There’s nothing quite like purchasing your first home. The wave of euphoria that hits you when you’re handed the keys for the first time is a real pinch-me moment for many New Zealanders. But one of the many questions first-home buyers ask is, “When is the right time to take that big step?”
2020 – the year no one saw coming
This year, the world has faced the unprecedented challenge of a global pandemic. New Zealanders will also vote in the general election, which has been postponed to October 17.
Some property experts argue that the uncertainty surrounding a general election (in a ‘normal’ year) tends to influence property market activity. In the past, house sales tapered off in the weeks preceding the general election. Then, in the weeks after, the market experienced a flurry of sales.
How an election can impact on the property market
In recent weeks, reports have shown that the election might not be a big concern for property buyers and sellers. According to a Trade Me property survey, 82% of people said the timing and result of this year’s election will have no impact on their intention to buy or sell property.
“Interestingly, our data shows that activity in the property market during an election year does not differ all that much from other years. That said, obviously this year we have some added challenges with COVID-19 preying on people’s minds,” said Trade Me Property spokesperson Aaron Clancy.
Whichever way you look at it, there’s no denying the impact a general election can have on property sales.
If you’re in the market to buy your first home and you’re wondering whether it’s the right time to take on a mortgage, here are some things you might like to consider.
Bank lending policies
At the end of April, the Reserve Bank announced the removal of loan-to-value (LVR) ratio restrictions on banks, which means they’re no longer restricted on the amount of money that they can lend to high-LVR borrowers. Coming out of lockdown, this move was made to boost demand for property in a bid to help restart the economy.
For first-home buyers, this change provided options. With the removal of LVR funding restrictions, the focus shifts to finding the right lender for your circumstances rather than how much money you can borrow.
If the new Government makes any changes to LVR and minimum-deposit bank policies post-election, this would certainly affect first-home buyer activity.
Rental property policies
Several things may affect the rental property market over the next few months, and could result in a surge of suddenly available properties.
There’s a lot of pressure on landlords to comply with various tenancy standards, and the COVID-19 wage subsidy will come to an end. This is predicted to cause more redundancies, and therefore perhaps more houses on the market for first-home buyers to snap up.
On the other hand, the Government could implement policies that slow down the turnover of tenants, which could also slow the buyer market – especially in Auckland where there is still a shortage of housing.
Interest rate changes
The Reserve Bank has kept interest rates low since the 2008 Global Financial Crisis. This means borrowers don’t have to pay as much back but it’s also what has allowed the Government to borrow at record amounts to help ease the economic impact this year.
In the wake of COVID, interest rates have dropped to an all-time low. Some predict they may fall even lower – an incentive for new buyers to enter the market.
Things are looking better than predicted….for now
While the best time to buy or sell a house can be affected by Government and bank lending policies, this year the ongoing impact of COVID-19 throws an extra spanner in the works. Any changes in policy and rates – especially restrictive housing policies – will influence your decision to buy now or wait until later. The possibility of a recession and other economic factors will also have an impact on your property decisions.
Lending and sales activity have remained stable over the past couple of months, defying many dire economic forecasts. But as we’ve come to expect with the year 2020 – there’s only so much we can predict.
Ready to buy your first home? Speak with a mortgage broker from Global Finance today.
**These are general guidelines and are by no means a reflection of bank or lending policies