Property values may be falling across New Zealand’s main centres*, with demand largely being restrained by the Reserve Bank’s interest rate hikes, but, not surprisingly, first home buyers are feeling positive about more opportunities to get into the property market. For existing homeowners, the outlook for property remains positive too, as factors such as interest rate, a thriving labour market, strong migration, and a downturn in supply continue to drive demand, ensuring property remains a safe bet.

Interest rate changes

Some economists believe interest rates around the world have peaked and that the housing market is likely to bottom out in 2023. While any decrease in mortgage interest rates is likely to be slow, already, we’re seeing some lenders offer heavily discounted “under the line” rates to encourage new borrowers, helping increase demand for property.

Job security

Property markets are strongly influenced by employment with confidence of continued income a positive for property demand. Currently, wages are growing at a strong pace and labour demand is up as many businesses continue to report labour shortages post-pandemic.

Migration factors

Net migration to New Zealand is expected to climb significantly in 2023 and, going by current figures, we could see a net gain of around 40,000 people. That means greater demand for housing which would come on top of demand from those displaced by the recent flooding.

Supply growth

As developers struggle with rising construction and labour costs, along with tougher lending conditions making it harder to secure finance, they also face a decline in the number of buyers willing or able to buy off the plan. The result is a potential fall-off in supply with fewer new developments coming to market.

First home buyers

Currently, first home buyers account for about a quarter of property sales across New Zealand, a record high, as financing and other costs prove to be too much for some investors. While entering the market may still be challenging for some first home buyers, careful preparation and the advice of a mortgage adviser may improve financing opportunities.

Property listings

The number of new property listings fell in the 3 months up to February 2023, coming off the back of a decline in the previous 3 months before that. The lack of new listings and less choice could again drive demand for housing and improve property values in some regions.

A change in viewpoint

According to Infometrics principal economist, Brad Olsen, there has been a shift in views on house price falls. Where previously rising property prices were seen as a good thing, there is more awareness of the negative impact a rapidly rising property market has on the economy and future homeowners.

“Even five years ago, rising prices were almost universally seen as a good thing. That has changed, and polls have increasingly found that people want prices to come back down.”

“New Zealand now has its lowest rate of home ownership in 70 years, and many people can see that where prices are is not good for society, or the economy, and they feel it would be bad for them to skyrocket up.”

Olsen also said that the recent price falls may be the biggest New Zealand has seen in decades, but prices are still far higher than they were pre-pandemic.

“That means many homeowners can ‘afford’ for prices to fall a bit. At the same time, housing affordability remains stretched for many, and people recognise that.”

Homeowners who bought over the last two to three years at the peak of the market aren’t likely to see falling house prices as a good thing, with many now in negative equity because of price falls. However, it’s important to remember that the property market moves in cycles, and forecasts suggest that once the market hits bottom, possibly later this year, it will start to recover again.

Financial advice

Before making any decisions about property, get financial advice from an expert. Talk to a Mortgage Express branded mortgage adviser to find out more about negative equity, or to take advantage of a quieter property market and get onto the property ladder.

References:

https://www.oneroof.co.nz/news/43146

*https://www.corelogic.co.nz/news-research/news/2023/housing-downturn-gathers-steam-again-in-february