Signs are emerging that people selling their homes are starting to become more realistic with their asking prices as they realise their properties are unlikely to fetch the high prices being achieved a couple of years ago.
Comparing the asking prices of residential properties listed for sale on property website Realestate.co.nz with the selling prices reported by the Real Estate Institute of New Zealand (REINZ) each month, suggests the gap between the price vendors are hoping to achieve and the price buyers are prepared to pay, is starting to narrow.
The two figures are not an exact match because Realeatate.co.nz uses an average asking price and the REINZ uses a median, but the Realestate.co.nz average is an 80% truncated mean, meaning the top and bottom 10% of prices are removed before the average is calculated on the remaining 80%.
That should produce a figure close to the centre of the market each month, making for a reasonable comparison with the REINZ's median.
Interest.co.nz has compared the average asking prices on Realestate.co.nz each month since February 2007 with the REINZ's median price the following month.
These figures show that once the market opened back up after the 2020 lockdowns, the difference between asking and selling prices narrowed considerably as the market took off, dropping to a record low of just $16,436 in November 2021, suggesting the gap between vendors and buyers was just 1.7%.
The figures also show that the market was running so hot in 2021 that there were two months - March and October - when the median selling price actually exceeded the previous month's average asking price, by $22,000 and $35,000 respectively, which were the only times this has happened since Realestate.co.nz was established.
However once house prices peaked in November 2021, the gap between asking and selling prices increased rapidly and edged above $100,000 at the beginning of 2022.
Although asking prices began to decline from March 2022, they did so at a slower rate than selling prices, suggesting vendors were slow to accept the full extent of the downward movement in the market.
By November last year, exactly a year after house prices peaked, the gap between asking prices and selling prices had ballooned to $139,636, a difference of 14.7%.
But it appears reality is sinking in and vendors are starting to adopt more realistic asking prices when putting their homes on the market and are more likely to accept lower offers.
The gap between asking and selling prices has declined steadily since late last year, and last month it dropped back below $100,000 to $94,352.
That has narrowed the gap between asking and selling prices to 10.8%. And although the REINZ's median price has increased by $18,000 since February, most of the reduction in the gap between asking and selling prices has been due to vendors lowering their price expectations.
Between May 2022 and May 2023 the average asking price on Realestate.co.nz declined by $90,526 (-9.4%) while the REINZ's matching median selling price declined by $60,000 (-7.1%) over the same period.
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