Is now a good time for investing in property in New Zealand?

Property prices have been decreasing over recent months. We may be entering what’s known as a buyers’ market. This could be concerning for those who already own a home and those wishing to sell. However, a buyers’ market can present great opportunities for people looking to invest in property.

What is a buyer’s market?

In a buyers’ market, more properties are available for sale. This makes ‘now’ a better time to consider investing in property in New Zealand than in the previous 2-3 years. Buyers can get into the market at a lower price point. While it is not necessarily a time for bargain basement prices, it gives buyers more time to do their due diligence.

Buyers have more time to find a home that fits their lifestyle and budget

A cooling market gives buyers more choices and they have more time to consider their options. According to a Realestate.co.nz spokesperson, there were over 10,000 properties for sale in the Auckland region in September 2022. More properties on the market also means that, in general, properties sell more slowly. A buyer’s market is a good time for negotiation on price and conditions as sellers may be more willing to be more flexible to get a sale.

However, it’s still important to carefully consider all factors before making any decisions.

Factors to consider before leaping in

Dropping prices
According to the latest data, Auckland’s property market has been weak in recent months and Wellington and the Waikato have also been affected by falling property prices. The national average asking price has fallen by around $10,000 per month. House prices are becoming more affordable than they have been in recent years.

Hitting the bottom price point
Experts forecast that these monthly declines in house prices will continue for the remainder of 2022, before easing over the first half of 2023. These price drops provide a window of opportunity for those looking to invest in property in New Zealand.

Rising interest rates
Before buying, however, the ever-present factor of interest rates needs to be taken into account. Interest rates on mortgages are still relatively high by recent standards. They are also still on the increase. Depending on the terms of your mortgage you take out, monthly repayments may still climb. It’s important to factor this into your budget when considering whether or not to invest in property.

It’s advisable to consult with a mortgage broker and do your research before making any property investment decisions.

Lest we forget
It’s important to remember that the property market is cyclical. We are currently experiencing a levelling out of the market after several years of strong price growth.

While there may be more homes available than there have been of late, particularly in Auckland, there are still fewer homes for sale across the whole of New Zealand than before the Covid-19 pandemic struck.

A 15 per cent price drop following the Covid-19 pandemic’s 45 per cent price increase isn’t particularly huge. And, while house values are declining, other prices, such as the cost of living and rents are rising. Relatively, this makes the fall in prices less significant.

Property is generally a long-term investment
Most of us should consider long-term prospects when making any house-buying decisions. According to records quoted by the Managing Director at Barfoot & Thompson, if you own a property for seven years or more, it will be worth substantially more than when you bought it.

Overall, the long-term outlook for property in New Zealand is positive. Therefore, the big question for many is whether to buy now or wait.

When are we going to hit the magical low point in prices?
It will vary from region to region. On average for the country, many experts are predicting we will be getting close to the bottom of the price decline by the middle of next year. This is earlier than they had originally been forecasting. Trying to pick the highs and lows of any housing cycle exactly seems to be a near-impossible task.

So, to buy or not to buy?
In a cooling market, prices are falling, and vendors are increasingly willing to negotiate and accept contract conditions. The other factor that could sway your purchasing decision: other potential purchasers may not be wanting to buy houses yet. They could be waiting. They might be wary of potentially paying 10 per cent more for a property they plan to hold on to for the next decade or so, or the home they wish to live in and raise a family.

FOMO vs FOOP
In previous blogs, we’ve discussed FOMO (fear of missing out) when it came to buying a home. Now the NZ economist Tony Alexander talks about FOOP (fear of over-paying). This is why potential buyers, and possible competition for the property you want to buy, might be holding off.

Do your research
If you’re thinking of investing in property, it is a great time to do your research and consult with a mortgage broker. There are plenty of properties available for sale, prices have fallen, vendors are increasingly willing to negotiate and accept contract conditions, and other would-be purchasers are holding back. You have the space you need to do your due diligence, get all your financial ducks in a row, and find a property that fits your needs.

Global Finance can help
Now is a good time to invest in property in New Zealand if you have carefully considered all factors before making any decisions. Our accredited mortgage brokers can help you to assess your financial situation and find the best mortgage product for your needs. We can set you up with a well-planned mortgage. We can work with you to find a home loan that fits your budget while you ride out the housing market cycles without too much stress. Our experts at Global Finance can help you secure the best deals and ensure the most positive outcome for your future. Get in touch. You can contact us either on 09 2555500 or email us at info@www.globalfinance.co.nz

**These are general guidelines and are by no means a reflection of bank or lending policies