With house prices still weak, a relatively large number of listings to choose from and interest rates falling, commentators say it probably is a good time to buy a house.
ASB chief economist Nick Tuffley said his latest survey of housing confidence showed buyer sentiment was strong.
The percentage of people who think it is a good time to buy is the highest since 2011 at a net 26%, just slightly down from the 28% in the previous quarter.
So what are the factors that make it a good time to buy, and how do they stack up?
Soft prices
Prices were still well down on the peak, by about 15% or 17%.
Most people don’t expect much to change in that regard, at least in the near term.
ASB’s survey showed a drop in the percentage of people expecting prices to increase – only a net 18% to respondents expect prices to rise over the next 12 months, down from 26% the previous quarter.
Auckland had the biggest drop by this measure, with only 14% expecting price rises.
“What we’ve seen over the pretty much the last year or so is prices have been bouncing around,” Tuffley said.
“They’re relatively flat. There’s been a period where there have been marginal increases and marginal declines.
“The challenge in the short-term is that until the sales turnover picks up a bit further we’re likely or have that overhang of stock on the market, which is holding prices back.”
BNZ chief economist Mike Jones said his bank’s high-level affordability index put overall affordability at the “least bad” level since December 2020.
Prices will rise eventually
Prices might rise soon.
Cotality chief property economist Kelvin Davidson said this year would be flat for prices but it was likely that they would start to pick up again in the first half of next year.
“Sales activity is rising, the Reserve Bank is projecting the unemployment rate to come down next year.”
There were signs that the economy was starting to respond to lower interest rates, he said.
“The economy is looking a bit stronger… 2026 is probably a year where house prices do start to rise again, I’m becoming more convinced about that.
“The confidence effect – people start to go ‘I’m pretty sure it’s going to switch to a seller’s market at some point, I’m secure in my job, interest rates are down’ and the confidence starts to turn as well, mindset plays a role.
“If you want to get in before prices start to rise it’s probably now.”
He said housing was “quirky”.
“There’s a tendency for buyers not to buy in a buyer’s market and wait for a sellers’ market.
“When housing goes on sale no one actually buys, they wait until it’s expensive again. It’s different to milk or whatever, there’s a sense that in a buyer’s market people are a bit reluctant to buy, they think ‘why is my mate not buying, what are they seeing I’m not?’.”
The Reserve Bank forecasts 4% growth next year.
“I go along with that,” Davidson said.
“It’s not as if things are set boom but the unknown is the psychology thing. Maybe the fundamentals tell you 5% but it could be stronger… I have to say there’s a greater chance of 10% than zero.”
Tuffley agreed it did not look like the conditions were likely to cause a significant boom in house prices.
“Don’t go banking on just because prices have stopped going down that they’re going to shoot back up as well.”
Jones agreed there was uncertainty.
“As a rough guide, the combination of our forecasts for house prices, wage growth, and interest rates points to housing affordability broadly sustaining the improvements of the past few years.
“But there’s clearly a scenario where house prices flat-line for longer allowing affordability to improve further.”
Stock levels and competition
Sales activity has lifted, but it’s only recently that it’s been outpacing the rate of new listings coming on to the market, so there remains a lot of stock to choose from.
There were 30,430 houses available in July, according to Real Estate Institute data, down 0.4% on the year before.
Davidson said there was still a lot of choice for buyers.
“It’s still a buyer’s market but it might not necessarily be so forever, there’s still a lot of stock out there.”
Interest rates and bank test rates
Tuffley said the fact interest rates had come down a lot was a big factor.
He said bank test rates, which banks use to sasses whether a borrower can afford a loan, had fallen a lot.
“They’re not that much higher than the rates prevailing over 2020 and 2021. It’s a good time to buy from those market conditions.”
Davidson said there was money available from banks. “If you meet servicing criteria, banks are willing to lend.”
‘Just do it’
“I reckon you can always make a case that it’s a good time to buy a house,” Davidson said.
“You can’t ignore the financial side of it, but if all that falls into place, you want to have security of tenure, you want to get into a school zone, it always just strikes me that you may as well do it, don’t worry about timing the market or anything.
“Generally house prices will go up over time. The growth in future might be a bit less but if you’re going to ride it out if you sit there 10 or 15 years, it’s not really going to matter.”
The morning’s headlines in 90 seconds, including a cash boost for regional airlines, sellers re-enter the housing market, and Donald Trump’s social media fury. (Source: 1News)
But watch out
Davidson said anyone who bought in 2021 might question the “just do it” theory, but it was an unusual period that was unlikely to be repeated.
Frank, whom RNZ has agreed not to identify, can attest to that.
Frank and his family paid $750,000 for their West Auckland house.
The house had a council valuation of $790,000, rates were $1965 a year and they paid $3800 in body corporate fees.
But he said four years later, the situation was “grim”.
The CV had dropped to $670,000.
“A real estate agent recently told us we’d be lucky to get $650,000 if we sold – and that’s before the roughly $25,000 in selling fees.
“Council rates have jumped from $1965 to $2600 – up 32%. Body corporate fees have surged from $3800 to $5600 – up 47%.”
Their mortgage repayments have also increased, from $1375 a fortnight in 2021 to $1650 a fortnight now. When interest rates were at their peak, they were paying $2000 a fortnight.
“It’s what I call the triple whammy: falling property value, rising holding costs, and relentless mortgage pressure. This isn’t just a market correction – it’s a financial grind from all sides.”
He said even if he could sell now, he would not buy again.
“The only way out is to keep the house for another couple of years and even if the market recovers 5%, I will just sell and move into a rental and never buy it probably.
“I would rather pay university fees for my kids instead of paying council rates and body corporate rates.”
He said the situation could have been even worse.
“We could have bought a house worth up to $900,000, but as a family we chose to play it safe – so imagine the situation now for those who overstretched themselves at the time,” he said.
rnz.co.nz
