Entry-level home buyers in driver’s seat

Good news for entry-level home buyers – property values remain flat and sale listings are on the rise, with the majority priced under seven figures.

A breakdown of residential listings published by OneRoof.co.nz in the six months since 1 November 2023 shows that just over 20,000 homes were purchased for less than $1m, more than double the number bought for seven figures or more.

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Vendors are showing a greater willingness to negotiate – more than 1-in-10 listings published in the last six months offered a reduction on the initial sale price.

However, at the lower end of the market, home buyers will have to fight hard to find a bargain – less than a quarter of the city’s listings were expected to sell for less than $750,000 (and less than 5% had a search price of under $500,000).

House Price Index shows falling values

The average dwelling value fell 0.2% over the three months to May this year, according to QV’s House Price Index June report.

The biggest declines were in Auckland, where the average dwelling value dropped 1.4%.

“The housing market has largely stalled, and now the seasonal slowdown is well and truly upon us, with both buyers and sellers continuing to grapple with difficult economic conditions. Against this backdrop, an excess of housing stock on the market is maintaining downward pressure on prices,” QV Operations Manager James Wilson said. “So, those who are in a position to buy right now have the upper hand.”

According to CoreLogic, values in 86 of the 199 Auckland suburbs analysed have dropped by at least 1% since March, with 13 down by at least 3%. At the other end of the spectrum, only 25 suburbs have risen by at least 1% over the same period.

Herne Bay remains Auckland’s most expensive suburb with a median value of $3.41 million. Auckland Central is the most affordable with a median value of $540,000.

In the meantime, potential buyers weigh their options  

Lower loan-to-value ratios, which kicked in at the beginning of the month, will make low-deposit lending easier. However, the screws are tightening for home buyers, with the Reserve Bank confirming that debt-to-income ratios (known as DTIs) will come into play from 1 July this year.

Compounding the squeeze, interest rates have remained high, blunting home buyers’ capacity for debt. The Reserve Bank (RBNZ) in its May statement indicated that rate cuts would not arrive until the second half of next year. However, ANZ, the country’s biggest bank, believes interest rate cuts will arrive sooner than it previously expected and has changed its official cash rate (OCR) forecast, picking the first cut to land in February, rather than May 2025.

Plummeting building consents will also play on the minds of buyers, whose fear of missing out could rise in the face of the dwindling supply of new builds. Stats NZ’s latest figures show there were 35,401 new homes consented nationwide over the year to April – a 23% decline on the year ending April 2023. Standalone house consents were down 20%, compared with the previous year.

New home consents have been declining since they hit a record high of 51,015 in the year to May 2022 during the building boom.

Choices abound for home buyers. Sellers must up their marketing game in the current climate. Call 0800 GOODWINS to learn how we can deliver a better bang for your marketing buck.