Why keeping your house on the market could be expensive

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In a falling market, setting a price that is too high can mean that some sellers will end up worse off, says a property economist. File photo.
Photo: 123RF

Waikato woman Helen – whom RNZ has agreed not to identify – has recently spent six months trying to sell her home.

While she received a couple of offers, they were well below what she was willing to consider, and eventually she decided to withdraw the property from the market.

“It’s really quiet, really frustrating. Anything in that slightly higher price point – we were trying to sell around $1.1 million – there’s nothing [happening]. From my perspective, it’s the fact that we worked really hard to get into this house and build our home – for us to turn around and get a couple of offers that were so low they weren’t quite a joke but they were so low it wasn’t worth it… for us it’s better to hold on to it.”

She said she was aware that potential buyers were worried about interest rates and many could not stretch to afford the repayments.

But she said she was also aware that the longer the property remained on the market, the lower any offers she received might potentially be.

“We were told that by agents. We had one agent for three months then switched to a new agent who said we had to be more realistic because we had been on the market for three months, we had to drop the price. I get that but at the same time, the house hadn’t lost value just because it had been on the market three months.”

It was after she talked to someone who told her that unless she was willing to drop the price below $1m that she could expect it not to sell for months that she withdrew it. “I felt that was really refreshing. Everyone else was having us sign up and do this and that, within five minutes they were telling us to drop the price. For us it was refreshing to get a blunt, honest real estate agent.”

Recent real estate data shows that the property market remains weak, although more people are listing their properties. The number of sales was down about a quarter in June compared to a year earlier.

Property economist Ed McKnight, from Opes Partners, said other vendors were probably experiencing something similar to Helen.

“Property prices have been falling by 0.85 percent per month since February, on average. So if a property had a ‘fair market price’ of $1 million in six weeks that value might fall to $987,000. So, if a seller lists at too high a price, they may find that by the time they drop the price and find a buyer they have to accept less than they would otherwise get.”

He said one vendor he knew wanted to sell for $1.8 million. But at auction the top bid was $1.75m, which they did not accept.

“After many months they eventually sold for $1.63 million. That’s $120,000 – 6.8 percent – less than the original offer. So in a falling market, setting a price that is ‘too high’ can mean that some sellers will end up worse off.”

Corelogic head of research Nick Goodall said, across the country, vendors were accepting a median discount of 3.8 percent compared to their original listing price.

That was a steady improvement from February 2023, when the median discount was 5.3 percent. Discounts were steeper in parts of Auckland – more than 5 percent in the North Shore, 4.6 percent in Manukau and 4.1 percent in Waitakere. Central Wellington had a median discount of 3.5 percent and Christchurch 2.8 percent.

“The improvement over the last 18 months or so may reflect an adjustment in vendor expectations, less of a willingness to discount – instead of removing the listing – or a combination of the both, it’s very difficult to tell.”