What’s happening with New Zealand house prices?
Up and up and up.
That’s the trajectory New Zealand’s house prices have followed for the past several years. In fact, the nationwide average climbed by over 13 per cent over the last year ending February 2017. This brings the national average to a whopping $631,349, according to QV data.
That’s probably why the topic of our nations housing is forever on our lips, as well as the pages of all major news providers. To cut through all the rest of the chatter and paint a more realistic picture, we’ve had a closer look at New Zealand house prices, and discuss why now is still a good time to buy property.
Property sales at a high
A recent report from The Economist summed up the state of the market here, showing that New Zealand is officially home to the most expensive property in the world. This was measured by comparing average incomes to average property prices.
We’re followed by Hong Kong, Canada and Australia. Does this mean that now’s the time to give up on your dreams of buying property? Should you shelve your investment or home buying plans and focus on something more obtainable?
Not necessarily. Property is still be a smart investment, and prices could even drop in the near future…
Price drops expected – and already occurring
Those who haven’t been keeping a close eye on the market will be shocked to hear that the nationwide median house price has softened, and Auckland prices have even begun to fall. According to Real Estate Institute of New Zealand data, during the for the four months to January Auckland prices dropped, sharply at first before levelling out slightly in December and January.
Recent price drops aren’t the end of it according to new data from research firm Infometrics.Their Chief Forecaster Gareth Kiernan commented on the future of price movements:
“Apart from the stresses on the market in Auckland, underlying demand conditions in some other regions do not justify current high prices, and we see scope for a 12 per cent drop in property values by the end of 2020.”
That’s a massive prediction, one that echoes the sentiments of many property analysts. If this were to occur, suddenly buying property would be far more obtainable as property prices drop, and wages continue their increases, slowly reducing the gap and improving unaffordability.
Getting on the market now – is it the right move?
You should always buy based on your personal standing, rather than the overall market. If you’re at the right stage of your life, and your finances are where they should be you shouldn’t worry about movements in values – they will always come back around.
The Reserve Bank’s data shows that property prices have gone up and down throughout history. In fact there’s been four peaks and troughs over the thirty years to 2015. However, the underlying trend is always upwards. In fact property prices averaged 12 per cent growth a year from 1965 to 1991 and around 7 per cent afterwards.
It’s undeniable that house prices are incredibly high at the moment, and it’s also a distinct possibility that they may drop in future. But if you’re in it for the long run house prices always eventually trend upwards, so don’t let the noise in the media change your mind.