Some property investors have recently found themselves priced out of the house buying market, driving property prices down over the last few months due to new loan to value restrictions. The temporary removal of investor competition has offered opportunities for first home buyers who were previously locked out of the market.

The explosive Auckland market, for example, has cooled exponentially since September. Sales volumes are at their lowest levels in at least five years. First home buyers should consider acting quickly as the lower cost of borrowing we’ve become accustomed to is likely to be offset by rising interest rates as house prices fall. Auckland investors are still looking in cheaper areas like Rotorua, Tauranga, Gisborne etc. This could erode the amounts banks are prepared to lend to some borrowers.

Price Trends  

Average residential property values are declining or becoming flat in areas like Auckland and Hamilton, according to the latest figures from the QV House Price Index.

In Auckland, the average dwelling value is $1,045,362, down 0.2 per cent in the last three months. Value is falling further in Hamilton where the average dwelling value is $532,888, down 0.4 per cent in the last three months.

The average value of all homes in the whole of New Zealand was $631,432 in the first quarter of 2017, up a relatively low 0.6 per cent compared to the last three months of 2016. Value is rising slower than before in areas like Christchurch and Tauranga, while Wellington still has strong buyer demand.

Overall, there are more listings and fewer properties selling at auction. First home buyers are facing less investor competition for entry level homes in popular areas like Auckland, while others are racing to regional areas to snap up a more affordable home before the next wave of investors arrive there.

Tougher Conditions for Property Investors

Changes made to the LVR in October 2016 means property investors face additional hurdles, requiring a 40 per cent deposit to buy property. Investors must have enough equity across their investment property portfolio to meet this deposit figure. This has made it much more difficult to get funding, meaning investor buyer numbers are dropping significantly.

Investors who have sold investment properties may have needed to repay more lending to the bank than they initially anticipated, to bring total property equity to the 40 per cent level. As less investors are now purchasing at auction, sellers are moving away from auction-style selling. This offers more opportunities for first home buyers to put conditional offers on properties in a less competitive environment.

Long Term Outlook

The long term buyer outlook for property is looking very positive. First home buyers who purchase property in 2017 can expect their homes to steadily increase in value due to the pressure on housing supply.

●        New Zealand still has a shortage of houses to meet current demand.

●        Inefficient government agencies are taking too long to release land and issue building permits and new titles, meaning supply will continue to lag behind demand.

●        Internal net migration (the amount of immigrants moving to New Zealand) continues to occur at a significantly higher rate than long term averages, adding more pressure on housing supply.

The property market around New Zealand can be patchy in terms of sales price and buyer demand at the moment. First home buyers should seek the advice of a mortgage broker as we can help scout the best options to suit each buyer’s situation and circumstances.

Here at Wealth Health, we can help first home buyers obtain great mortgage deals and find a home loan structure best suited to them. We’re based in Papamoa, Tauranga but we can come to you! Call Craig on 027 667 2537 or contact us online.