Real Estate Market Trends: Is Now the Right Time to Buy?
The property market is a dynamic entity, influenced by a myriad of factors that can make the decision to buy a home both exciting and daunting. As of mid-2024, the real estate market is showing signs of recovery after a period of volatility. If you’re considering buying a home, it’s crucial to understand the current trends and factors that could impact your decision. Let’s explore the latest market trends and whether now might be the right time to buy.
Current Market Overview
House Prices
House prices in the country have experienced significant fluctuations over the past few years. After peaking in November 2021, prices fell by 17.8% and appeared to bottom out in May 2023. Since then, there has been a modest recovery, with prices increasing by 2.28% up to May 2024. This suggests that the market is stabilising, although prices remain below their peak levels.
Interest Rates
Interest rates play a pivotal role in the property market. Currently, the average 30-year fixed mortgage rate is around 6.77%, which is higher than the historically low rates seen during the COVID-19 pandemic but still relatively moderate in the long-term context. Higher interest rates can make borrowing more expensive, potentially dampening demand for property.
Housing Supply
The supply of available homes has been a concern in recent years, but there are indications that this might be improving. Changes in tax policies, such as the reduction of the bright-line test from ten years to two years, may incentivise investors to sell, thus increasing the housing supply. This could provide more options for buyers and help stabilise prices.
Regional Variations
The property market is not uniform across the country, with significant regional variations. For example, Wellington City, Auckland, and Christchurch City are currently considered undervalued, suggesting potential for future growth in these areas. Conversely, areas like Mackenzie District, Queenstown-Lakes District, and South Waikato District are seen as overvalued, indicating slower growth prospects.
Economic and Demographic Factors
Population Growth and Migration
Population growth, driven by record migration numbers, is putting pressure on the housing market. This increased demand is likely to support price growth in many regions. However, recent data also indicates a sharp increase in the number of citizens leaving the country, which could impact overall demand.
Government Policies
Government policies continue to influence the housing market. Recent initiatives aimed at liberalising the housing market and making property more affordable include abolishing urban limits, setting housing growth targets, and defining rapid transport plans. These measures are intended to increase the availability of affordable homes and support long-term market stability.
Expert Predictions
Experts have varying opinions on the future of the property market:
- Tony Alexander, an independent economist, predicts house prices could increase by up to 10% over the next 12 months, driven by population growth.
- Kiwibank’s chief economist, Jarrod Kerr, forecasts more modest gains of 5% to 7%.
- CoreLogic’s chief property economist, Kelvin Davidson, suggests a growth rate of around 5% in 2024, with regional variations.
Considerations for Buyers
Affordability
While house prices are recovering, they are still below their peak levels, which could present opportunities for buyers. However, higher interest rates mean that mortgage repayments will be more expensive, so it’s essential to consider your budget carefully.
Long-term Investment
Real estate has historically been a solid long-term investment. Over the past 30 years, house prices have increased by an average of 6.1% per year (excluding Auckland), indicating strong long-term growth potential. If you have a long-term outlook, buying property now could be a wise investment.
Personal Circumstances
Ultimately, the decision to buy a home should be based on your personal circumstances. Consider factors such as job stability, savings, and long-term plans. If you’re in a stable financial position and plan to stay in the property for several years, now could be a good time to buy.
The current real estate market presents both opportunities and challenges for buyers. While prices are recovering and interest rates are higher, the potential for long-term growth remains strong. Regional variations and economic factors such as population growth and government policies will continue to influence the market.
If you’re considering buying a home, it’s essential to stay informed about market trends and seek professional advice. A mortgage broker can help you navigate the complexities of home loans, and a real estate agent can provide valuable insights into local market conditions.
By carefully considering your personal circumstances and the broader market trends, you can make an informed decision about whether now is the right time to buy a home.