For a property market in which buyers are staying away in the belief prices may fall further, there’s plenty of evidence to suggest it’s time to stop standing on the sidelines.
A new survey from the industry researcher Cotality (formerly CoreLogic) says so-called “mum and dad” investors are back, quickly becoming 25% of all buyers. Agents are also reporting that first homebuyers are becoming more active in the entry-level tier.
Both are signs we have entered the optimal time to buy.
Our dramatic 3% reduction in the Official Cash Rate (OCR) since June last year has been a key reason for their re-emergence.
The Reserve Bank of New Zealand (RBNZ) not only reduced the OCR by 0.5% to 2.5% last month but also signalled it was prepared to act again in the next few weeks.
That prospect is unlikely to change following the release of our inflation figures, which showed consumer prices rose 1% in the September quarter.
While this has increased inflation to 3% from 2.7% in the year to June, the result was in line with RBNZ’s forecast.
According to Cotality, eager investors are focusing on new homes because they’re exempt from lender rules relating to calculations governing Loan-to-Value (LVR) and Debt-to-Income (DTI) ratios.
These rules, imposed on mortgage providers, are designed to stop them dishing out generous loans that could prime the market and create an unsustainable price break-out. In other words, they’re a strategy to stop a boom-bust cycle.
Cotality’s Kelvin Davidson said that rather than dipping values, the biggest influence in luring back investors was falling interest rates.
He said: “The most significant change has been lower interest rates, reducing the cashflow top-ups that are generally required on a rental property purchase. Investors are hunting out some good deals in the current sluggish market.”
Investors are leveraging the market’s uncertain mood, which is being influenced by the struggling economy and general concern regarding job insecurity across the community.
It’s clear these elements also continue to feed into the price performance of the market.
The latest OneRoof/Valocity housing report has found the median price for a home dipped a further 0.8% last month. This equates to a $8,000 drop to an average price of $957,000.
Only six of our 16 regions recorded lifts in their average values – Tasman, Southland, Bay of Plenty, West Coast, Hawke’s Bay and Otago. Growth in each of these markets was less than 1%.
Auckland’s bumpy ride continues. Its average price is now $1.26m, which is $316,000 below its peak recorded in January 2021.