They say that the best time to buy property is at the bottom of the property market cycle… which is easier said than done and usually you don’t know that the cycle has bottomed out until months after it has happened! However, there are some indicators that we can look at to see if we are at or near the bottom of the current cycle
1. It’s mid-July 2024 – the middle of winter, the weather is pretty miserable and most people are holed up at home or if lucky enough off on holiday somewhere nice and warm! Winter is typically a slow property sales season so it would be a reasonable bet that the vendors selling properties are genuine sellers wanting to get a deal done, so there could be some good deals out there
2. Supply of properties for sale: Across New Zealand, there has been a dramatic increase in the number of listings compared to the 2023 March quarter, however, sales have only slightly increased compared to the same quarter which would suggest that there are more properties on the market now than what there has been for several years
3. Interest rates on the way down? The Reserve Bank of NZ has finally started to make noises that they feel inflation is heading in the right direction, therefore they can see the OCR being reduced sooner than originally expected. This hint of the OCR falling has seen the wholesale swap rates (basically the interest rates that the banks themselves pay) plummet and are currently at similar levels to what they were in November 2022, the one-year fixed offered by the banks to retail clients rate in November 2022 was approximately 5.85% compare that to the current one year fixed rate of 6.85%. That’s a whopping 1% difference and would suggest that the banks have some room to move on negotiating rates down
4. Job security: When taking on considerable debt you need to be sure that you can afford to pay that loan back over a long period and to do that most people need to have secure employment. Considering New Zealand is either in or very close to a recession, having job security could be something of an unknown for some people, however certain industries can be quite confident that their jobs will be safe with the obvious ones being medical staff, teachers, Police/Ministry of Justice staff and the like.
With a potential oversupply of properties and potential falling interest rates that alone would suggest that the market is starting to bottom out and for those of us who are lucky enough to have good job security then yes now would be a good time to assess whether you should look at buying property before things start heating up again.
Will house prices take off? Probably not in the medium term as it’s unlikely that interest rates will drop significantly, and almost certainly won’t be falling to the levels that we saw in 2020/2021, however, the lower rates will see pressure on the housing market as more buyers come back on stream and competition to buy becomes stronger. So even if you aren’t quite ready to buy now, don’t give up hope as we should see a period of stability in the housing market which will hopefully give more people the opportunity to become property owners!