The softening house market and why it’s a good sign for buyers
The current softening of the real estate market is a good sign for home buyers whether you are looking for your first home, trying to move and upgrade, or investing.
A soft house market means there are more sellers than buyers, in other words more supply and less demand. And this results in a flattening or even a drop in prices. A soft market is also known as a buyer’s market because those looking for a house have more power to negotiate harder and get a better deal.
Christchurch and Canterbury is now experiencing a softer market. Anyone who keeps a keen eye on real estate will know there’s been a lot of movement since 2011. The first real trend was a lot of building after a shortage of supply and at its peak in 2014 there were over 3,000 consents issued.
The period we’ve entered now is an over-supply and despite this more homes are still being built! While this becomes a challenge for sellers, real estate agents and housing developers, it presents a very realistic chance to buy a new home.
It’s strange how things change - it wasn’t long ago that many first home buyers couldn’t get onto the housing ladder – but this has all changed over the course of this year.
Here are five indications why the market is softer.
1. The prices in Christchurch and most of Canterbury have either plateaued or dropped
According to data gathered by Quotable Value (QV) in July 2017, the average value of a home in Christchurch was $495,098. This represents a mere 0.6 per cent increase from 2016’s valuation of $492,832. In the East and Hills zones, average values have dropped 0.8 per cent and 1.5 per cent, respectively.
In fact, the house market in much of Canterbury is moving slowly at the moment. The average value of homes in the region is $447,000, which is only 2.9 per cent higher than last year. This is sluggish progress when compared to the entire New Zealand house market where the average home value is $641,280 and some areas reached double-digit percentages in terms of growth.
2. There are more housing options
Plenty of newly-developed houses in and around Christchurch have yet to be sold, and today a lot of them sit vacant in sub-divisions across the City. This means you have more choice to consider. You just need to find a broker or agent who is willing to put in the work needed to find the one that is most suitable for you.
3. The rental property market is down as well
Rental properties have also been affected by the softening of the market, and currently there are also a large number of empty rental properties around the City and surrounding areas. There’s such an abundance that landlords are being forced to lower rents and provide incentives just to attract tenants. The over-saturation of rental properties—specifically fully-furnished units— has caused problems for some landlords, as the properties stay empty for longer. A soft rental market provides less incentive for investors to buy and this just depresses the market further, giving more good news to buyers.
A slower rental market is also good for people still saving for a deposit or not wanting to buy just yet, as it provides a better opportunity to put some money aside because renting is cheaper.
4. The September 23 election is having an impact
Housing is something that everyone in New Zealand has an interest in, no matter which party they support. In many ways, the housing market is a bellwether for the political situation.
Recent political events and the uncertainty over the election result is only supporting a softer housing environment simply because people are more likely to wait and see the election result before making a decision about buying or selling.
This presents another opportunity for buyers, especially if there is a seller who needs to sell. The lead up to the election may be the best opportunity to find a deal.
5. The Impact of the LVR restrictions.
There is no doubt the Loan to Value Restrictions (LVRs), imposed in October 2016, have had an impact on the housing market, because they have dampened the growth in house prices.
This is best illustrated by recent media stories calling for LVRs to be eased now that the housing market has slowed. The jury is out whether this would be a good move for the housing sector, even for first home buyers.
It’s taken some time but these have had a dramatic braking effect just in time for the General Election, which may be good news as the rampant housing market has been a major point of criticism in recent years.
Get in touch with a mortgage broker
Options to buy your first home will improve in a softer market simply because it means your deposit will go further and you may find a good deal, or even be able to afford a better house.
It can also be beneficial if you are upgrading your home or investing.
Whatever your goal a mortgage broker can help you out. They can assist you with any questions you might have about the current state of the house market and they can help you secure your best next home in Christchurch and Canterbury.
If you would like to hear more about why now is a good time to buy, please come and talk our mortgage broker Paul Townsend at Taurus Home Loans today – 03 366 6087. We will buy you a coffee and give you some free advice to set you on your way to buying a house.
Posted 25 Aug 2017