Movers return to market could be slow
Property buying by relocating owner-occupiers or movers has slumped.
Friday, July 28th 2023, 9:48AM 2 Comments
by Sally Lindsay
Statistics showing home owners wanting to upsize, downsize, or move to a new area are all drifting lower, says CoreLogic.
CoreLogic’s Buyer Classification figures suggest there has been less of a pandemic-driven hunt for extra space going on than might have been perceived.
While movers may start to get more active again, with mortgage rates still high, it could be a slow process.
At the headline level, movers haven’t been as active compared to the long-term average. In the second quarter of this year they accounted for 26% of property purchases. That was higher than first home buyers at 25%, but still well below the long-run movers average of 29%.
CoreLogic chief property economist Kelvin Davidson says it is not hard to find the reasons for this relative lack of activity.
For a start, general market confidence levels have been low, and movers won’t have been particularly keen to relocate when they weren’t sure about how long it might take to sell their own house first and what price they might achieve.
Difficulties in getting bridging finance have also meant people have needed to sell before they buy, and this introduces ‘conditional offers’ and delays in housing chains.
It's also conceivable, says Davidson, some households have been wanting to avoid triggering a ‘credit event’ – such as a new loan/house move, top-up, or bank switch – given the intense income and expenses checks this would involve. Instead, much of the focus has likely been on paying down existing debt and managing the progressive rise in mortgage rates.
In addition, although the available stock of listings on the market at the end of 2021 and most of last year has been relatively high, some of this is likely to be stale stock, and the lack of new listings has probably meant that would-be movers haven’t been able to find what they want as easily as in the past.
At the same time, there’s certainly been an increase in ‘loving not listing’, with alterations and additions activity rising.
Analysing movers
What about the different sub-groups within the ‘movers’ category?
CoreLogic can analyse movers data by upsizers (the new property carries a council valuation at least 10% more than the last house), downsizers (at least 10% below previous CV), or shift to a new area.
This segmentation shows upsizers have been less prominent lately. After a relative rise in activity in the two to three years prior to Covid, their overall share of property purchases has dipped since the 2020 peak of 7.6% and sits at about 6%.
It still takes a lot of extra money - either debt and/or equity - to trade up the housing ladder. This financial hurdle may have put some would-be upsizers off, especially when mortgage rates have been steadily increasing.
Downsizer activity troughed in the early stages of the pandemic, then became a more prominent feature of the market in 2021, rising from 4.6% of purchases in the third quarter of 2020 to 6.3% in the first quarter of last year.
To some extent this goes against the perception that many households were desperately looking for more space for working from home in the post-Covid period – although no doubt that did happen in some cases.
Since that early 2022 peak, the proportion of downsizer activity has drifted lower again, perhaps as house price falls have reduced the scope for people to cash in and free up equity through moving to a smaller property.
Meanwhile, firmly in support of another perceived Covid-driven pattern over 2020-21, this data shows that ‘new to area’ moves did become more prominent, rising from about 4% of all purchases in early 2020 to a peak of 6% in the first quarter of last year, which was about the time \property prices started to fall.
In other words, there are hints here of a hunt – at least to some degree – for quieter spaces, with more people shifting to new regions.
Clearly, the normalisation of remote and hybrid working models will have helped – although since the market’s peak in late 2021, that relative share of ‘new to area’ moves has tailed off again.
What next?
As buyer confidence starts to return, Davidson suspects the overall portion of property purchases going to movers will increase in the coming quarters – which may also help the flow of new listings to market.
The hurdles of raising extra finance at a higher mortgage rate and serviceability test rate may, however, mean a slow return to the market for movers.
Within that potential overall shift, it could be that both downsizing and upsizing play a role.
In the case of upsizing, this may be due to some households looking to get that bigger property before any medium-term growth in house prices pushes it out of reach again.
Meanwhile, downsizing could be a form of protection against mortgage stress as households that are struggling with higher repayments after repricing look to trade down and ease the strain before there’s any risk of a forced/mortgagee sale.
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As it is often the quality of the source of info that is just as important as what they are saying.
My question would be, what about standard house movers with no increase in debt level, because as interest rates and servicability incrase on top of the CCCFA rules a lot of people if they had to re-apply for their mortgage or try to switch banks, would not get approval. Banks are trying to get you to do a full finance approval just to buy a same house at the same price to prove you can afford the level of debt that you already have. The probably is most bank staff havent read the CCCFA like I have and the Banks Policy analysts have installed policy just to be safe (the NZ health and safety way). If you are swapping finance, like for like, I believe under the CCCFA you dont have to do a full application. But the banks are still making people do that, as their staff dont know any better. Have you or anyone else got any information regarding this issue ? - cheers Paul