Why the Real Estate Market is Ripe for Savvy Buyers

New Zealand’s real estate market is at a crossroads, and the question on everyone’s mind is whether now is the right time to buy…

The answer, as it often is with real estate, is nuanced and not straightforward. However, there are lots of signs that we are at or near the bottom of the market making a compelling case for why savvy buyers should consider stepping into the market now.

A Buyer’s Market in Uncertain Times

It’s no secret that the housing market has cooled. According to the Real Estate Institute of New Zealand (REINZ), the volume of properties sold has declined, leading to a surplus of listings, and mortgagee sales have increased. This situation typically benefits buyers, granting them more leverage in negotiations and potentially leading to lower purchase prices.

Yet, despite these favourable conditions, many potential buyers are holding back. The economic climate, characterised by high inflation, rising living costs, and higher interest rates, is causing hesitation. It’s a paradoxical situation: the market is ripe for buyers, but economic anxieties are keeping them at bay.

What’s Happening with Interest Rates?

One of the pivotal factors influencing buyer confidence is the future direction of mortgage interest rates. Earlier this month, the Reserve Bank of New Zealand (RBNZ) dropped the Official Cash Rate (OCR) to 5.25 percent, following its August Monetary Policy Committee review. With the RBNZ signalling a further two OCR reductions by Christmas of 0.5% and a further 1% reduction in rates over the course of 2025, it is expected that mortgage interest rates are likely to fall to around 5 percent by the end of 2025, providing some welcome relief to homeowners.

Time to buy?

With interest rates now dropping, we are calling out that this is the bottom of the market. This makes it an excellent time to buy as stock levels are high and there is limited competition from buyers. With further cuts anticipated throughout 2025, it may now make more sense for people to buy a house vs rent and will also make rental investments stack up better. 

What this means is that over the coming months we are expecting to see more people willing to buy and excess stock will clear. Right now, there are a lot of people holding off buying as they try to pick the bottom of the market. However, as stock clears ‘fear of overpaying’ will switch to ‘fear of missing out’ and it’s likely that we’ll start to see the pendulum swing back in the other direction with the impact being that prices will trend upwards again. 

Additionally, as rates fall and the market picks up, there will also be an easing in the bank’s lending criteria making it easier for homeowners or investors to borrow money, in turn creating more competition. 

Looking ahead

With interest rates heading back towards 5%, the motivation for property investors and buyers to move quickly and take advantage of the softer market and the deals available should be strong. This will be fuelled further when the banks drop the rates they use to test borrower serviceability. Currently these rates are still high but as these fall, it will enable buyers to borrow a bit more and potentially pump a little more money back into the housing market.

While short-term economic conditions might seem daunting, the long-term fundamentals of New Zealand’s housing market remain robust. Population growth, a chronic housing shortage, and ongoing demand suggest that house prices will recover and continue to climb. Buying in today’s market, with favourable conditions, can position you well for future gains.

Moreover, with interest rate cuts on the horizon, the cost of borrowing is likely to become more affordable. This creates an attractive window for buyers who are prepared to navigate current uncertainties.

So, is now the right time to buy?

If you are in a stable financial position and can secure a mortgage, the current market conditions offer a unique opportunity for those who are well-prepared and informed. By understanding economic indicators and making strategic mortgage decisions, you can take advantage of the current market and position yourself for future success.

If you are interested in understanding more about your borrowing options, please click here to book a free consultation with one of our financial advisers . As with any financial decisions, we recommend talking to your adviser about your specific circumstances. By taking into account economic forecasts alongside your financial position and objectives, your adviser will be able to recommend the right loan structure and strategy for you.

The content of this article should not be taken as financial advice, or a recommendation of any financial product. Threefold is not liable or responsible for any information, omissions, or errors present. We recommend seeking advice from a qualified financial adviser before taking any action.