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’. A 1.5% drop in property valuations last year in Auckland for example, is certainly not huge against the backdrop of gains during the last decade. If all you read is the property press you would think the sky has fallen. What has fallen are real estate sales prices and high sales turnover, providing a reality check for vendor expectations.

Enter the fall of mortgage rates perfectly timed to assist new buyers:

 “It seems extraordinary to say it, but we could see mortgage rates below 3.5 percent by the end of the year, despite it being the 10th year of an economic expansion with unemployment near four percent.”

Bernard Hickey, senior contributing editor/interest.co.nz (5 April 2019)

Buyers are already benefitting from this opportunity. Look around and you will also see that investors who had overleveraged (high Loan to Value) are getting out of properties that don’t meet equity requirements (and new tax rules) which means – yes – more properties on the market to choose from. 10% deposits on new builds is the best news for both new buyers and investors in a long time. This dovetails perfectly with Kiwibuilds as well as all the new apartments going up now. 

One nice thing from my perspective on this market is that some investment properties, which tend to be in the low to moderate price range, become available for new buyers who are also in this price range. Since we can’t really count on the Kiwibuild boom (yet) to happen on the predicted scale – better supply is great news. 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. Use this time and money to upgrade properties which may not currently meet the new health and safety standards for rental properties.

This market news must also be encouraging for new home developers who don’t see Kiwibuild poaching their audience anytime soon (few if any of the Auckland penthouses I’ve seen selling off plan are aimed at new buyers). Auckland, unlike Sydney, is simply not headed for a crash of oversupply. If anything, more new buyers of all ages entering the market for the first time with this combination of low mortgage rates and more properties on offer is quite encouraging from a social and economic point of view.

All is not doom for sellers either! If you need to make a move or downsize, you are likely to be buying in a softer market which takes some of the sting of that lower sale price of your exit home. Certainly, investors may also benefit from more properties to choose from.

And what about those rates? WOW. 3.99% is the median offer rate today* with a lower OCR (Official Cash Rate) mooted sooner than predicted**. You might say that banks are scrambling for business which lets you in on a little secret: mortgage demand has fallen off or they would not be competing so visibly. So, again, timing is crucial. If you wait for the market to tick up - so will interest rates.  

In a hot 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. And frankly, it’s no secret that a few banks are dangling teaser rates which are not on offer to the average bear. 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.  


© 2019 susan templeton / niche mortgages

Excerpts from interest.co.nz article 5/4/19: *Banks have dragged their special fixed mortgage rates down to 3.99 percent and could drop them to 3.5 percent this year if capital controls aren’t too tough. **The Reserve Bank says interest rates are more likely to fall than rise through 2019 and 2020. A full set of fresh forecasts are due on May 8 and financial markets see a greater than 50 percent chance of a cut.