First National: Building languishes despite cheaper sections

Council red tape, lack of finance and lack of confidence are deterring section purchasers from building, according to First National’s monthly residential property survey.

The survey, which measures listing levels, sales, market trends and overall activity across the networks 70 offices, found section prices were down or significantly down on the same time last year in 95% of areas where respondents worked.

Yet new home building activity was either non-existent or at very low levels in 90% of areas. Pockets where lower prices had sparked interest were Richmond, Mangawhai and Te Awamutu, Wellington and Mid Canterbury. Building in Central Otago was continuing on sections purchased some years ago.

Section prices in parts of Auckland were up on the same time last year but building was not. Agents in Auckland commented on an increase in the number of families upgrading to larger existing homes.

First National Group general manager John Stewart said it was obvious that section prices were not currently the main issue when it came to building new homes.

Agents are telling us section buyers lack the courage or confidence to build, due mainly to council red tape or financial issues. In some areas it is simply better value to buy an existing home. However pressure will come on existing home prices if building continues to languish.

Despite this, overall the residential property market was slowly freeing up, Stewart said.

Sales for May were up 20% on the same time last year and prices were stabilising. Listings were down 8% on the same time last year to 6384, mainly in Auckland, Christchurch and the Bay of Plenty.

Economic commentaries indicating further value drops may be causing vendors to hold out of the market even when sales are cleaning out current listings, Stewart said.

Additionally, prospective sellers seem unsure as to whether to list coming into winter irrespective of all other market conditions. Those with well presented, sensibly positioned properties are therefore seeing real competition.

Investors were notably off the boil during May in most areas except Hawera, Howick, Timaru and New Plymouth. Investors landbanking in Northland and Tairua was noted.

Of real interest to us in May was the noticeable lift in sales and multi offers in many markets noted in the last week or two of the month.

Whether this is a trend or a warm weather flutter remains to be seen. Irrespective, astute home buyers are presently on the hunt and fighting over top properties in all sectors.

ENDS

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