House prices at the bottom of the market now falling in every region, but first home buyers no better off due to rising interest rates

This may be true for now, but not necessarily so for much longer, especially after the Ponzi implodes and house prices decrease by 30% to 40%. 

There is no need to be a first home buyer at the moment.

The smartest kids are hopping on a plane for overseas experiences ✈️✅ and the second smartest kids are standing back while the market reverts to mean. 🫧⤵️💥

Only the very dumbest kids are buying the slums of tomorrow at today's prices. 🤯

While I have noticed a lot of prices dropping in Auckland, I think we are in a strange time where the prospective first home buyer (like myself) no longer has the benefit of low interest rates, but doesnt really have the benefit yet of softened prices. Vendors are still expecting prices from a time of low interest rates. This is also not helped by the various property valuation sites which haven't really adjusted their estimates at all. We have recently made the call to pop to London for a couple of years, make double what we make now and return (hopefully) to a humbled market. 

That title is misleading and ignores the bigger picture.

With a 19% mortgage it is was very worthwhile paying every spare cent off a loan (assuming you purchased the home in high mortge times at lower prices). 

With low interest rates mortgages are massive and the spare cash thrown at the massive mortgage has almost zero impact.

Higher mortgage rates = lower prices, and increased ability to pay off more capital. This is exactly what new home buyers need.

Hutt Valley Market Update 16th May

To start with this week – the real estate agents in the Hutt  have started to come to the realisation that the “property party “ is well over

I received an email from a “large Hutt Valley real estate firm”  on Friday with the heading “Huge Price Reductions on these Properties”

Normally these type of email headings are reserved for Kathmandu and Briscoes and every kiwi knows you don’t pay full price at these retailers unless your desperate.

So It makes sense with these real estate headlines that buyers have quite a bit of time up their sleeves and FOMO has rapidly disappeared. Makes sense to ensure (as you would at Briscoes and Kathmandu) you don’t pay too much- further discounts are likely in the near future.

Current Market Listings

611 houses on the market- down 17 on last week.

Quite a few houses sold last week (mainly in the 700K-850K range) and also there was a large number withdrawn unsold– at least 11. May is looking to be a stronger month for sales than April and March were – recent house price falls may be encouraging people back into the market – specifically in the bottom quartile of the market

There continues to be a low number of listings this week (Consistent for this time of the year)  combined with withdrawals and what looks like a consistent number of sales appears to be the key reasons for the decline in the number of houses.

Based on the REINZ data which showed that 96 sold in Feb and 104 sold in March and 98 in April giving an average sale of 25 houses per week– 611 houses means there is 24.5 weeks stock on the market.

I am expecting given the withdrawals and low number of new listings for the number of listings to fall to around the mid 500’s

House Price Reductions

308 houses have a listed price

55% of the houses listed with a price have reduced their price since listing

The average markdown has fallen this week from 84K  to 82K.

Of those that have listed prices (pool 308) -34 have reduced their prices by 100K (last week this was 30 properties

6 have reduced their prices by over 200K and 2 have reduced their prices by 300K with the biggest reduction been 350K (a total 20% reduction)

The data continues to show the majority of houses listed are under 900K. The Median house price for all 611 listings is now 830K. (Steady on last week and the lowest Median YTD – previous low was $839K)

REINZ data showed the April Median was 847K – my data for April showed 849K. 

The latest QV valuations (valuations by QV which are updated every month and give an approximation of a houses value) have dropped $130K since Jan for the Hutt.

In April the QV valuation had dropped 80K – approximately 20K a month since the start of the year but this escalated in April – dropping 50K in one month.

Meanwhile Homes is indicating there has been an approximate $110K drop on house prices in the Hutt valley– since the peak which they are indicating was early Nov 21.  According to homes prices are back to June 21  prices – so flat with this time last year.

Houses sold vs houses removed

My records show 157 houses listed with a Price have sold YTD (up 15 from last week).

I have records of a further 133 houses (up 11 from last week)  that have been removed from the market unsold YTD. 

18 of those houses removed from the market have been listed on the rental market

The total number of houses removed from the market in the last 4 weeks is 57 (this compares to about 5 houses delisting a week over the previous 14 weeks).

Length of time on the Market

• 441 of the houses have been on the market for over 30 days  - 72% (last week it was 472)
• 303 of the houses have been on the market for over 60 days - 50% (last week it was 286)
• 169 of the houses have been on the market for over 90 days – 28% (last week was 166)

The number of houses on the market over 60 days is for the first time over 50% (one in two). This has risen from 32% of houses in mid March (one in three) and just over 1 in 4 houses have now been on the market more than 3 months.

The time to sell is getting longer and longer.  Anybody looking for a quick sale of their property would need to be well under the QV valuation or have a very attractive property at a very attractive price.

A real estate agent did advise most houses are going conditional with subject to sale as the most common condition in some cases there is chain effect occurring where there are now several houses all in the chain subject to sale. So anybody with cash is going to be an attractive buyer at the moment and could probably get a premium discount on the asking price.

Rental Market

Meanwhile the rental market has 198 properties for rent (up 4 on last week), and up 93 on this time last year – when just 105 houses were for rent.

Average rental price reduction is $58 a week (up $5 on last week)  and 42% have dropped their prices since listing.

As noted last week I have also been noting how many properties are listed for rent over $650 a week.

At the moment the percentage of properties listed at $650 is  41% - last week it was 40%. This is the lowest percentage of houses over $650 since the week of the 27th Sept 2021 when 38% houses listed were over $650.

And it tanks the vapour equity of debt stacker investors, while increasing debt servicing cost. The squeeze of negative leverage. Loans are coming due for rollover and conversations about real equity will happen. 

More popcorn pls.

Any FHB hoping to tap their KS to form part of a deposit are also watching that balance get ravaged at the moment.

(ask me how I know...  )

So it is the price of lower quartile houses that are on the decline, not the other 3/4.

"That was followed by Auckland, where the lower quartile price was $900,000 in April, down $66,000 compared to its peak in November last year.

Other regions where April's lower quartile prices were down significantly from their recent peaks were Northland -$60,000, Bay of Plenty -$47,000, Hawke's Bay -$40,000, Taranaki -$45,000, Manawatu/Whanganui -$60,870 and Nelson/Marlborough -$30,000."

Auckland, Nov 21 to Apr 22, say decline of 6.8 %, average per month 1.4%. Roughly works out to be 16% in Nov 22.

Has it ever been a good time to buy except in hindsight? Go find me a news article from any period about how easy it is to get into a home

Whenever the going is good the market quickly adjusts. Always. 

There simply aren't any FHB who can jump in or will jump in. Why would you catch a falling knife for exorbitant prices to live in some shitbox in a bad area?

These property owners seem to think they can get 685 or 700k for whatever garbage property they have for sale when it is $1500 per fortnight in interest after a 20% deposit. 

The vast majority of young people aren't earning enough to pay for these mortgages or to save for a deposit when landlords charge $750 per week for rent. I completely support rent strikes by tenants until rent prices go down. Rent is effectively a tax on income which robs the producers and workers for their income, renders our wages uncompetitive through higher wages needed to pay higher rent with no benefit for consumption.

The parasitism of the Property market's dominance over the economy makes it bankrupting to raise a family or to invest in the future. All the young people who stay and try to raise families are robbed blind and worked to death just so their children are thrown into daycare so they never see them. This system does not work for anyone except the vampires who make the loans.

fhb will always be better of with less debt

All this means is that prices haven’t yet fallen back into the range buyers can afford to pay, and still have considerable way to fall yet.

For FHB the other big factor is how much less of an advantage investors will have. Interest rates rising means the yield will be becoming less attractive at the same time their equity position is worsening.

Good time to sit back and wait

Worth noting that total mortgage repayments have been increasing on average by around 3.5% per year over the last six or seven years - despite the housing boom. This is about the same as rent increases.

Sadly, people always spend as much as they can afford on housing - whether they are buying or renting. There is always a slightly better house in a slightly better suburb within reach.  

We are only at start of downturn interest rates still just up from emergency level, inflation climbing and NZD tanking which will put inflation higher. If anyone is think of purchasing a house now it would be prudent to wait could be two or three years till prices finally hit bottom at which point they will be 50% too 60% from top last year.

Hi Greg, It is not fully truth that rising interest rates are disadvantage to FHB.

Firstly FHB are already at disadvantage with or without interest rate hike BUT falling house prices are big plus for FHB despite rising rate as now if they do manage to buy house their mortage will be 20% or 30% less as all indication are that fall of 20% to 30% is imminent ( have already fallen by 10% to 15% though with resistance as those who are able to hold are holding for now with hope that like in past 2008 and 2018 this downfall too will be short and shallow, not realizing that this time is different as RBNZ is not able to rush to support by reducing rates or LVR, instead is forced to do opposite so worst is yet tome). 

1: Having mortage of $600000 Is better than $800000 

2: Saved from buying into ponzi under FOMO and seeing their equity turning into minus.

Advantage or disadvantage, the madness had to stop as also not good for economy in the long run, so earlier the reset, better it is as cannot avoid facing, What we are facing now.

Anyone arguing that economy reset is not good is influenced by vested biased interest as economy cycle has to play out.

What I found of interest is that the median weekly income in Palmerston North of $1798 is better than the $1792 of Auckland North Shore, but the median house price of $508500 is so much lower than $1009350.

Why would anyone want to work in Auckland for the same salary but have to pay double for housing? Is it really that more attractive in our biggest city? Or are there other factors at play?

The fact is people are so much better off to buy now than a year ago.  It's too simplistic to say the market is "taking away" the benefit of lower prices with higher repayments.  If you had bought last year you are stuck with the level of debt you bought your place with- yes you might have paid off 10-20k more by locking in a low rate for a year or two, but if you had waited until now you could have saved more money in the form of a deposit AND have the benefit of the lower prices of today (which in most cases is going to be lot lower than 10-20k).  We're seeing entry level prices in parts of Auckland (e.g. Mt Wellington, Avondale) $100k-200k+ down on what they would have been mid-last year.  I suspect we'll see a large group of people with a massive amount of debt on a house that's worth significantly less than they bought, and who also will inevitably have to fix at these higher rates at some point.  When their rates come up for renewal, they may also no longer have the 20% equity required to lock in the banks lower rate card, making the climb to equity that much tougher.  It is sad that this will mainly impact first home buyers, but I guess that's the way the cookie crumbles.  Long run though, building costs are going up alongside these drops, meaning new construction will quickly fall off, ultimately meaning a new bigger bubble at some point in the distant future.

Feeling like I dodged a bullet here by securing for 3years. Gives me time to either generate more income or hold out for the rates to stabilise. if that fails then sell at a loss perhaps. But I’ll hold on for dear life 

Talk about stating the bleedin' obvious!

Sometimes I feel like I was the only one watching effects of politically driven monetary interference on the real estate market in the 1990s...

If only Labour had regarded all as a housing crisis rather than a first home ownership crisis*....by now a massive state housing build would be well under way creating constructive (literally 😬) solutions.

(I believe that the Labour policies are quite cynically aimed at voting potential first home buyers and their families.)