The Property Market Awakens

After a price slump of some years, the New Zealand property market is showing promise

The property market slump of the last few years may have turned a corner.

In most places, property prices are now recovering.

A recent survey conducted by Trade Me Property, involving more than 1,500 Kiwis, revealed a cautious yet notable shift in buyer and seller mindsets as the property market has begun to gear up.

The survey highlighted evolving perceptions of value between buyers and sellers, indicating potential opportunities and obstacles in the current market landscape.

Background: The New Zealand Property Market

Until a few years ago, many people thought the New Zealand housing market was unbreakable.

Prices just rose and rose. Property values increased through global events such as wars, local events such as earthquakes, and everything from lockdowns to terror attacks.

It seemed everyone wanted to be a property investor. As mortgage interest rates fell for a decade or so, and house prices kept increasing, it didn’t take much skill to be a great property investor.

Then, on the back of rising interest rates (increased to combat a spike in inflation), changes in lending regulations, and economic uncertainty, house prices peaked in Nov 2021, before falling about 18%. Prices appeared to bottom out in May 2023.

The fall in prices over that time wasn’t consistent across the country. Prices fell substantially in places like Lower Hutt, while in other locations, such as parts of the South Island, they barely fell at all.

Overall Property Market Outlook

Most commentators expect long-term increases in property values to resume. But, the consensus seems to be that the increases won’t match the substantial gains pre-2021.

This statement from independent economist Tony Alexander sums up the sentiment of most experts:

“It pays to remember that the long-term trend in prices is upward. Since 1992, on average New Zealand house prices have risen 7% per annum. I think we’re looking at 5% per annum going forward.”

In addition, many people have suggested Auckland should lead the way with price increases, and in-demand locations such as Christchurch might also see a similar uptick. That’s because these two centres have plenty going for them, including:

• Diverse economies. This is great for employment prospects
• Major international airports. A big drawcard for international immigrants
• Room to grow
• In the case of Auckland, it’s the country’s economic hub
• For Christchurch, there’s plenty of earthquake rebuilding going on, including a new stadium

In the most recent data from Trade Me Property, the numbers indicate confidence is slowly returning, with 53% of Kiwis believing it’s a good time to buy.

However, only 23.6% of buyers report finding sufficient properties within their budgets.

This suggests that while more homes are available at certain price points, sellers may need to consider pricing strategies to enhance marketability.

Impact of Interest Rates on Property Buyer Confidence

Interest rates play a significant role in buyer sentiment, as most of us need to take on a mortgage to buy a piece of real estate!

“Mortgage rates staying the same or going down will likely have a reasonably significant impact on buyer confidence,” the Trade Me Property survey indicated.

As mortgage interest rates continue to fall, which is widely expected, confidence in the property market might increase further.

Is Now a Good Time to Buy a House in New Zealand?

Yes, it probably is.

Property prices in most regions are significantly lower compared to 2021, making it a market where buyers have the advantage. Prices bottomed out in May 2023, indicating we’ve reached the market’s lowest point. Therefore, purchasing a house now carries less risk of a dramatic drop in property value sometime soon.

It’s never a perfect time to buy a property, as there’ll always be some things working in your favour, and some things working against you. For instance, mortgage rates aren’t as low as they have been over the last five to ten years, though they’re still lower than historical averages!

As per usual, anyone buying and holding property (or other quality assets such as shares) will generally be rewarded over long periods of time.

The Bottom Line: The Property Market Awakens

The potential revival of the New Zealand property market is exciting news for many. However, it’s important not to get too caught up in short-term news and fluctuations.

When it comes to any investment, including buying a home, it’s wise to look beyond the immediate noise. Short-term price changes and headlines can be more confusing than helpful, often leading people to wait for the “perfect” moment to act. But in reality, perfection is elusive, and waiting for it can mean missing out.

Instead, stay focused on your strategy and the factors you can control. Concentrate on building the assets you need to achieve your dreams. Remember, success comes from consistent effort and smart decisions, not from chasing perfection. Keep your eyes on your goals, and you’ll be well on your way to making them a reality!

It would be the pleasure of one of our trained professionals to help you work through any of the topics mentioned above, so get in touch today.