The Auckland property market has definitely changed. Activity has slowed down as have price increases. Investors are unable to buy as easily and first home buyers have hit the wall of unaffordability. The factors which were driving the market have not gone away – we still have a growing population and a shortage of houses but the demand has reduced significantly.
The slowdown has not occurred because of any particular event but because of a combination of circumstances. Investors need to have a 40% deposit, banks are reducing their lending and wage rates cannot keep up with the amounts needed to pay a home loan.
Minister of Finance Bill English is determined to keep this lid on the market tightly clamped down by suggesting that interest rates should start to rise in the near future, which will impact on borrowers very strongly.
There is no indication that prices will fall in the market but prudent home owners and investors are looking at the constantly moving property cycle and putting strategies in place to ensure they are well positioned to ride out this flat period.
No one likes to buy a house at the peak of the market and because there is no neon sign announcing when it has been reached, when a slowdown starts to occur many buyers become very cautious and prefer to wait until the indications are clearer. This caution tends to accelerate the slowing down of course.
So the strategies that many are putting in place include refinancing home loans to lock in rates, changing from interest only to principal and interest loans, redoing budgets to pay loans off more quickly, buying more carefully to ensure they are buying the best property and improving properties to increase their returns if they are investors.
Any home owner or investor who has been through the complete property cycle before (and there are plenty who have been through many cycles) are putting strategies in place to protect their assets and to ensure that their cashflow is as strong as it can be. And they are doing this not because they anticipate a decline but because they know that a flat period is the right time to put these strategies in place.
This change in the market may be followed by rises in house prices across Auckland again but it may not and if we do start to see some decline in prices in the future everyone will need to ensure that they are in the best possible position to hold on tight to the property or properties they own. The best way to do that is to start sorting out your personal strategies now.
Advising Auckland property buyers