So what exactly is happening in the Property Market. There are conflicting reports. On one side you have a mini boom in the Auckland Property market in some areas and reports that there are plenty of Chinese buyers coming into the market to buy top end properties while the house market is more subdued. March generally was a good month in terms of price appreciations in many areas of the NZ property market.
BUT
The fear level has risen with a rise in the opinion that prices will fall in the next six months after about a three week lag resulting from the Government’s suggestions in late Feb that they are looking at all areas New Zealand’s tax system especially our over infatuation (as they put it) with residential property. Latest data suggest that coming into April, many home buyers are in wait and see mode, investors are virtually an extinct breed (except for the experienced and canny ones), yet homesellers are not wanting to budge in terms of asking price. It is a Mexican standoff that has resulted in plummeting market activity in many regions. Home loan approvals are at all time lows (also here).
The next month???
My pick – Quiet on all fronts until the end of May when the Budget is announced and the raft of tax changes are confirmed. It will take a few weeks for the population to assimilate what the changes will mean for them, and then activity will increase as a response to the changes to be passed into law.
Is it a good time to buy?
Depends on your attitude to risk, your debt/equity, your aim with the purchase (move in yourself vs rent it out), and your holding time (is this a purchase that you plan to sell again in the next couple of years or do you plan to hold it for longer?). IN terms of the cost of money, I think it is a good time to buy.
At a very basic level, there are four market variations that affect your weekly purse strings in terms of the cost of ownership.
A) high prices and high interest rates – a booming market and high confidence levels – The most expensive time to buy.
B) low prices and high interest rates – better option than C because demand for housing will be hampered by the interest rates BUT still not cheap on the purse strings.
C) high prices and low interest rates – dangerous time to buy in terms of the potential for capital losses. Low interest rates in this scenario suggests an underlying weakness in demand going forward or the top of a cycle. Not an issue if you are buying to hold for a while. Not cheap on purse strings, but better than A.
D)low prices and low interest rates – confidence will be weak, the media will be negative, demand for houses will be low. Most buyers will be waiting until the market begins to push up again. This is the cheapest time to buy.
The worst time to buy is scenario A, the best time is scenario D.
We are currently in scenario D. Low confidence, low interest rates, weak demand. Will it last forever? NO Will prices eventually start rising again? YES.
