The once booming and successful New Zealand property market’s pace has slowed down to a much more manageable level thanks largely to targeted action taken by the Reserve Bank of New Zealand which has been on a determined path to rein in relentless domestic inflation anxiety.
Naturally this is bad news for any investors looking to exit the market now and in the near future, but it is good news for those looking for a window of opportunity to enter an historically strong and successful market, because if the market slows down and property prices head south, if you bide your time you could bag a real estate bargain in New Zealand.
The property market in New Zealand is traditionally a strong market with high levels of local demand for both rental stock and real estate to own – local affordability is also relatively robust which has propped the market up before in times of inflationary pressure.
Further supporting the historical and long term success of New Zealand’s property market is the fact that it is such a popular nation for immigrants which means annually a high percentage of brand new buyers and renters enter the market with income and lump sums for property purchase, mortgage repayments or rental outlay that has been sourced external to the local economy.
These underlying fundamentals support New Zealand’s property market and mean that no matter where in the cycle the real estate economy is at, an investor who times his entry carefully will stand to profit from property in New Zealand at least over the long term.
It would be unwise to advise an investor to enter the property market in New Zealand right now though - because according to the ASB Housing Confidence Survey from ASB Bank, higher rates of interest are expected in New Zealand this year and the momentum that was fueling house price growth has started to slow down significantly.
Interest rates in New Zealand are already high and their affect on the property market is now beginning to appear as fewer borrowers are willing to further extend themselves by upgrading housing or re-mortgaging to release equity. This means there is less activity in the market, prices asked are not being offered and all in all the market appears to be entering a period of slow down or even stagnation.
Now is of course an excellent time for investors to bide their time and watch New Zealand property market developments closely because if interest rates rise again and tip the balance in favour of a property market downturn, there will be bargains galore as developers sell off stock below value, repossessions increase and buyers who have to sell are more willing to accept lower offers.
