With interest rates coming down and confidence returning to the property market, Ray White chief economist Nerida Conisbee and Ray White senior data analyst Atom Go Tian shared their outlook on the property market, and their top tips for first home buyers.
Speaking at a Tower Insurance event, in partnership with Ray White Concierge, Ms Conisbee said New Zealand’s official cash rate was coming down which was good news for the property market, but there was still a lot of uncertainty in the broader economy.
“New Zealand’s economy is in recession at the moment which has a lot to do with high interest rates needed to get inflation under control,” she said.
“The outlook is uncertain particularly because of what’s happening in the US. Trump is very erratic and he has a really strong tariff agenda. It is likely to lead the US to go into recession which could lead to lower global economic growth as well.
“New Zealand is quite sensitive because it is a small open economy. It’s particularly sensitive to tariffs in the US as its first biggest trading partner is China but the second biggest is the US.
“At the moment New Zealand hasn’t been hit hard by tariffs but we don’t know what Trump will put in place. He hasn’t put tariffs on beef yet, but if he does it could impact New Zealand and Australia.”
Ms Consibee said the country’s population was still growing.
“We have seen strong migration out of New Zealand to Australia particularly, but we’ve seen strong migration into the country as well,” she said.
“The household growth is 19,400 which means we do need 19,400 more homes, but New Zealand is quite good at building new homes, currently with 33,600 new dwelling consents.
“This means there’s more stable price growth. People tend to celebrate price growth but it does make it harder for people to get into the market.”
After a period of stagnation, Ms Conisbee said New Zealand’s house prices were on the rise again.
“We saw really strong growth at the start of the pandemic but then that dropped off as interest rates went up and remained quite flat,” she said.
“During Covid people were rushing and we saw investors and first home buyers competing for properties, so a flatter market is better for first home buyers as it allows them to take their time.”
She said New Zealand has seen some pretty big challenges for renters.
“There have been some quite big rent increases which has led to an affordability problem for renters,” she said.
“When you compare worldwide, a lot of renters in New Zealand are spending a large portion of their income on rents. Around 25 per cent of people in New Zealand are spending more than 40 per cent of their income on rent.”
Mr Go Tian shared some strategies to help first home buyers get into the property market, including government incentives, rentvesting, buying in bridesmaid suburbs, and buying with another person.
“In New Zealand there are three incentives for first home buyers who wish to buy a home to live in, including KiwiSaver, First Home Loan, and First Home Partner,” he said.
“KiwiSaver members for at least three years can put their KiwiSaver savings towards their first home purchase.
“First Home Loan allows first home buyers to purchase with just a 5 per cent deposit instead of 20 per cent.
“First Home Partner allows you to co-purchase the home with Kainga Ora who temporarily owns a share with the aim of you being the full homeowner within 15 years.”
He said rentvesting was another popular option which allows people to buy where it makes financial sense and live where it suits their lifestyle.
“This strategy doesn’t allow you to use the government incentives as you don’t have the intention to live in the home,” he said.
“But you can use the rental income to cover your mortgage repayments and property expenses, and rent in the area you would prefer to live.
“Then you can use this home to build equity and sell it to buy your forever home when you’re ready.”
Alongside this is the strategy to buy in a small or undervalued area.
“New Zealand has a range of suburbs where there are plenty of homes selling for under $750,000,” Mr Go Tian said.
“Often referred to as ‘bridesmaid’ suburbs, these areas can have lower house prices than metro areas, but still be experiencing good growth.”
The final strategy for first homebuyers was to buy with another person.
“A lot of people think of this as a partner but it could be a friend or family member, which we’ve been seeing a lot more in recent years,” Mr Go Tian said.
“However, there are some considerations to make from a legal, financial, practical and personal standpoint.
“Legally it might be a good idea to have a co-ownership agreement. Financially you should consider how the mortgage repayments should be split and who will contribute the downpayment, insurance etc.
“Practically you need to decide who will be living in the home, and decide on any renovations or when it is time to sell.
“Personally you need to agree on how conflicts will be solved and what to do if one person can’t uphold the financial side of the agreement.”
Media contacts:
Nerida Conisbee
Ray White Group
Chief economist
nconisbee@raywhite.com
+61 439 395 102
Atom Go Tian
Ray White Group
Senior data analyst
agotian@raywhite.com
+61 422 089 938
Cassandra Glover
Ray White Group
Senior media advisor
cglover@raywhite.com
+61 447 000 472