Another reduction in interest rates has given the New Zealand real estate market an additional shot in the arm.
Real estate agents are reporting the 0.5% reduction in the Official Cash Rate (OCR) to 3.75% has sparked an immediate response from first-home buyers.
While this is only anecdotal evidence, data over the longer term suggests the market has awakened from the cash-rate-induced slumber that’s lasted more than two years.
Today, the property market is moving so quickly that it seems like ancient history that our OCR of 5.5% – a level that caused a market pause – lasted from May 2023 to last April.
Now, the annual number of residential property sales in New Zealand is closing in on 71,000 compared to 59,000 in mid-2023 when the cash rate hit its peak.
Of course, while the news on mortgage costs is positive, there are still nerves reflecting the country’s economic challenges and subsequent fears for job security – two factors that weigh heavily on any property market.
This uncertainty, many agents say, is being reflected in a continuing reluctance of many homeowners to test the market.
As an experienced agency, we understand these concerns but would point out that what you might lose on the roundabouts (selling) you’ll gain on the swings (buying).
If prices aren’t at the level you’d like when selling, you can bet they will play in your favour when you’re choosing your next property.
Below, we’ve listed considerations for homeowners deciding whether to sell in the current environment. We hope you find them helpful.
Cheaper Cash: A near-2% drop in the cash rate translates to significantly lower mortgage repayments. This makes a substantial difference in affordability. Therefore, it’s important to do your calculations.
Reduced Competition: The market is not yet at its peak, so you face less competition for the type of property you want. This could give you more negotiating power.
Focus on Needs vs. Wants: Prioritise essential upgrades over luxury items. This can help manage costs and make your home search less overwhelming.
Lock in Interest Rates: Consider locking in a fixed interest rate to protect yourself against future rate hikes. A five-year, fixed-rate term may be advantageous. At the very least, you’ll have a guarantee of consistent mortgage costs for the medium term.
Renovation Challenge: One thing is for sure – construction costs are not likely to fall. Materials and labour continue to be in limited supply. If you’re considering a fixer-upper, delaying your decision is likely to increase costs. The same applies to homes requiring renovation.
Consider the Long-Term: Real estate is generally a long-term investment. While fluctuations are possible, the market tends to recover over time. If you plan to stay in your new home for a significant period, the machinations of the market are less important.
Lifestyle and Wellbeing: This crucial factor is often overlooked. How much would a bigger home improve your family’s quality of life? More space, a better location and improved amenities have a positive impact on stress levels. This is hard to quantify financially, but it’s an important consideration.
It’s Personal: Ultimately, the decision is yours. There’s no single right answer. Carefully weigh the financial and emotional aspects of your decision. But right now, you could benefit from making your real estate move.