Best selling author Ryan Holiday tells a real-life story of how a real estate agent he had not previously met gained his trust — because the agent undervalued the investment potential of a property he had expressed interest in.

When Ryan obtained the rental income range, he didn’t trust this report, so he did his own research. He called two other rental agencies who managed units in the same building and got actual numbers for what the property earned.

Much to his surprise, the actual rental income was higher than what the agent had estimated.
“The agent I was speaking with could have stretched the truth. He could have given me optimistic numbers about the rental prospects of the property. I trust him implicitly now as I know he is not the type to make a hard sale. I am now comfortable that the investment works even with this conservative math. And, most of all, one of the excuses I was looking for as a buyer — one should always look for reasons not to do something they are excited to do — has evaporated.”

Agents can over-promise on price and oversell their abilities because they don’t want to come across as not being good enough. People don’t care how much an agent knows unless they know how much they care. An agent doesn't have to be the dominant agent in the area to get the listing, but they do have to know the marketplace incredibly well and be the “Google” of that area. That’s how an agent demonstrates their credibility.

When an agent is conservative, they can over-deliver. But when an agent over-promises, they open themselves up to under-delivering to the customer.

“We didn’t just want an agent who would tell us what we wanted to hear, we wanted an agent who listened to our needs. Shannon ticked all those boxes and more from our first meeting.”

— Scott Radcliffe

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There have been many reports in the media about the performance of the property market — more opinion than fact. Over the years you’ve been reading my updates, you know me well enough to know that I like the facts.

There are some key drivers in any property market: employment levels, net migration, crowding, property sale volumes, construction, affordability, rents, and number of days to sell property to name a few. All of these remain at relatively stable levels.

The first home buyer market is certainly buoyant (new mortgage registrations rose from 24.8% to 26.4% last month) with lenders easing up on restrictions along with attractive interest rates — with no predictions of tightening anytime soon.

Changes to LVR's
The RBNZ Financial Stability Report released on Wednesday the RB noted the slowing in mortgage lending growth and house price inflation. In response they have cut the minimum deposit requirement for investors from 35% to 30% (having cut it from 40% a year ago). And banks may now have up to 20% of their lending to owner occupiers at less than 20% deposit. This had been 15% from the earlier 10% percentage of volume limit.

Will these changes affect property values?
Not really. At least, they certainly won’t lead to large rises in house prices, but the changes should bring further stability to the market. Remember when they imposed the changes as the market was rising?  They were never to bring house prices down, they were just to slow the growth and stabilise the market.  Now it’s the reverse.

The sellers market has passed (2 years ago), but the balanced market environment we are presented with is a healthy one. Values remain relatively stable along with stock levels and sales volumes. I see this property climate remaining similar for a few years yet.

The property market in Auckland remains balanced and stable with homes turning over at a relatively slower rate in recent months as listings remain relatively high.

We are finding homes are taking a while longer to sell given the current stock levels, however, there is still a good percentage of homes selling each month and values are reasonably consistent. Sellers are finding that in a balanced market, prices need to be competitive from the get-go and aligned with current market conditions and buyer activity if they are to sell. The silver lining to that, of course, is that prices are relative; so, if you're buying and selling in Auckland in the same market, it balances out.

It's also worth noting that in Auckland over the past 20 years, property prices have nearly doubled every 10 years, as the median 10 year rise is 96% which you can see in the chart below (this data is using REINZ House Price Index). When you compare this to all of NZ, Auckland has sustained a relatively consistent higher 10 year growth in prices that are well ahead of the NZ total at 88%.

Regardless of the rates of values and turn over, the balance between demand and supply always needs to be considered in assessing market activity and property values.

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