Time to buy before the market shifts up?

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This week the Reserve Bank of New Zealand (RBNZ) did what everyone was expecting and cut the Official Cash Rate (OCR) by 50 basis points to 4.75%. This was in line with most analysists’ predictions with many calling for further cuts sooner rather than later to kick-start our ailing economy. 

The big banks were quick to react, making cuts to their mortgage rates with Kiwibank cutting its variable lending rates by 50 basis points prior to the official cash rate decision and ANZ following with a cut to their 1-year rate.  

So, what does all this mean to homeowners and prospective buyers? 

For kiwi homeowners with an average mortgage of $500,000, every 0.25 percentage cut to the interest rate puts about $88 extra a week in their pockets. While that’s welcome news, many will simply choose to keep on paying at the higher rate to pay off their mortgage faster.  

Stephen Toplis, head of market research at BNZ believes the RBNZ should continue cutting interest rates steadily, with the aim of bringing them below 3% sooner rather than later. 

That will make a huge difference to existing homeowners and give prospective new buyers even more confidence to buy.  

What are the signs of a turning market? 

There are always cycles of ups and downs in the property market with the overall trend being up. The Real Estate Institute of New Zealand (REINZ) August 2024 figures show signs of increased confidence and activity compared to the previous year. While the overall sales volume slightly declined, several regions reported increases in activity, and year-on-year listing numbers continue to rise. 

LJ Hooker group head of Network NZ Campbell Dunoon welcomed the move, noting that the reduction in interest rates is already positively impacting the property market. 

"With two consecutive rate cuts, we’re seeing a significant uplift in buyer activity and confidence. More people are attending open homes, and there has been a noticeable increase in auction participation across the country," Dunoon said. 

These views were echoed by REINZ Chief Executive Jen Baird who said August provided a sense of confidence and positivity to the property market. 

“August data shows a level of stability in the market. Despite a marginal 0.6% (or $5,000) decrease in national median prices year-on-year, we're seeing prices hold steady with a 1.3% increase month-on-month,” said Baird. 

Economist Tony Alexander says house prices have bottomed out and agents are reporting a 12% increase in people attending auctions. 

The ANZ’s monthly Business Outlook Survey has recorded a two-month surge in confidence about the economy over the coming year to a net 51% positive from just 6%. 

So, while we can all feel the economy is stuttering along, there are signs that fresh fuel is making it to engine and the revs are slowly picking up. 

5 changes that give us new confidence. 

Interest rates are just one lever for creating positivity in the market. We see several signs that could indicate the time is now for a house purchase. 

  1. Banks are very keen for business. With all the rate cuts, bank margins are getting squeezed, so they are very competitive and are looking to protect their market share. 
  2. There may be more good news to come. With more reductions in the OCR forecast by all the major banks, we can only see the cost of mortgage repayments getting lower. 
  3. Good stock on the market. There is a good range of properties for buyers to look at, meaning you are more likely to find exactly what you want with fewer compromises. 
  4. Good value properties.  The market has corrected, so there’s a great opportunity to buy in and lock in those savings.
  5. Better yields for investors. With lower interest rates, investors can get improved yields now with the foresight that it’s predicted to get even better in 2025 and beyond. 

In addition to all these changes in the property market, we're currently offering a cash gift of up to $25,000 when you purchase one of our selected homes in Auckland or Canterbury. It’s Fletcher Living’s way of saying “Welcome” at the special moment of buying a new home and helping you make your dream a reality.

When you add it all up, the time certainly feels like now for getting into the property market, particularly with a home builder you can trust to deliver quality, value and years of support and warranties.  

 

 

 

 

 

 

 


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