The Property Market: Is It Really ‘What Are You Waiting For’?

Property coach Steve Goody says now is the right time to buy a house – but not everyone believes it.

Goody asked his social media followers this week what they were waiting for.

“I can get 5.59 per cent for three years even though the floating rate is still at 8.

“Auckland house prices are now averaging below $1 million for the first time since 2020… The country’s mortgage brokers are recording a huge increase in activity as investors and first-home buyers get pre-approvals.

“Daylight Savings is starting to give agents more sunlight and open homes in the evening. So what indicator or metric are you waiting to get stuck on? Do you wait for two more OCR reductions?

“Would you wait for the average price to break through the old peak of two years ago?

“I’m interested in knowing why people are at the bottom of the market and don’t think good times are coming.”

He told RNZ the market had “very definitely” bottomed out.

“I think if somebody wants to be absolutely counter-cyclical and definitely time for growth and profits and cash flow and all that.

“A few years ago interest rates were 3 per cent, but yields were low because everyone was buying left right and centre. Now it could be exactly the opposite, inter rates are high but coming down and people can expect returns of 7 or 8 per cent.

“If you’re getting a 7 or 8 percent return based on borrowing at 6.5 percent or 7 percent and interest rates go to 5 percent, that can look really good later in the year.

“Now is a great time to get in because the average taxi driver or Uber driver isn’t talking about the latest house he bought. Once he does, it’s too late, you’ve missed it.”

He said house price recovery could be slow in some areas with lots of buildings.

“There’s an oversupply in some places – Lower Hutt, Christchurch, townhouses in South Auckland – there’s certainly no shortage.”

But banks seem willing to lend and everything is in the right direction, he said. “A lot of people don’t realize it until it passes.”

CoreLogic chief property economist Kelvin Davidson said much of what Goody said was accurate.

“I agree that we’re probably close to the bottom, not that a new boom will suddenly start – or at least anything more than the typical spring effects we’ll see in the next few months.

“While rates are going down, so is employment, and that’s a big handbrake.”

Henry Russell, an economist at ANZ, agreed that rising unemployment could undermine public confidence in credit and investment. “The labor market holds the key.”

He said the expected fall in the official cash rate had already had an impact on household lending rates and that slowing migration would mean less pressure on prices.

Russell said ANZ expected the housing market to bottom out. He said prices will remain stable at the beginning of the year and should rise by about 4.5 percent over next year.

“This is very modest compared to other forecasters, with some banks calling for a 10 percent increase next year.”

But houses are still unaffordable and the house price-income ratio is around six across the country, he said. “That’s the level of the second half of the last decade and we’re not talking about housing prices being affordable at that time.”

Debt-to-income ratios could also limit price growth in the future, he said.

Russell said the number of people applying for home loan preapprovals is increasing. “There’s a difference between getting pre-approved and actually buying a home.”

But many of the structural drivers of the market have not changed, he said, and the country as a whole is still not building enough homes. “As a result, the long-term upward trend in home prices should continue.”

There are also “animal spirits” that drive the market, and if sentiment is broad like Goodies, it means a strong bounce.

Mortgage broker Glen McLeod said it would be a stretch to say the market was “flat out”, although banks were struggling to get approved.

“Looking at my calendar I only have one free appointment slot this week and next week isn’t fully booked yet. When I’m fully booked two weeks in advance, it’s flat out.”