Georgina Bond
Property deals are falling over, buyers are loading offers with more conditions and motivated vendors are having to drop their prices as the housing market continues to lose ground.
Auckland property lawyers say the signs of a buyers’ market are harder to miss, with fewer transactions, properties failing to sell under the hammer and increased friction, even after buyers and sellers have struck a deal.
Those on-the-ground observations come as fresh figures reveal the housing market is slowing further, with property sales falling for a seventh consecutive month in July. Sales dropped 6.4% from the same time last year to 6,935 deals, according to property data company Cotality.
Property values also dropped 0.3% during the month, as higher mortgage rates and economic uncertainty keep buyers cautious.
First home buyers are making the most of it, comprising a record 29% of purchases in July, while their transaction volumes also continuing to rise.
Cotality chief property economist Kelvin Davidson says the prolonged drop in sales has kept the number of properties for sale high by historical standards, giving buyers more bargaining power.
“Buyers aren’t in any rush, given the high level of available stock, but sellers aren’t capitulating either, given that job losses have been relatively limited. That’s keeping property values subdued, down -0.3% nationally in July, which first home buyers are benefiting from,” he says.
More conditions – and more deals falling over
Property lawyer Tina Hwang, director at Queen City Law, says she’s seen an increase in conditional sales and in the number of conditions buyers were attaching to their offers.
“Generally, yes, there have been more conditional sales, an increase in the number of conditions and it does feel like there is an increase in fallen sales,” she says.
Buyers are making greater use of blanket due diligence conditions, as well as making purchases conditional on selling their existing house.
In some cases, that was creating chains of transactions, where a buyer needed to sell their own home to someone who was also wanting to sell.
There were also more requests for extensions and for work to be carried out or other requirements met before conditions were satisfied, she says.
“We have seen a number of ‘big’ transactions fall through on due diligence and some go through with significantly extended settlement dates.”
Bryce Town, consultant at Kent Legal whose property practice tends to sit at the middle to higher-end of the market, says what’s clear is fewer transactions are taking place.
Sizeable deals were still being done, but vendors who genuinely wanted to sell are having to adjust their expectations, he says.
“If vendors are keen to move on and prepared to meet the market, then they will take a haircut on their expectations.”
And at the more expensive end of the market, that haircut can be substantial.
For properties around the $5 million to $6 million mark, he said vendors might have to drop their expectations by $700,000 or $800,000 to get a deal done.
Buyers can afford to walk away
With plenty of property to choose from, buyers can afford to be choosier about the risks they are prepared to take.
Town says his firm recently cancelled a purchase under a solicitor’s approval condition after identifying concerns about the way the property’s body corporate was operating.
“We didn’t like the way the body corporate was functioning, foresaw problems down the track and, given the limited upside and risk of significant downside, we recommended to our client that they shouldn’t proceed.”
Some properties are sitting on the market for a long time for exactly that reason, with due diligence uncovering problems buyers were not willing to take on, he says.
“There is some difficult stuff out there. Some of the properties in the market have been out there a long time. The reason they haven’t been snapped up is because they have problems.”
Hwang was seeing something similar at the distressed end of the apartment market, including leaky or otherwise problematic apartments being offered cheaply by vendors wanting to “get out”.
For Town, the imbalance at the expensive end of the market came down to a simple equation.
“There is an awful lot of property out there, an awful lot of expensive property out there, but only so many buyers.”
Little sign of a turnaround
The latest Cotality figures suggest those buyers won’t need to rush anytime soon.
Over the past 12 months, 89,385 properties have sold, down from a recent peak of 91,411 in December.
Davidson says some key groups of buyers remain hesitant.
“Relocating owner-occupiers, or ‘movers’, remain less active than normal as economic and job uncertainty weighs on sentiment. Meanwhile, mortgaged multiple-property owners saw a slight uptick in market share in July, but this may be short-lived given the cashflow squeeze from flat rents, rising holding costs, and general election uncertainty,” he says.
Borrowing costs are another reason for caution.
“Adding to market headwinds, the Reserve Bank has commenced a tightening cycle for the official cash rate, with expectations building for another potential increase in September as they look to reduce future inflation risks,” Davidson says.
“Mortgage rates have already drifted higher in recent weeks. While many borrowers are attempting to hedge further rises by taking out longer-term fixed rates, those rolling off shorter fixed terms onto new two-year loans face higher rates.
“Looking ahead, sales volumes seem poised to keep trending largely sideways or slightly down in the coming months, with mortgage rates now drifting higher.”
Davidson doesn’t see much changing for the rest of the year.
“All in all, housing market activity remains subdued, and the second half of 2026 is likely to look quite similar for both sales volumes and property values,” he says.
0 Comments