Is now a good time to buy?
The short answer is yes. However as ever something as significant and life-changing should not be acted upon based on one piece of advice without a good degree of supporting facts. So to help you understand why I believe this is the case, here is my supporting evidence based on 4 key suppositions:
Prices are not actually rising
Actual property prices are at best growing slowly and more likely quite flat and likely to remain fairly flat for sometime to come. This may not at first seem like a logical platform on which to base a suggestion that it is a good time to buy, but continued rising prices as we have seen particularly in Auckland eventually tend to dissuade buyers especially after prices have been rising for some time and people become wary of prices being too high. A fast reducing pool of buyers tends to favour the brave set of buyers who see value in the longer term. My view in regard to property prices is that the headline statistic of median price is misleading. Whilst it is still showing double digit growth, this is actually largely a function of the impact of the LVR restrictions which have severely depressed the low price segment of the market which has thereby artificially raised the median price. This scenario of real prices being flat whilst the media reporting of historical prices showing significant growth is going to change sharply in the coming months and can therefore be seen as a valuable point of leverage in negotiations with sellers who find that the vibrant inflation-heated market appears to have deflated fairly quickly.
There is not a shortage of property for sale
The reporting of levels of new listings coming onto the market continues to tell us that there is a shortage of property for sale. This is not actually the case. As compared to 5 or 10 years ago there are less properties on the market, but then there are less sales occurring and in this regard real estate agents tend to have poor memories whilst at the same time having a vested interest in supporting the view that there are shortages in order to attract new listings. There is a healthy level of stock out there in the market, with if anything a growing number of new listings, this means that a buyer has relatively good choice and should feel less pressured in fear of not finding the right property. This is a point of leverage in negotiation.
Cost of finance is not excessive
Interest rates are rising and will continue to rise in the next couple of years. This is something that actually provides certainty at least in managing any downside risk. However there may be some upside if the speed of these increases slows and we don’t see four, quarter point increases a year in the coming year to 18 months. If you plan for these increases within your borrowing calculation you can approach the next 3 years with greater certainty. A certainty that could be to your advantage as the relatively low interest rates we have enjoyed for the past 5 years have become the norm and the recent increases will potentially dissuade buyers; thereby leaving you with a great opportunity to be seen as a credible buyer just as sellers realise their position of strength they have for so long held in the market is weakening. Time for that serious negotiation on price.
No better time to buy than winter
People love visiting open homes on summer days and agents love showing off homes on summer days, but look behind the veneer of open home visitors to genuine buyers and see this time of year as the opportunity to seek out properties which are being marketed by sellers who tend to be more realistic about selling during the winter months as the motivation for them is clearly sell now for whatever reason rather than wait like everyone else for the ‘spring season’. Avoid the crowds, get out and view properties and leverage the lessening demand seen in the winter and make a smart buying decision. Overall I hold the view that this is a good time to buy. There is though only ever one certainty when it comes to property forecasting and that is the certainty of uncertainty! and therefore making predictions is virtually impossible. However if you have made the decision that homeownership is your goal and you have the financial status to afford a mortgage at those future interest rates then you would be wise to get out there and leverage the advantages I have outlined. Buy well and enjoy your home, invest in it and it will reward you over time.