A buyers market is a beautiful thing...
They say all good things come to those who wait. When the tide turns from galloping valuations for home sellers toward better access for buyers - naturally the machinery designed to sell property gets nervous. Property gurus wring their hands about the lower valuations impacting their sales numbers and switch tactics from auctions to variations on ‘by offer’. But whatever the trend of house prices in your area, current valuation dips are small against the backdrop of large gains during the last decade. When is the best time to buy? 20 years ago. The next best time is today!
Reading the property press can be confusing. What really matters are your goals in context to the area you intend to invest. In many markets, values are stable even during an unstable international market. It all depends on local factors of supply and demand. Certainly, New Zealand is increasingly seen as a good place to live, so we are not likely to suffer a lack of housing demand anytime soon.
Enter the fall of mortgage rates perfectly timed to assist new buyers:
“It seems extraordinary that fixed mortgage rates have dropped below 3.0% in April 2020, in part because of the instability of the overseas markets caused by COVID-19.”
Updated from original post of 2019
Buyers are already benefitting from this opportunity. Look around and you will also see that investors who had overleveraged (high Loan to Value) may be letting go of properties that don’t meet equity requirements (and new tax and healthy home rules) which means – yes – more properties on the market in lower valuations. 10% deposits on new builds is the best news for both new buyers and investors in a long time. This dovetails perfectly with Kiwibuild homes slowly coming online. We still have a housing shortage!
One nice thing from my perspective on this market is that some investment properties are being liquidated just in time for new buyers. Timing is crucial though, as once Kiwibuild properties come online this will certainly impact sellers with older properties. It’s a great time to be renovating while the money is flowing. In a softer market, the number of homes on offer may be limited, so you may need to do a little work to achieve your goals. Be prepared to upgrade properties which may not currently meet the new health and safety standards for rental properties. Fortunately, a renovation loan or extra revolving line of credit may do the trick.
In short, Auckland is simply not headed for a crash of oversupply. If anything, more new buyers of all ages are entering the market for the first time with our record low mortgage rates which is quite encouraging from a social and economic point of view. Returning Kiwis are also having quite an impact on the competition.
If you need to make a move up or down, choosing the right property for your goals may take a bit more time and effort. It can be a very good thing when you have more time to reflect and do your due diligence rather than feeling quite so pressured by multiple offers.
And what about those rates? WOW. Under 3.0% fixed interest rates have followed our lower OCR (Official Cash Rate). You might say that banks are scrambling for business which lets you in on a little secret: mortgages are how banks make their money. The competition is stiff in a slowing market. So, again, timing is crucial. If you wait for the market to tick up - so will interest rates.
In a buyer’s market, it’s more important than ever that you have a very zipped up application to make the grade to snag one of those amazing rates. A vendor will take your offer much more seriously if you are informed and prepared. And frankly, it’s no secret that a few banks are dangling low 'special' rates while actually getting a loan is much harder. Best to find a great mortgage adviser who can help you find the right combination of bank, loan type, and terms to support you on your path and keep you going.
© 2020 susan templeton / niche mortgages
*Follow the RBNZ for OCR rate changes and stay in touch with your financial adviser if you are in the market to buy.