Auckland entry-level home prices have fallen by NZ$200,000 to get deals done! Is it time for buyers to act?

Auckland is New Zealand’s largest property market, and its house price trends have long attracted close attention from property investors. Recently, however, one piece of news has sparked widespread discussion: prices for Auckland’s entry-level homes have fallen by around NZ$200,000 to get deals done. So, given current property market conditions, is this the best time for buyers to act?

 

The latest figures show Auckland house prices are still below their market peak by 16.5%

 

What do economists say?

 

Ed McKnight, resident economist at Opes Partners, said the signs point to a buyer’s market. More choice and lower prices have given homebuyers the upper hand, but the biggest winners are likely to be first-home buyers hoping to own their first property.

Opes Partners’ resident economist Ed McKnight

 

However, McKnight also stressed that this does not mean everyone should buy a home now; the decision should depend on individual circumstances. He explained that first-home buyers can benefit from greater choice and falling house prices. More homes are being offered at an asking price, by negotiation or by inviting buyer offers. This benefits first-home buyers because they can avoid auctions and do not have to spend hundreds of New Zealand dollars upfront on building and valuation reports. Instead, they can take full advantage of the current competitive market to make conditional offers.

 

Similarly, owner-occupiers hoping to move up the property ladder can benefit from falling prices, while those hoping to downsize may need to wait for a seller’s market before acting. Buying may also make little sense for property investors: high interest rates mean few rental properties generate positive cash flow, requiring owners to contribute more cash to meet mortgage repayments.

 

 

Kelvin Davidson, chief property economist at CoreLogic, believes that in some circumstances, setting aside the hard-to-predict interest rate factor, it could be said that now is a good time to buy. For owner-occupiers, however, the decision depends on their individual financial circumstances as well as many other factors, including the house and its location.

 

Notably, CoreLogic’s latest figures show that first-home buyers dominate the current property transaction market, accounting for a record 26% of all buyers. Property prices are also lower than before, with the average house price around 11% below the market peak. Davidson stressed that falling house prices mean buyers need smaller deposits, making them easier to save.

 

 

What do mortgage advisers say?

 

Jatinder Singh, a mortgage adviser at Kiwi Mortgages, also agrees that now is a good time for first-home buyers to get onto the property ladder. He said applying for a loan is faster and easier than a year ago. First-home buyers in particular are finding it easier to obtain loans because banks no longer scrutinise how many coffees they buy in a year. The biggest challenge affecting their borrowing now is the sharp rise in insurance premiums.

 

He suggested that, in the current high interest rate environment, buyers should fix their mortgages for between one and two years, then wait for market conditions to change and interest rates to fall. He has observed that first-home buyers have more choice in the current market and have become more selective. They attach conditions to their offers, such as finance and building inspection conditions, then continue negotiating the price down. After several rounds of negotiation, many sellers keen to sell will in fact agree to buyers’ conditions. He has found that current market conditions make buying easier for first-home buyers than for investors. Investors facing the Reserve Bank’s new debt-to-income restrictions will find their borrowing capacity is much lower than before.

 

What do real estate agents say?

 

Tom Rawson, a co-owner of Ray White Manukau, said it is now easier for first-home buyers to enter the market because there is less competition among buyers. They can now buy the same entry-level home for around NZ$200,000 less than two years ago. This is because the supply of listed properties has increased considerably while buyer demand has remained steady, giving buyers more choice among comparable homes for sale. He also stressed that reduced demand for property means sellers are more willing to consider conditional offers, giving first-home buyers enough time to carry out due diligence and obtain loan approval.

 

YIJU also interviewed Lily Zhang, a real estate agent at Barfoot & Thompson’s Albany branch, to hear her views.

 

 

YIJU: We have heard that, in the current market, prices for some entry-level homes in Auckland have fallen by 200,000 New Zealand dollars to get deals done. Do you think now is a good time for buyers to act?

 

Lily Zhang：I actually think now is a good time to enter the market, particularly for first-home buyers and investors, because interest rates seem to be showing a clear easing trend. In addition, the pace and frequency of property sales in our market seem lower than in previous months. There were particularly large numbers of listings in January and February, but we have now passed the peak listing period and new listings are appearing at a more normal rate. Our sales can therefore keep pace with the normal flow of listings. If interest rates fall further and there is other positive news on the economy and employment, our housing market should gradually recover.

 

Some homeowners are currently choosing to reduce their prices because they cannot see a positive outlook. Prices for some homes have fallen to, or even below, what their owners paid, effectively seeking buyers at low prices. But this is actually an unusual pattern, because the purpose of investing is to make money, and buying and selling also supports the normal progression of people’s lives. Selling at a loss or without making a profit is itself unusual, and unusual conditions cannot last forever. Once the market returns to normal, homeowners will regain a normal, enthusiastic outlook and prices will recover accordingly. If the market gives homeowners confidence, they will feel confident enough to wait for the right buyer rather than feeling compelled to sell at a low price.

 

Overall, I personally think now should be a very good time to enter the market. Of course, this is only my personal view. After all, the housing market is influenced by many factors. Whether it ultimately rises or falls is a matter on which people will differ, and everyone must make their own judgement.