Is now the best time to buy a home?! Do you agree with these 5 reasons from the experts?

The latest figures released by the Real Estate Institute of New Zealand (REINZ) show that New Zealand house prices have been trending down in recent months. The national median house price in October was NZ$825,000, down 7.5% from the same period last year. Compared with the peak in November last year, current prices are down 12.4%.

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Faced with this sharp wave of house price falls, most economists are relatively pessimistic, saying prices are still far from bottoming out and will continue falling for some time. Westpac economists, for example, expect prices to fall a further 10% from current levels by the end of 2024, taking the overall decline from last year’s peak to at least 20%.

 

Opinion:

Continuing house price falls have benefited buyers, particularly first-home buyers. However, inflation has shown no sign of easing since Stats NZ released the September figure, and another round of increases in the Official Cash Rate (OCR) and major banks’ mortgage rates has followed. This has put countless buyers back on their guard, prompting the question: “Is now still the best time to buy property?”

 

Some economic experts say that if buyers can afford the mortgage, now is indeed the best time to buy. Through conversations with several experts, we explore why it is worth deciding now to “buy”, with five reasons to purchase a home.

 

Reason 1: Falling house prices offer more affordable properties to choose from

Figures show that New Zealand house prices rose by around 43% during the property boom from 2020 to 2021, in the early stages of the COVID pandemic. This pushed housing affordability to its lowest level on record.

 

Well-known independent economist Tony Alexander said that although house prices remained around 26% above pre-pandemic levels, affordability had clearly improved significantly. Alongside rising personal incomes, this had brought many previously out-of-reach properties back within buyers’ sights. He believed “overvaluation is disappearing, giving buyers more affordable options”.

 

CoreLogic chief property economist Kelvin Davidson said falling prices benefited first-home buyers even more than higher mortgage rates hurt them, because they needed less money to buy. For example, if a first-home buyer saved NZ$60,000 on the purchase price, even if they had to accept a higher mortgage rate, the extra interest would represent only a small proportion of the total house price. Saving such a substantial amount upfront was significant for buyers.

 

He also believed lower prices gave buyers more properties to choose from. Many standalone houses in Auckland were now more affordable, so buyers were no longer limited to townhouses, or could buy a property with more bedrooms.

 

Homeowners, by contrast, are in a very different position from a year ago, having to accept lower sale prices than last year. Loan Market mortgage adviser Bruce Patten said this made little difference to homeowners moving house: although they might sell their property for less, they could also buy their next property at a lower price.

 

Reason 2: House prices cannot fall forever

Many buyers currently worry that further house price falls will reduce the value of a property they buy now, potentially leaving them in negative equity. Kelvin Davidson said that while negative equity was a genuine risk, in practical terms it was not a problem as long as buyers could afford their interest payments and did not plan to sell soon, because prices would recover over the long term.

 

Admittedly, if house prices fall another 5%, buying now could mean missing out on a lower price. But the reality is that nobody can predict the market’s lowest point precisely. If buyers can purchase now at 15% below last year’s price, a greater discount than the current overall market decline of 10%, they have already secured a bargain.

 

Harcourts Hobson Partners general manager Lauren Mirabito said the market adjusted through cyclical fluctuations, which posed no problem for buyers intending to hold property over the long term rather than speculate. The market might not yet have bottomed out, but viewed over 15 to 20 years, the overall house price trend was still upward. Prices might continue falling for now, but would eventually rise again.

 

In her view, people who held property for the long term were unlikely to lose NZ$100,000 when selling. “We do regularly hear about people missing the best opportunity to buy because they are waiting for prices to fall further, but that often doesn’t happen.”

 

Reason 3: More properties are being listed for buyers to choose from

During the property boom, the number of listings fell far short of buyer demand. This made FOMO, or the fear of missing out, the dominant market sentiment and influenced buyers’ decisions. The shortage of properties has now eased substantially. According to the latest Realestate.co.nz figures, the number of properties available for sale nationwide has increased by nearly 75% since last year’s market peak.

 

Realestate.co.nz spokesperson Vanessa Williams said buyers now had a large selection of properties, meaning the market had shifted from a seller’s market to a buyer’s market. She believed this was highly favourable for buyers, reducing their risks and pressure. They could take sufficient time for inspections and assessments before making a considered purchase decision.

 

Reason 4: Interest rates do not move in only one direction

Although rising interest rates are always a major obstacle to buying a home, Tony Alexander offered a different view. He believed fixed rates could already be close to their peak, and that current rates had returned to the average level of the 10 years leading up to 2018.

 

Hastie Mortgages mortgage adviser Campbell Hastie said rising rates had a significant psychological impact on borrowers, but rate fluctuations were normal over a mortgage repayment term of 20 to 30 years. Repayments might be difficult for buyers now, but there would also be easier periods. Above all, decisions needed to be based on their actual financial circumstances.

 

Reason 5: Do not try to wait for the bottom of the housing market

Anyone’s attempt to predict the property market may prove futile. In reality, it is usually only after market peaks and troughs have passed that the data reveals the turning points. Bruce Patten believed buyers should act when they could afford to buy, could service the mortgage and had found a suitable home. Vanessa Williams shared a similar view, saying buyers should base their purchase on their own financial circumstances rather than market conditions.

 

That raises another question: do buyers and real estate agents in the current market also think now is the best time to buy? YIJU spoke again with several property sales consultants to present as accurate a picture as possible of the market.

 

YIJU: In your experience, are there many prospective buyers in the current market? What types of buyers predominate?

 

Kevin Meng: There are quite a few prospective buyers in the market. My own clients are mainly first-home buyers. But buyers understand current market conditions, so they are being rational and are in no hurry to purchase.

 

Gavin Han：Recently, almost everyone enquiring about listings or attending open homes has been a first-home buyer or a family. Although bank interest rates are rising, buying a first home is an essential need for every family. There are also Kiwis overseas considering returning to New Zealand over the next few years. They are another group of prospective buyers who should not be overlooked.

 

YIJU: Some say house prices will fall further but interest rates will keep rising. Do you think prospective buyers should hold on to their money and wait, or buy now?

 

Kevin Meng：It is fair to describe the current market as a buyer’s market, with more opportunities to find a home they like within their budget. For first-home buyers, I recommend taking the opportunity now and buying a suitable home sooner.

 

Gavin Han：Mortgage rate increases are not something unique to the past 1–2 years; they have always occurred in recurring cycles. What surprised everyone was the speed of the rise from 2% back to 6–7%. Rates have reached 10% over the past 10-plus years. Rates cannot stay high forever either. Once inflation comes down, mortgage rates will naturally fall too; borrowers just need to get through this toughest period of repayments at high rates. Most recent buyers have been first-home buyers or families buying a home, both driven by essential needs. A good home will not wait for you, so act when the time is right. Rather than waiting for the supposed bottom, it is better to buy a good home sooner and lock in a suitable mortgage rate.

 

YIJU: Previously, auction bidding often pushed the sale price of homes well above cv. With auction clearance rates now lower, is it still worthwhile for buyers to participate?

 

Kevin Meng：When the market was strong, most properties sold at auction. Many buyers prepared thoroughly but were often disappointed with the outcome. Auction clearance rates are now very low, and many clients say they want to wait until after the auction to negotiate. But if they really like a property, I advise them to prepare in advance and attend the auction. Many homes currently listed are urgent sales, with owners needing an unconditional agreement as soon as possible. If nobody competes with you at the auction, you have a good chance of buying below the owner’s expected price. Conversely, if everyone waits until the property passes in before negotiating, multiple offers often emerge. You then face competition from several buyers, making the outcome much harder to predict.

 

Gavin Han：Buyers who are ready to make an unconditional offer can participate in auctions. If competition at the auction is limited or absent, owners may lower their expectations, creating a good buying opportunity. We have seen this frequently at recent auctions, with final sale prices below owners’ expectations, sometimes by over a hundred thousand dollars or even several hundred thousand dollars.