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Real Estate Market

Prior to January 2008, the residential real estate market of the greater Ponsonby area in Auckland had the longest buoyant period in decades. Expectations were that this market was natural and sustainable so people acted accordingly. They began upgrading homes with little equity and investing in properties on 100% mortgages and little home equity. Some bought property because they feared that they would not be able to enter the market otherwise. Others bought properties that did not suit their needs simply because they could afford it. The real estate market was booming. Property values were doubling every 2-3 years rather than the usual 7-10, the trend that has persisted for the past 150 years.

These conditions continued until the end of 2007 and into 2008. It was during the early months of 2008 when New Zealand and international financial institutions began to collapse. Along with the collapse of these major institutions came the collapse in the market for property in Auckland, New Zealand as well as in the world abroad.

How did this happen?

Immediately upon receiving news of the collapse of these major institutions, purchasers reacted. However, vendors did not. They were reluctant to believe that their property value had been negatively affected in any way. Because of this discrepancy, during the first six months of 2008, purchasers were prepared to offer far less than the inflated expectations that vendors were still clinging to. The volume of real estate sales dropped dramatically.

By the second half of 2008 vendors had finally realized the seriousness of the financial situation and accepted that their real estate / property values had decreased. With this realization, vendors and buyers were again in agreement (roughly) with regards to the price of properties. The volume of sales of property in Auckland, New Zealand increased. As we entered 2009 a change occurred yet again as expectations of sharply declining mortgage interest rates developed. With summer coming around and expectations of 3-4% mortgages, buyer optimism increased. The volume and the total value of sales in March was greater than it had been in the preceding 18 months.

And now, here we are in April. Interest rates are showing upward movements, winter is coming and daylight savings is about to end. Early trends appear to indicate, for these reasons, that buyer confidence has taken a hit. Due to the fragile nature of the market, it is reasonable to expect there will be a future decline in the volume and the value of property in Auckland, New Zealand in the winter months to come. Prepare for the worst but lets hope for the best.

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