NZHousePriceInsights HowtopredictthemarketbyNathanNajib
UnderstandingtheNewZealandPropertyMarket ThisguideisdesignedtohelpyoubetterunderstandhowtheNewZealandproperty marketworks.Whetheryouarebuyingyourfirsthome,investing,selling,orsimply stayinginformed,itexplainsthekeyforcesthatinfluencehousepricesandmarket behaviour.
Bycombininghistoricaldatawithcurrentmarketinsights,thegoalistohelpreaders developaclearerunderstandingofhowpropertymarketsmoveandmakemore informeddecisions.
AlltheKeyHousePriceInsightsinOnePlace Wehavebroughttogetherallthekeydatathatareoftenscatteredacrossdifferent sourcesandmadethemaccessibleinoneplace.Ourgoalistosimplifycomplex marketinformationsoreaderscaneasilyunderstandthenumbers,verifythedata,and useittomakeinformedpropertydecisions.
Usingbothcurrentmarketobservationsandhistoricaldata,thisguideaimstohelpyou understandhowthepropertymarketmovesovertimeandhowdifferentfactors influencenewzealandhouseprices.
First,whylistentous? We’reproudtobetrustedby10,000+Kiwiswhorelyonourweeklyinsightstobetter understandthepropertymarket.
We’renotpaidtocommentfromthesidelineslikemanyare.We’reonthegroundeverydayas realestateagents,that’swhyourviewofthemarketishonest,practical,andgroundedinwhat’s actuallyhappening.
Herearesomeofthevideosweproducedwhereourmarketcallsprovedaccurate, whilemanyotherswereclaimingthemarketwouldskyrocket!
UnderstandingtheNZpropertymarket TheFiveKeyVariablesThatAffectPropertyPrices
TheFiveKeyVariablesThatAffectTheNZPropertyMarket TounderstandhowtheNewZealandpropertymarketisperforming,wefocusonfive keyvariables.Theseindicatorshelpexplainwhatthemarketisdoingtodayandwhereit maymoveinthefuture.
Ifyoumonitorthesefivevariablesbelow,youwillbeaheadof99%ofbuyersandsellers andmakefarbetterdecisionsintherealestatemarket.
1)HousesPrices(MedianSalePrice): Monitoringtheannualchangeinmedianhouseprices.
2)Sales(Demand): Thenumberofannualhousesales,indicatingmarketactivity.
3)Inventory(Supply): Levelsofavailablehousingstock
4)InterestRates(MortgageRates): Fluctuationsinratesandtheirimpactonborrowingcapacity.
5)Affordability(Inflation+Unemployment): Inflation,incomelevels,andunemploymentrates
1)NewZealandMedianSalePrice Themedianhouseprice/mediansaleprice isthemostcommonlyusedmeasuretotrack propertyvalues.Unlikeaverages,whichcanbedistortedbyveryexpensiveorverycheap homes,themedianrepresentsthemiddlepriceofallhomessold,givingamoreaccurate pictureofthemarket.
Forexample,iffivehomesinastreetsellfor:
The$2Mpropertysignificantlyskewstheaverage,liftingitto$860,000.Bycontrast,the medianpriceis $600,000,whichprovidesamoreaccuratereflectionofthetypicalhouse priceformosthomesinthemarket.
Sharppriceincreasesmaysignalamarketoverheating,asexperiencedduringthe2022 propertyboom.Steadypricedeclines,liketoday,maysuggestadownturn.
Arepropertyvaluesrising,falling,orstabilising? 2007–2012:marketwasmostlyflattoslowaftertheGFC
2013–2021 stronggrowthcycle,withthebiggestjumpin2020–2021drivenbyhistoricallylowinterestratesandtheCOVID-erastimulusenvironment
2022–2023 marketturnedandmostreg onscorrectedastheReserveBankincreasedtheOCRtobr ngdown nflation reducingborrowingpowerandaffectingdemand.
2024–2025 Christchurchrecoveredbestsincethecorrect on,whileAucklandandWel ingtonrema nedsofterandsti lbelowtheirpreviouspeaks.
ResidentialvsTownhouse Variable1-What’sthebestinvestment?
Christchurch Residence-Betterforlong-term capitalgrowth,landvalue,and scarcity.Typicallyperformstronger overlongercycles.
Townhouse- Betterforaffordability, higherrentalyield,andeasierentry.
Auckland Residence:
Dropped-14%frompeakwithslowerrec butstillofferlong-termcapitalgrowthpo
Townhouse:
Morenewtownhousesdevelopingarou Auckland,offeredlimitedcapitalgrowth during2020-2021.
Residenceismuchbetterforthelong run,landisscarce,whichdrives strongerlong-termcapitalgrowth.
Townhouse:aredownaround-13%from peakwithlesscapitalgrowthduringperiods ofgrowth.
WhenshouldyoubuyaTownhouseVsResidence Residence Townhouse Nowisastrongtimetobuy,w ththemarketnearthe bottomofthecycle.Christchurchisstillholdingfirmon price, arge ybecauseitremainsmoreaffordab ethan AucklandandWell ngton.
Townhousesareoftense lingbelowCV wh chcan createroomtonegot ateandsecureabetterbuy.
Overthelongterm,homesonlargerlandparce shave generallyoutperformedtownhousesforcapitalgrowth, especiallyinstrongergrowthcyc es.
Thebestopportunitiesareofteninup-and-com ng suburbsthathavenotyetpeaked.Lookforpropertieswith land renovationpotential,andclearupsidetoaddvalue overtime.
Theyusual yofferlowermaintenanceandcan del versolidrentalyield butoverthelongtermthey tendtoseelesscap ta growththanstandalone homes
Buyingatownhouserequiresmorediscipline.The stronger-performingonesusuallyhaveapointof differencesuchasagarage more and,betterprivacy uniquedesign,orastrongerlocationc osetokey amenities
Simplerule: buytownhousesforaffordabilityandease, buyresidentialhousesforgrowthandlong-termupside.
No.ofSales-BuyerDemand Variable2-Isitabuyerorsellermarket?
2)No.ofSales-BuyerDemand Thenumberofhomessoldindicateshowactivethepropertymarketisand reflectsbuyerdemand.
Highersalesvolumestypicallysignalstrongbuyerconfidence,whilelower volumessuggestbuyersaremorecautiousduetofactorssuchasinterestrates oraffordability.
Highdemand+lowsupply → pricesrisequickly
Highersupply+weakerdemand → pricesstabiliseorfall
KeyHighlights
From2019to2021,demandroseforthreestraightyears,withsales increasingfrom77,326to85,238to88,650.
Overthatsameperiod,supplydroppedsharply,withinventoryfallingfrom 283,549to184,922.Thatcreatedamajorshortageinthemarket.
Theoutcome:highdemand+lowsupply=sharppricegrowth,withpostCOVIDFOMOpushingbuyersevenharder.
Thenfrom2022,thetrendreversed.Demandweakened,supplylifted significantly,andhousepricescameunderpressure.
TotalStock-Supply Variable3-SupplyvsDemand
3)TotalStock-Supply Housinginventorymeasureshowmanyhomesareavailableforsale,representingthesupplysideofthemarket.
Duringthe2020–2021boom,demandsurgedduetolowinterestratesandstronghouseholdsavings,whilehousingsupply remainedlimited.Thisimbalancecreatedintensecompetitionandrapidpricegrowth.
+116%SupplyIncrease(2021–2025)Inventoryrosefrom184,922to398,191.
Todaythesituationhasreversed.Currentlysupplyismorethanthedemand.
OCR/InterestRatesFluctuation Variable4-OCRinfluenceonmortgagerates
4)OCR/InterestRatesFluctuation TheOfficialCashRate(OCR)issetbytheReserveBankofNewZealand(RBNZ)andstronglyinfluencesmortgageinterestrates.
WhentheOCRrises,borrowingbecomesmoreexpensive.Whenitfalls,lendingbecomescheaperanddemandoftenincreases. Becausemostpropertypurchasesinvolveborrowing,interestratesplayamajorroleinhousingdemand.
CurrentOCR: TheOCRfellfrom5.50%to2.25%*
Lowerratestypicallyincreaseborrowingcapacityandbuyeractivity.
* nterestrates&OCRrecordedApril2026,thesemaychangeovert me
KeyHighlights In2020,historicallylowinterestratesincreasedborrowingpowerandbroughtmorebuyersintothemarket,whichhelpeddrivehousepriceshigher.
Theinterestrateenvironmenttodayismuchhealthier.TheOCRincreasesoverrecentyearsputpressureonhouseholds,andaffordabilitychallengesforcedsomepeopletosell. Wearenowinamorebalancedposition.
Watchourlatestvideowiththenumberonemortgageadviserinthecountrytounderstandwhattoexpectnextandhowtostructureyourhomeloan.
HowToMaximiseYourMortgage IntroducingguestwriterZhiyangChengfrommhq
ZhiyangChengisatrustedmortgageadviseratMHQ,known forhispersonalised,long-termapproachtohelpingclients achievefinancialfreedomthroughsmartlendingstrategies.
RecognisedasaTopAdviserinNZAdviser2023,hefocuses onsimplifyingcomplexmortgagestructuresanddelivering honest,values-drivenadvicetohisclients.
Findoutmoreaboutmhq: mhq.co.nz
Inthissection,ZhiyangshareshisperspectiveonDebtIsn’ttheProblem-HowYouUse YourMortgageIs
FormanyNewZealanders,debtissomethingtogetridofasfastaspossible.Payitoff.Minimisewhat youowe.Aimtobedebt-free.
Thatmindsetmakescompletesenseforcreditcardsandpersonalloans.Butwhenitcomesto property,thatsamethinkingcanquietlyholdpeopleback.
Notalldebtworksthesameway,andamortgage,usedwell,canbeoneofthemostusefulfinancial toolsyouhavetogrowyourwealth.(articlecontinuedoverpage...)
Ipridemyselfprovidingvaluein offeringpersonalisedadvice,our expertiseandadviceiswhatsetsus apartfromothers,andwillhelpyou succeed.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs ThereAreTwoKindsofDebt
Consumerdebt-creditcards,carloans, hirepurchase-losesvalueovertime income.Itcostsyoumoneyandchipsawayatyourabilitytoborrow.
Propertydebtisdifferent.Whentiedtotherightasset,amortgagecangrowy rentalincome,andgiveyouoptionsdownthetrack.
Somedebtdrainsyou.Otherdebt,withtherightapproach,canworkinyourfavou
WhyaMortgageIsMoreThanJustaLoan
Amortgagegivesyouaccesstoleverage,theabilitytocontrolahigh-valueassetwitharelativelysmall amountofyourownmoney.A20%depositgetsyou100%ofaproperty,andanygrowthinvalueisbased onthefullprice.That’soneofthemainreasonspropertyhasbeensuchareliablewealth-buildingtoolfor ordinaryNewZealandersovertime.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs TheTrade-OffWithPayingItDownFast
Puttingeverysparedollartowardyourmortgagei becomesequityyouown.Withtherightloanstruc foradeposit,arenovation,oranopportunity.
Theissueisn’tpayingdownfaster.t’swhetheryou built.
Abasicprincipalandinterestloanwithoutaredrawfacilityorrevolvingcreditcanleaveyourequity lockedaway-technicallyyours,butnotpracticallyaccessiblewhenyouwanttomove.Gettingthe structurerightmeansyoucanrepayaggressivelyandretaintheflexibilitytousethatequitywhen thetimecomes.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs HowtheLoanIsSetUpMattersMoreThanMostPeopleRealise Twopeoplewiththesameloanamountandinterestratecanendupinverydifferentpositions-just becauseofhowtheirmortgageisstructured.
Awell-set-upmortgagecanletyouaccessequityasitgrows,makeuseoffeatureslikerevolving creditoroffsetaccountstoreduceinterest,andgiveyoumoreflexibilitywhenyourcircumstances change.
Whetheryou’rethinkingaboutasecondproperty,arenovation,orjustwantabitmorebreathing room,thestructureofyourlendingmakesarealdifference.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs AlreadyOwnaHome?Here’sWhereMostPeopleGetStuck
Alotofhomeownersreachapointwheretheyhaveequitybuiltupand property,onlytohitawall.Thebanksaysno,orthenumbersdon’tquite assumeit’sjustnotfeasible.
Alotofpeoplerunthenumbersonapotentialinvestmentproperty,dec stopthere.
Butoftenthenumbersdowork,it'smoreaboutknowingwheretolook arealwayspropertiesavailablethatmakesensefinancially;theshiftism seemstoohard"towardactivelyexploringwhat'sactuallywithinreach
Themarketisbiggerthanmostpeople'simmediatebackyard,andthe announcesitselfobviously.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs BuyingtheRightPropertyfortheRightRea
Thepropertythatlooksbestandthepropertythatperformsbestareoftentwodifferentthings.
Stronginvestmentdecisionsaren’tabouttheshiniestsuburborbuyingclosetohome-they’re aboutwhetherthestrategyandnumbersmakesense.
Mostofthetimethebestopportunitiesareinareasyou’dneverchoosetolivein,butwherethe growthpotential,rentalyield,anddemandfundamentalsstackupwell.Buyingwherethenumbers work,ratherthanwhereyou’remostcomfortable,isoneoftheclearestdifferencesbetween investorswhobuildmomentumandthosewhostallafteronepurchase.
Underneathallofit,propertyinvestmentcomesdowntotwothings:equityandservicing.Equityis whatgetsyouintothenextdeal.Servicingiswhatthebankneedstoseetosayyes.Thewholegame isabalancingactbetweenthetwo.
Butsustainabilitymattersjustasmuch.It’snotonlyaboutwhetheryoucanaffordthenextpurchase it’saboutwhetherthatpurchasestillleavesyouinastrongpositionfortheoneafterthat.Aproperty thatlooksgreatinisolationcansetyoubackifitoverextendsyourborrowingortiesupyourequityfor years.
DebtIsn’ttheProblem-HowYouUse YourMortgageIs Abigpartofstayingsustainableiscashflow.Ideallyaportfolioshouldcarry coversthecostswithoutneedingtobetoppedupfromyourownpocketea therearesituationswhereholdingapropertyataslightlossmakessense,p capitalgrowthcaseisstrong.
Thekeyisknowingexactlywhatit’scostingyouandhavingaclearviewofw improve.That’sadeliberatestrategy.Quietlydrainingyourincomemonthto itisnot.
Theinvestorswhobuildportfoliossteadilyaren’ttheoneswhomovefastest.They’retheoneswho thoughtasteportwoaheadandmadesureeachpurchasesupportedthenext.
ToWrapUp AWordonRisk Amortgagegivesyouoptions,butitalsocomeswithrealobligations.Interestrateschange,rental incomecanbeinconsistent,andmarketsdon’talwaysmovethewayyouexpect.Keepingafinancial buffer,notoverextending,andhavingyourrepaymentssetupinawaythat’ssustainablenotjust optimisticgoesalongway.
Amortgageisn’tjustsomethingtoendure.Approachedwithabitofthought,itcanhelpyougetintothe marketsooner,buildvalueovertime,andcreateafoundationforfuturepurchases.
TheBottomLine Thegoalisn’tjusttopayitoffit’stounderstandhowtomakeitworkforyoualongtheway.
-ZhiyangCheng
AffordabilityinNewZealand Variable5-Inflation&UnemploymentRate
5)AffordabilityinNewZealand Inflationmeasureshowquicklythepriceofgoodsandservicesincreasesovertime.
InNewZealand,theReserveBankgenerallyaimstokeepinflationaround1-3%.
CurrentInflationisat3.1%
Unemploymenthasincreasedto 5.4%
InflationCooling:Inflationfellfrom7.2%(2022)to3.1%(2026),thiscreatedpressureon interestrates,butmidtolong-termthisisrequiredtokeepeverydaygoodsaffordable.
UnemploymentRising:Unemploymentincreasedfrom3.3%(2022)to5.4%(2026).Thisis anothercausetowatchwhenmonitoringhouseprices.
BalancedEconomy:Lowerinflationwithslightlyhigherunemploymentsuggeststhemarket ismovingtowardmorebalancedconditionsforbuyersandsellers.
Wheninflationrisestooquickly,centralbanksoftenincreaseinterestratestoslowtheeconomy. Unemploymentmeasureshowmanypeopleareactivelylookingforworkbutcannotfind employment.Higherunemploymenttypicallyreducesconsumerspendingandconfidence.
HowinflationaffectsUnemployment Thesetwoindicatorsarelinkedthroughaconceptknownasthe PhillipsCurve,whichsuggeststhatwhenunemploymentislow, inflationoftenrisesbecausemorepeopleareworkingandspending moneyandviceversa.
Forthepropertymarket,thesefactorsinfluence:householdincome stability,buyerconfidence&borrowingcapacity
Post-CovidShift:Followingthepandemic,inflationrosesharplyto 7%+in2022whileunemploymentdroppedtoaround3%,creating anoverheatedeconomy.
Sincethen,inflationhascooledbacktoaround3%,while unemploymenthasincreasedtoaround5–5.4%,bringingboth indicatorsclosertomorebalancedlevels.
Thisshiftshowstheeconomyhasmovedfromhighgrowthand overheating → towardstabilisation,whereinflationand unemploymentarenowsittingatmoresustainablelevels.
NZRealEstateCycle Whereareweinthecycle TheFourSeasonsofthePropertyCycle Propertymarketsmoveincycles,justliketheseasonsoftheyear.Theygothroughperiodsofgrowth,peakactivity,slowdown,and recovery.
Oneimportantthingtounderstandisthatmarketscannotskipacycle.Afterastrongboomusuallycomesaslowdown,andaftera slowdownthemarketeventuallybeginstorecoveragain.
Thesemovementsareinfluencedbykeyeconomicvariablesasmentionedpreviously.Whenthesechange,thepropertymarketresponds. Currentlyweareexperiencingawintermarket.
Spring|Expansion
Theeconomygrows.Inflation2%,GDP2–3%, unemployment4.5–5.5%.Propertypricesbegin rising.
Summer|Peak
Themarketisveryhot.GDP3%,pricesmaybecome overvalued,strongbuyerdemand.
Fall/Autumn|Contraction
Themarketcools.GDPfallsbelow2%, unemploymentrisesabove5.5%.Pricessoften andarecessionriskmayappear.
Winter|TroughThemarketstabilises.
Demandslowlyreturns,unemploymentbeginstofall,and pricesstarttorecover-preparingforthenextSpringcycle. Ittakes8-24monthscorrection.Afterthisaround2-3 yearsofstabilisation
TheFourSeasonsofthePropertyCycle KeyeventsofNZeconomyovertheyears 2000-2002Key
2008-2009KeyEvents:
Demandshock– st ngsrose buyersscarce
2009A fordab ty ncometo
HousePr ceRat o573
GFCs ump pr cesd p~10%
OCRCut o2 5%
nf at on0-3%
Unemp oymentpeakedto65% postGFC
2003-2007KeyEvents:
Supp y&Demand
Undersupp y–cons ruc ion ag demand surged Hous ngBoom Specu at nggrowth
OCRPeaked8 27%2007
In a on2-4%
Unemp oymentFe to35%
2010-2012Key
2016-2018KeyEvents: S ronggrowth K w Bu d ore gnbuyerban
OCR175%( ow)
nf at on05–2%
Unemp oyment49% → 44%
2019–2020KeyEvents
Lockdownfreezethensurge LVR f ed
OCRS ashed o025%(2020 nf at on15–2% → br e ynegat ve Unemp oymen 4% → 5 2% COV Dshock)
Unemp oyment65% → 6% → 5%
2013-2015KeyEvents:
Severeundersupply esp Auck and Pr cessurge LVRru es Br ght- netax
OCRupto35%thenback 2 5%
nf at on05–1%
Unemp oyment55% → 5% → 53%
2020Af ordab ty ncometoHousePr ce Rat o739
2021PeakKeyEvents
Seve eundersupp y–few ist ngs rant c demand
Affordab ty- Worstonrecord Marke peakNov2021(~$925k
OCRRising 025% → 075%
nf at on49%
Unemp oyment34%
MoneyPrinting: Excess ve pr nt ng of money and wasteful spending ead to a surge n inflat on
2022Incometohouse pricerat owas8 91 worstonrecord
Peak
2022–2023(Correction)KeyEvents: Prices a 15–20% sa ess ump OCRupto55%
nf at on73%peak(2022 → 47%(2023
Unemp oyment33% → 4%
2024–2025KeyEvents
Oversupp y supp yca ch nguptosubdued demand
Stab l sa ion( $770km d-2025)
OCReasing55% → 5 25%
In la on4%(2024 → 33%(m d-2025)
Unemp oyment44%-53%
Let’slookathowthe5variablesplayedoutduring thehousingboom,whenlabourwasinpower.
PrintingMoney
Unemploymentdecreases
LowOCR&InterestRates
IncreaseConsumerPurchasingPower
HousingBoom Greatforconsumersintheshortterm,butdamagingfortheeconomy overthelongterm.Duringthisperiod,lowborrowingcostsandeasy accesstomoneybroughtmorebuyersintothemarket,fuelling FOMOandpushinghousepricessharplyhigher.
Theproblemisthatthismakeshousinglessaffordable,keepsinflation elevated,andaddsfurtherpressuretothecostofliving.
Increasehousingdemand (LimitedhousingSupply
HomePricesIncreaserapidly
Let’slookathowthe5variablesplayedoutduring thehousingbust,whennationalwasinpower.
Stopsmajorspend ng &moneyprinting
HousingBust Intheshortterm,thisistoughforconsumers.Effortstobringinflation downoftenleadtohigherinterestrates,whichputpressureon householdbudgetsandmakeeverydaylivingmoreexpensive.But thisisnecessarytocreateahealthiereconomyoverthelongterm, keephousingmoreaffordable,andmakehomeownershipmore achievableforfutureKiwis.
Increasehousingsupply (decreasedbuyerdemand)
HomePricesFall UnemploymentIncreases
Ishousingstillaffordable? Letstakealookatincomevshousepriceratio
IncometoHousePriceRatio(NZ) Theincome-to-house-priceratioiscalculatedbydividingthemedian housepricebymedianhouseholdincome.Realistically,ahealthierlevel wouldsitclosertoaround4xhouseholdincome.
Affordabilitydeterioratedsharply(2007–2021)
Theincome-to-house-priceratiorosefromaround6xto9x,showing housingbecamesignificantlylessaffordableduringtheboom.
Affordabilitypressurepeakedin2021–2022
Housepricesgrewmuchfasterthanincomes,pushingaffordabilityto someoftheworstlevelsseeninrecenthistory.
Affordabilityhasimprovedrecently(2023–2025)
Theratiohaseasedbacktoaround7.5x–7x,ashousepricesstabilised andhouseholdincomesincreased.
Whythismatters Theincome-to-house-priceratiohighlightshowunaffordablehousing becameinNewZealand.Thiswasdrivenbystronghousepricegrowth, slowerincomegrowth,andbroadereconomicfactorssuchaslowinterest rates,inflation,andrisingdemand.
MeetLukeKemeys-Award-WinningCA&Speaker LukeKemeysisaFellowCharteredAccountantandbusiness advisoratnextAdvisory,heisalsothehostofKeepTheChange, oneofNewZealand’stop-ratedfinancialliteracypodcasts, helpingeverydayKiwisimprovetheirmoneyhabits,investing knowledge,andlong-termwealth.
Youcansubscribetothefinancialliteracy newsletterat:www.keepthechange.co.nz
Inthissection,Lukeshareshisperspectiveonthe7financialmistakesbuyersshouldavoid.
Peoplewillspendweeksscrollingthroughpropertylistings,butverylittletimethinkingaboutthe financialdecisionsthatsitbehindbuyingahome.
ThroughmyworkasaCharteredAccountantandbusinessadvisor,Iregularlyseetherealfinancial impactoffinancialdecisionsplayoutinpeople’slives.AndthroughmyfinancialliteracypodcastKeep TheChange,whereIspeakwiththousandsofeverydayKiwisaboutmoney,thesamepatternsappear againandagain.
Propertycanabsolutelybeapowerfullong-termasset.Butthedifferencebetweenpropertybecoming asteppingstonetofinancialfreedomorasourceoffinancialstressoftencomesdowntoahandfulof keydecisions(articlecontinuedoverpage...)
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake1:BuyingBasedonWhattheBankSaysYouCanAfford
Justbecauseabankwilllendyouacertainamountdoesn’tmeanthatlevelofdebtwillbecomfortableto livewith.Banksareassessingriskfromtheirperspective.Theirjobistomakesuretheloanislikelytobe repaid.
Buttheyaren’tassessingthingslike:
Thelifestyleyouwanttolive
Yourrisktolerance
Futurecareerorbusinesschanges
Unexpectedexpenses
Familyplans
Manybuyersstretchthemselvestothemaximumloanamountbecausetheyfeeltheyneedto“getinto themarket”or‘’getontheladder’’or‘’getthemosthouseyoucan’’.
Theboringaccountantinmeremindspeoplethatabetterquestiontoaskis: “Whatlevelofdebtallowsmetosleepwellatnight?”
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake2:UnderestimatingtheTrueCostofOwnership Buyingahomeisjustthebeginning.Therealfinancialimpactofpropertyownershipshowsupintheyears thatfollow.Icallthese‘downstreamcosts’.
Peoplemessagingmehaveoftenunderestimatedongoingcostssuchas:
Maintenanceandrepairs
Insurance
Rates
Renovationsandupgrades
Interestcostsovertime
Ahousewillalwaysneedwork.Roofsneedreplacing,kitchensgetupdated,andunexpectedissues appearwhenyouleastexpectthem.Thesecostscaneasilyrunintotensofthousandsofdollarsover time.
Iwastaughtthatagoodruleofthumbistoassumeatleast1%ofthepropertyvalueperyearwillgotoward maintenanceandupkeep.
Ignoringthesecostswillforsureleadtoanxietyinthefuture.
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake3:ConfusingEquityWithWealththeTrueCostofOwnership InNewZealand,peoplefeelwealthierwhentheirpropertyvalueincreases,andonpapertheirequity grows.
Yourhouseincreasinginvaluedoesn’timproveyourday-to-daycashflowunlessyousellorborrow againstit.
Thisiswhysomepeoplecanappearwealthyonpaperbutstillfeelfinanciallystretched.Truefinancial strengthusuallycomesfromstrongcashflow,manageabledebt,anddiversifiedassets,notjustarising propertyvaluation.
Propertycanbeapowerfulpartofawealthstrategybutitshouldn’tbetheentirestrategy.ToomanyKiwis areallinonpropertyandhavenodiversification.
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake4:IgnoringOpportunityCost Whenpeoplebuyproperty,theyoftenfocusonlyonthepurchasepriceandmortgagerepayments. Whattheyforgettoconsiderisopportunitycost.
Opportunitycostissimplyasking:“Whatelsecouldthismoneybedoing?”
Forexample,alargedepositsittinginpropertymeansthatmoneyisnot:
Investedinotherassets
Fundingabusinessopportunity
Generatingincomeelsewhere
Thisdoesn’tmeanpropertyisabaddecision(farfromit).Buteveryfinancialdecisionhastrade-offs.
OnethemethatregularlycomesuponmypodcastKeepTheChangewhenspeakingwithinvestors andentrepreneursisthatwealthtendstogrowwhenpeoplethinkabouthowtheirmoneyworks acrossmultipleopportunities,ratherthanconcentratingeverythinginasingleasset.
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake5:BuyingforStatus PropertyinNewZealandcarriesastrongemotionala ispressureto:
Buythe“right”house
Liveinthe“right”suburb
Upgradeassoonaspossible
Butbuyingpropertyforstatusratherthanfinancialst houseoftenmeans:
Alargermortgage
Higherinsuranceandrates
Moremaintenance
Greaterfinancialstress
Amoremodestpropertycanfreeupcashflowtoinve goalshouldnotsimplybetoownproperty.Thegoals freedomovertime.
7BigFinancialMistakesKiwis MakeWhenBuyingProperty Mistake6:StretchedTooThinFinancially
Oneofthebiggestrisksinpropertyownershipisbecomingover-leveraged(andweallknowNZ housepricesareveryexpensive).
Whenahouseholdisstretchedtoothin,evensmallchangescancausestress.
Forexample:
Interestratesincrease
Incometemporarilydrops
Amajorrepairappears
Unexpectedlifeeventsoccur
Beforebuyingaproperty,it’sworthasking:
Couldwehandleinterestratesincreasingbyafewpercent?
Dowehaveanemergencyfund?
Howstableisourincome?
Stress-testingyourfinancesbeforebuyingcanpreventalotoffutureanxiety.
7BigFinancialMistakesKiwis MakeWhenBuyingProperty 7.NotThinkingLongTerm Propertytendstorewardlong-termthinking.Short-termmarketmovementscancreatenoiseand uncertainty,butoverlongertimeframespropertyhashistoricallybeenastableasset. Themistakemanypeoplemakeisbuyingwithoutconsideringtheirlonger-termplans.
Questionsworththinkingaboutinclude:
Willthispropertystillsuitourlifeinfivetotenyears?
Couldweholdthispropertythroughmarketcycles?
Howdoesthispurchasefitintoourlong-termfinancialgoals?
Buyingandsellingpropertyfrequentlycanbeexpensiveoncetransactioncosts,legalfees,and movingcostsareconsidered.
ToWrapUp PropertywilllikelyremainanimportantpartofwealthbuildingformanyNewZealandersbecause Kiwiloveitasanassetclassbutthisisslowlychangingwithyoungerpeople.
Butthepropertyitselfisonlyonepartoftheequation.
Therealimpactcomesfromthefinancialdecisionssurroundingit.Howmuchdebtyoutakeon,how muchfinancialflexibilityyoumaintain,andhowpropertyfitsintoyourbroaderwealthstrategy.
Takingthetimetothinkcarefullyandnon-emotionallyaboutthedecisionsaroundpropertycan makeallthedifference.
Goinwithyoureyeswideopen.
-LukeKemeys
Whatweareseeingnow What’sdrivingtheNewZealandhousingmarket
The5KeyVariables-What’sDrivingtheMarkettoday Prices:TheNZmedianpriceissittingaround$753,106,showingsignsofstabilisationafterthecorrection.
Demand(Sales):Demandisgraduallyimproving,butremainsbelowpeaklevels.
Supply(Inventory):Inventoryisrising,givingbuyersmorechoice,butnotatarapidpace.
InterestRates(OCR):TheOCRisstableat2.25%,withmortgageratessittingaround4.5%.
Affordability(Inflation&Unemployment):Inflationisatamoremanageable3.1%,whileunemploymentsitsat5.4%.
Summary:Themarketisnolongeroverheated.Itisnowmorebalancedandrecalibrating.Weareunlikelytoseesignificantpricegrowthinthe nextfewyears,withareturntohealthierannualgrowthofaround2–4%morelikely.
Overall,themarketappearstobeinalateWinter/earlySpringphase,layingthefoundationforthenextgrowthcycle.Thatcreatesopportunity forbuyers,whilesellersneedtoberealisticonpriceandstrongonpresentation.
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