It’s becoming increasingly clear that property sales volumes in many parts of the country have now turned the corner, and we’re also starting to see the flow-on effects for prices. Indeed, our recent analysis of median property values at the suburb level (Mapping the Market) showed that 188 areas across NZ have seen growth of 0.5% or more in the past three months.
What are the factors behind this turnaround? To my mind, five things are important. These are the broad peak for mortgage rates (which means people can quantify their ‘worst case’), the rise in net migration, the continued strength of the labour market, the decline in available listings on the market, and the loosening in credit conditions (e.g. LVR rules and CCCFA).
For investors, however, the overall messages remain a little mixed. True, ending the falls in house prices will mean that some prospective buyers can have more confidence about entering the market without ‘catching a falling knife’ (or buying ‘too soon’). On the other hand, some investors will no doubt have managed to secure bargains in the weaker environment seen since late 2021.
Equally, although a peak for mortgage rates will help investors’ moods, we’re unlikely to see meaningful falls in interest rates for some time yet either – and when you factor in low gross rental yields, the average investment purchase is likely to require a pretty substantial ‘top up’ from other income for the foreseeable future. Of course, a potential National election victory would see mortgage interest deductibility reinstated over a phased period, helping to ease some of the cashflow pressure a little (but not altogether).
As such, it’s probably even more important than usual that investors target the right properties in the first place. So, how...
