Beyond the doom and gloom there is hope
Despite the media and various economists beating the drum of doom and gloom about the property market recently, this may just be the opportunity that some first home buyers, property investors, or those looking to upgrade, have been waiting for.
The property market has undergone many changes in recent years with significant price increases throughout the country, especially in Auckland. This has come from historically low interest rates, a lack of supply and sometimes panic buying driving the market up. Accordingly, it has made it difficult for new buyers to enter the market, or for those wanting to upgrade their house, to do so.
However, the many and varied negative impacts of the pandemic, rising interest rates and the increasing regulations that have been imposed on property investors may just have a positive flipside.
Covid has delayed, and in some cases obliterated, any plans people may have had. This has meant many buyers are now holding off purchasing a property or a new house, which in turn has seen the number of houses selling at auction drop, the number of days to sell fall, and forced vendors to seriously reconsider their price position as prices have come off a lot from 2021.
People are also leaving the country to undertake an OE or move overseas as the borders open which reduces the pressure on the housing supply. That’s a win for all those wanting to purchase a property as they are not competing with the masses or having to deal with the frenzied bidding at auction, and they may just be able to get on to the property ladder now.
Even though interest rates may be rising, recent price indexes have noted house prices in areas such as Auckland have dropped by as much as 4.9% in the last three months. With the average house price in Auckland over $1m this equates to a $50k price reduction.
This opens up opportunities for potential buyers (especially those cashed up) to jump in and take advantage of lower property prices while they can.
The increasing interest rates will also see the number of mortgagee sales rise as those who may have done their numbers on the historic low interest rates of 2% are now finding that their mortgage repayments have doubled and may even triple in the next year or two.
Accordingly, they may be forced to sell before the bank forecloses on them or may find that the bank sells under its mortgagee powers resulting in a fire sale.
If you’re not quite sure about taking the leap, consult a mortgage broker to crunch the numbers. Also, consult with your parents about whether now is a good time for them to help you, especially while the heat is out of the market. You will never time the absolute bottom of the market but if you are close to the bottom and holding the property long term you will enjoy the benefit of the rise when it next comes.
Then, once you have found a property you are interested in, engage a lawyer to undertake a thorough due diligence investigation so you will have the confidence to get on the property ladder, upgrade, buy your dream home or acquire an investment property.
If you are looking at purchasing a home or property, Haigh Lyon can assist you to make the process a little easier. Contact Shaun McGivern on @email or 09 306 0623 or Jason Hendriks on @email or 09 09 306 0603.