiry for this time of year but also an increased number of agreement defaults.

Across the market there is a reticence to commit to paper and those who do are increasingly using escape clauses to get out of agreements.

Buyers are not only doing their homework well but support services, such as building inspections, and banks are having increasing influence. Minor repairs that may have been accepted six months ago are now causing contracts to fall over while funders are demanding greater equity than in the past, limiting prospective purchasers, especially in the lifestyle and rural markets, but also in the urban centres.

Its tough for many sellers out there right now.

Our survey indicates many compelling reasons for general market uncertainty and tightening household budgets. Unemployment, shortened work hours, the festive season, holiday costs and general rural income uncertainty along with disquiet over Government-led tax change proposals are all affecting general confidence.

Our website is showing all time high visitor numbers but for the reasons above these are not translating into sales.”

Also for the first time in at least six months, first home buyer enquiry had dropped in multiple regions.

Middle sector house sales also appear to remain stalled.

The drop in values over the past year or more has damaged many mid-market owners equity to such an extent that they will be presently unable to attract bank support for a new purchase should they wish to move on,” Stewart said.

As we commented late last year, we anticipate these tight conditions in most markets may not let up until at least Spring.”

However, well-presented and well-priced properties were still being snapped up and in some cases, fought over by serious buyers, Stewart added.

People who need to sell for financial and career reasons and those developing an investment portfolio will in the main be the movers this year.”

Survey results showed:

Trends
Increased investor activity noted in Wanganui, Geraldine, Otaki and south Auckland.

Rural sales still quieter than usual in all regions and even where interest in purchasing exists, banks are scuttling most propositions.

Fewer buyers seeking lifestyle and coastal properties.

Sales
Sales volumes are consistently 20% up on the last years rolling average, but still well under half the average volumes of 2006 and 2007 in most regions.

Listings:
Looking ahead, listing inventory overall has increased just 2% between 1 November and Feb 1.

Listings in Auckland have tightened since 1 Nov and are currently 18% lower. This is due to a combination of brisker sales activity in eastern and northern Auckland and a slow down in new properties coming to the market.

This was balanced by an upswing of listings in the Waikato, of 17.5% over the same period.

Across First Nationals offices in Northland, Bay of Plenty, Taranaki, Manawatu/Wanganui, Marlborough, Nelson, Canterbury, Otago, Southland and the West Coast, listings have remained relatively stable, rising or falling less than 5% in each region since November.

ENDS

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