The housing market is a very cyclical beast. It rises and falls as economic, social and political factors change, and just like the tides, over the last few years we’ve experienced some of the highs and lows.
In 2023, it felt like we were in a bit of a holding pattern. There was uncertainty about interest rates, banks competed but no one was ever sure when that was going to happen, and property sales were slower than we had seen in several years.
That’s all tipped to change in 2024, for several reasons.
Interest rates have likely peaked, and there are cuts on their way. Even the most bearish of commentators are now in agreement that before the end of 2024, we’ll likely have lower rates than those we’re seeing now. That’s building confidence into the market and those who were worried about how they might maintain an 8-9 per cent interest rate are becoming more likely to make a property decision.
The political changes following the formation of Government in late 2023 have now started to bring more investors and developers back into the market, a segment which has largely lain dormant for at least 18 months as they stared down the barrel of the removal of interest deductibility and a five-year Brightline test. Both of these things have now been reversed, and are likely to come into play mid-2024, which will pump more demand into the market.
First home buyers have enjoyed minimal competition for properties in 2022 and 2023 and will now start to face rising prices. But assistance tools like the First Home Grant, KiwiSaver and the likelihood of banks opening up more lower deposit lending (to over 20 per cent of their overall lending) is going to assist those buyers into homes and set them up at a time when interest rates will start dropping and lending will become more affordable. My advice to those who are in a position to buy is to take action in the first half of the year if they can. Prices will start to rise this year and with that brings challenges of deposit savings not keeping up with increasing costs of buying a home.
In the lending world, it’s about understanding various policy and ensuring every client has the right fit for them. With bank policy and appetite for lending, especially for business owners, constantly changing, having the best options on the table is key.
We’ve been here before when the tide has come in, and we’ll be here again when it goes out. It’s about finding the nuggets of gold in a sea of sand and having the right people around you to achieve your property goals.
- Claire Williamson is a mortgage advisor for My Mortgage.