Housing market uncertainty continues - buyers even more dominant heading towards the end of year

There is no good news for vendors in the latest housing market activity figures, suggesting a very subdued market for at least the rest of this year. 

Let's start with the obvious one - stock.

High stock levels relative to sales has been a defining feature of the market over the last couple of years, with the weight of properties for sale tipping the market strongly in buyers' favour and maintaining downward pressure of prices. There is no sign of that changing.

Property website Realestate.co.nz had 37,433 residential properties available for sale at the end of October, up 22% from October last year, meaning buyers continue to have a growing pile of properties to choose from.

So what about sales?

The Real Estate Institute of New Zealand (REINZ) reported 5840 residential sales in October, down 22% compared to October last year.

Put those two numbers together and you have a situation where the number of sales reported by REINZ in October last year was equivalent to 24.4% of the stock for sale on Realestate.co.nz. By October this year that figure had dropped to 15.6%.

Although that's potentially good news for buyers, the low sales numbers suggest even they are increasingly watching and waiting.

The above figures are bad enough, but wait, there's more.

Every month interest.co.nz calculates the number of dropouts from the market. These are properties that have been for sale and have either been taken off the market completely, or are still technically for sale but are no long being actively marketed.

Interest.co.nz estimates there were 1837 dropouts in October last year, equivalent to 24% of sales that month.

In October this year the estimated number of dropouts had increased to 2388, up 30% compared to October last year and equivalent to 41% of sales.

And finally there's the overhang.

The overhang is the number of properties that have been on the market for more than a month but remain unsold. They are like something in the fridge that's hit its "best before" date. You need to decide whether to eat it now or biff it, because the longer it sits there, the bigger the pong.

In spite of anecdotal reports that vendors are starting to become more realistic in their price expectations, interest.co.nz estimates the overhang is up 21% over the last 12 months, increasing from around 21,400 properties in October last year to 25.800 in October this year.

Put another way, in October last year the overhang was equivalent to around 285% of the REINZ's reported sales that month and by October this year that figure had mushroomed to 441%, and many of those properties will be getting decidedly whiffy.

One word that's been bandied about in real estate circles recently in uncertainty.

Firstly there's been uncertainty around the election and consequently the future shape of government policies on things such as taxation and how they might affect the property market.

Although the election has been and gone, we still don't even know who will be talking to whom to form a government, let alone what policies may come out of those negotiations, and that uncertainty could persist into next year.

Then there is interest rate uncertainty and how this could flow on to mortgage interest rates. 

Last month the Reserve Bank dropped an atomic bomb of uncertainty on the market when it held the Official Cash Rate at its current level against almost universal expectations of a hike.

Although its has hinted strongly of further hikes, will it follow through next month, or dither on the sidelines once again?

In the meantime, inflation waits for no one and uncertainty reigns supreme.