The New Zealand housing market looks to be in an increasingly precarious position as it heads into spring.
Both the stock of properties for sale and the overhang of unsold properties is up compared to this time last year, while the number of properties dropping out of the market remains elevated for the time of year. Meanwhile the number of sales is down significantly on a year ago.
Property website Realestate.co.nz had a total of 32,908 residential properties available for sale at the end of August. That was up almost 10% on the same time last year, and was the most properties the website has had for sale at the end of August in 12 years.
Contributing to the high stock level was the large overhang of unsold properties.
The overhang is the number of properties that remain unsold after being on the market for more than a month.
Interest.co.nz estimates there was an overhang of around 24,600 residential properties at the end of August, up 16% compared to August last year. The overhang has not been that high at the end of August since 2014.
On top of that the number of dropouts remains high.
Dropouts are properties that have either been taken off the market completely, or are still listed for sale but are no longer being actively marketed, with no open homes or promotional activity.
Anecdotally, the main reason for dropouts is that their owners generally have unrealistic price expectations and refuse to meet the market, so their properties languish at the end of their marketing campaigns.
Interest.co.nz estimates there were around 3200 dropouts in August, up 4% from July.
It says something about the state of the market, and the unrealistic price expectations of many vendors, that the estimated number of dropouts has increased by 57% since 2023.
Whether they are rising or falling, the size of the overhang and the number of dropouts generally follow a seasonal pattern, peaking at the end of the summer season around May, then declining over the winter months before starting to pick up again in spring.
The worrying trend this year is that total stock for sale, the overhang and the number of dropouts are already at very high levels before the spring bounce kicks in, while sales numbers have headed south.
That could mean that the market moves even further in buyers' favour over the next few months as rising mortgage interest rates, uncertainty over potential tax changes for property investors and a lacklustre economic outlook all help to pile on the pressure on property sales and prices.
Summer might be just around the corner, but for the property market it may not be a summer of love.
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