Real estate agents in the latest REINZ/Tony Alexander survey say buyers are more worried about missing out than about buying and then watching prices fall away.

A gross 34 per cent of agents have said they see buyers displaying signs of worry about missing out. The results are still well below the 52-70 per cent who from mid-2020 to late-2021 were seeing FOMO, with a peak of 92 per cent.

FOMO can mean either missing out on a particular type of property, range of choice or failing to buy before prices go higher.

Buyers are also concerned about the lack of listings. A net 46 per cent of agents say this is a rising problem, compared to only 14 per cent three months ago. Alexander says the window of opportunity for buyers to casually peruse a good number of properties on offer is closing quickly.

In contrast, FOOP is being observed by just 28 per cent of agents nationwide, which is the lowest reading since October 2021 and below the 73 per cent peak during May last year. This measure ranged from 16 per cent to 37 per cent between mid-2020 and late-2021.

Investors wary

One of the distinct characteristics of the turnaround in the residential market which is underway is the absence of investor buyers.

The survey shows a net 13 per cent of agents are seeing fewer investors in the market. This is the least weak reading since March 2021 – but it is still negative and well removed from the net 59 per cent positive reading for first home buyers

Individuals buying in order to provide accommodation for the one-third of New Zealanders needing rental space have stood back from the market ever since the tax change of March 2021.

Alexander says feedback supplied by both real estate agents and mortgage advisers is that while some investors have been buying (often with no debt, according to CoreLogic data), the bulk are sitting on their hands waiting for the election outcome. If National wins, as the polls suggest, and deductibility of interest expense returns, many investors will look at making a fresh purchase to expand the rental stock.

However, for the first time since October last year, the survey reveals more agents observing investors bringing their properties to market to sell than holding them back.

“We can take this rather complicated measure as an indication of the general change in the willingness of investors to sell,” Alexander says.

“Under pressure from high interest rates and another year bringing additional reduction in the proportion of interest payments which can be offset against rental income, thoughts of selling are growing.”

Rental supply

He says to date, the effect on the rental supply of this lack of buying and slightly greater than average selling has had its impact obscured by the record surge in house construction over the past decade.

“But as that boom fades away and we see the conversion of some long-term accommodation to Airbnb for holidaymakers and foreign students, conditions are likely to tighten considerably in rental markets. This is especially likely in the main cities,” he says.

“It seems reasonable to expect the acceleration in population growth will see rental demand growth outpacing new supply growth with clear upward pressure on rents.

“The transfer of extra net demand to rents may be greater than in the past given the government’s many moves against landlords, which have boosted their costs,” Alexander says.