Mortgage rates are dropping against a background of a weak economy, and many pundits are trying to work out whether the current scenario will send property prices north or fail to ignite the market.
Many believe that the current Official Cash Rate (OCR) of 4.5% will drop a further 1% to help revitalise the economy.
This is surely good news for the Kiwi property market, which is currently experiencing an above-average number of homes for sale but a generation of buyers who appear reluctant to purchase for fear they’ll pay over market value.
Their concern is certainly fuelled by the relatively high level of interest rates, which sat at 5.5% for more than two years to quell the spike in post-Covid inflation.
Average house prices today suggest that affordability has steadily increased since the last boom in 2021.
The income of house prices to incomes makes for fascinating reading. Using Statistics NZ data, prices sits at 7.2 times the average annual wage. In early 2022, the ratio was 8.8.
More significantly, perhaps, is the ratio before Covid, when the market (and the world) was “normal”. Back then it was 6.7 times the annual salary. So while affordability has eased, it isn’t at the level before the pandemic.
Many economists believe it takes a full 1% reduction in interest to start to move the market. With more cuts on the way, we see a cautious but inevitable increase in home values as buyers grow in confidence and have access to cheaper loans.
If you’re thinking of capitalising on the current market, here are some tips:
Bite The Bullet: Being prepared and proactive are keys to success when selling your home in a changing market.
Monitor The Market: Watch value trends for your style of property in your area. Remember, New Zealand has hundreds of property markets, so what might happen in a neighbouring suburb may not be true for you.
Don’t Stall: If you want to sell your property, don’t let doubts cloud your judgment. A well-presented home will always sell for a premium price, especially in a market recovery.
Be Competitive: While we are about to see a healthy bounce back in the market, don’t get greedy. Price your home competitively. If you ask for too much money, buyers will look elsewhere, leaving your biggest financial asset to languish on the market and, ultimately, lose value.
Use Experts: Hiring an agent with great market knowledge and experience is critical to ensure you capitalise fully on a rebounding market. A high-quality agent will ensure you hit the right marketing notes and price your property to meet the market.Let’s Talk: You need to know your bottom line price. This is essential when buyers wish to negotiate on price and settlement details. Unless a buyer deliberately low-balls, then each offer should be considered carefully with a view to countering their offer.