FALLING PRICES HELP BUYERS RETAKE CONTROL OF THE CHRISTCHURCH HOUSING MARKET

Buyers are seeking control of the housing market in Christchurch for the first time in two years, as you read this. The transition in the Christchurch housing market comes in the wake of housing prices dropping the sharpest for the first time in a decade across New Zealand. National home valuation stats indicate that the real estate main centres are ‘bearing the brunt of rising interest rates and tightening bank credit’.

But, is it time to cash in on the market yet? Or should you wait to see if the market goes further bearish? Here is some more news from the NZ and Christchurch market that may help you decide.

The New Zealand housing market witnessed a massive jump in housing prices at the start of the first phase of COVID-19 lockdowns that came into action 2 years back. However, the time may be up for the seller’s market thanks to a global financial crisis.

Across NZ, the average home price has decreased in value by 0.6%, according to national valuation institutions. The present national average home valuation sits at $1,046,636. Auckland house prices have witnessed a 20% drop since their peak in November.

The February 2022 prices are at $1.54mn as compared to November 2021 at $1.25mn. While this may appear as a nominal decrement to some, the decrease is still welcome news after the consistent price hikes.

Buyers are more confident about ignoring FOMO and adopting a comparative, price-aware stance towards investments. Which, according to Christchurch housing market predictions, can indicate further price cuts- but more on that below.

Notable economists project a further 10% average drop in NZ prices further down the line this year. But, word to the wise would be to hold off on investing immediately, as the median prices rose 31% till July 2021, and are still a long way from returning to their value from 2 years ago.

The price drop across New Zealand’s main centres can cumulatively give us some indicators about the fate of the Christchurch market. The most desirable cities for housing assets used to cost several times the average annual income.

In a positive turn of events the hike in bank interest rates, the cost of living, and the tougher lending rules have dwindled the demand for housing, leading to the price softening. Where FOMO used to drive buyers earlier, now they are hesitant to invest beyond their means.

According to Christchurch housing market predictions, the market is still yet to suffer the same fate of other NZ main centers. But, the fear of paying too much’ is driving consumer sentiment- so much so that only 16% of New Zealanders considered February 2022 prices suitable for investment, after they dropped 25% below the October 2021 prices.

Whereas, a whopping 58% reacted adversely to investing in the market right away indicating further price drop expectations. The price cool-off is being further assured by state government reforms that are pressing down on banks.

Tightened mortgage rules aim to reduce ‘discretionary spending, but also aim to phase out mortgage interest as a tax-deductible cost. Higher inflation rates are a justifiable cause for banks to hike mortgage interest rates, thereby disenchanting new buyers and existing owners with high mortgage payments.

This may serve as a good incentive if you wish to invest in the Christchurch housing market. Buyers who had been planning to sell considering the price correction to be temporary, are now a cautionary tale for new buyers.

First-time buyers are still hesitant to invest in Christchurch’s premium suburbs, such as Fendalton, whose median value currently hails at $1.62 million, locations like Scarborough Hill ($1.58m), Richmond Hiill ($1.36m), and Merivale ($1.38m), are still out of their investment range.

However, lucrative locations like Wainoni ($490,000) and Kainga ($491,000), Linwood ($481,000), Aranui ($441,800), and Phillipstown ($428,200) are still out of bounds. The high cost of living, heavy mortgage payments and inability to fetch a profitable or breakeven market price are definite financial incentives to detract investors.

Taking these factors into account it is safe to assert the Christchurch housing market predictions that there are several cogent reasons to hold off from investing, unless you find a particularly lucrative deal in a goood location. The months ahead will likely see further price compression and more accessible price tags all around, in the Christchurch suburbs.

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