Reading the tea leaves of today’s Kiwi property market is not an easy task.
Sales are up, yet prices are flat. Record levels of inventory are starting to dwindle with a reported 5% fewer properties coming onto the market than 12 months ago.
The Official Cash Rate (OCR) has dropped 2% since last September, but the market feels weighed down by economic and cost-of-living concerns.
We still have a strong net immigration figure (+21,000), which might usually fuel demand, but that number is below our annual average for the past decade. And it’s far below the +135,000 benchmark set in 2023.
So, is the first-home buyer segment adding momentum? They’re taking their time because of lacklustre buyer competition – it’s a rare moment for them.
And investors? They’re complaining about high maintenance costs, falling rental demand and compliance with the Healthy Home Standards.
However, the potential for some green shoots in the market lies in the low- to mid-tier range, where there are some excellent buying opportunities for those buying their first home, or upgrading to a second property.
A defining point will come when we start to feel the economic impact of the cuts in interest rates. The Reserve Bank of New Zealand has applied one of the most ambitious rate-cutting strategies of any Western economy in the past 18 months.
In real estate, it’s important to remember that market sentiment can turn within just a few weeks.
Another truism is that there’s always an opportunity in real estate. When the market is buoyant, you get a great price for your home. And when it’s in the doldrums, your buying capacity gets a boost.
And this latter point is all-important right now.
If you’re thinking about selling and upgrading your property, this is a great time to make your move.
You may have to wait a little longer than anticipated to strike a deal on your current property, but there are some great opportunities to purchase once you’re through that first step.
Here are some ideas on how to approach today’s market:
Leverage lower rates – The 2% cut in interest rates is a significant advantage for buyers. This directly impacts affordability by reducing mortgage repayments. You can increase your borrowing capacity, but it’s wise to include a buffer for potential future increases.
Question of time – New Zealand has recently had record-high levels of inventory – that is, homes up for sale. Combined with flat prices, this has led to an increase in sales. Right now, you have the luxury of being able to consider multiple properties with a limited risk of buyer competition. This situation won’t last forever.
Sensible offers – Few sellers need a deal urgently. So, a low-ball offer is unlikely to fly. While you have considerable leverage as a buyer currently, research the local area to ensure your offer is realistic for the home you really want.
Long-term focus – Don’t be lured into a deal simply because of price. Long-term value is an essential component of any purchasing decision. Consider the location, its potential for development, and the quality and condition of the home.