Thinking about buying a property but not sure if it’s the right time? With the current state of the economy, high interest rates and low house prices, it’s easy to feel hesitant. But here’s the good news — it may be a great time to buy. If you’re in the right financial position, you can take advantage of a unique situation. We sat down with Aseem Agarwal, Head of Mortgages at Global Finance, to discuss why now is a great time to achieve your property goals.
1. Lower house prices outweigh high-interest rates
Most people believe that while interest rates are this high, they should avoid buying a property. But rates are about up 2% from New Zealand’s average baseline, and they’re expected to drop in the next two to three years. So even though you’ll pay a little more interest in the short term, buying now means you could get a great deal on the purchase price. Aseem says that will more than cover the extra spend on interest.
“You might pay $15,000–$20,000 more per year in interest, but that won’t last long. In two years, you may end up paying $30K-$40K additional in interest payments to the bank. However, when house prices are down by $100,000 to $150,000, you can have a great return overall. Because in two years if the house prices go up by $100K-$150K due to the drop in the interest rates, then the homeowners will end up borrowing this increase in the house price in the loan amount and pay further interest on this additional borrowing over the lifetime of the loan. This means, the house will cost them more over the lifetime of the loan and their repayments may still be same as today with no reprieve.”
2. House prices will rise as soon as interest rates go down
When interest rates drop over the next two years, we will inevitably see house prices rise again. Right now, house prices in New Zealand are down 10-20%, and if you wait two years for the interest rates to go down, you’ll miss this opportunity to find the right property at a more affordable price. Aseem says that acting now will lead to greater gains in the future.
“Anyone with a good capacity to borrow should take advantage of the housing market right now.”
3. A slower market means you can take your time
During the height of the housing boom, market conditions favoured sellers, with limited housing supply and high demand. We saw competitive bidding wars, auctions and tenders where buyers had to act aggressively to secure a property. Now, we are definitely in a buyer’s market, and there are many more choices. Aseem has noticed how much more relaxed and enjoyable the process is for his clients.
“Less pressure means you can assess your options, do your due diligence and make the right decision.”
Invest in your future
If you’re in the market for a new home, and it makes financial sense, now is a great time to buy. With interest rates expected to drop to 4% over the next two years and house prices likely to climb again, your new asset will have a great return. And with the slower market, you can take your time to find the perfect investment.
If you want to take advantage of these unique circumstances, speak to the team at Global Finance today. We’ll help you start the process.
The information and articles published are true and accurate to the best of the Global Finance Services Ltd knowledge. The information given in this article should not be substituted for personalised financial advice. Financial advice should always be sought independently which is personalised depending upon your needs , goals, and circumstances. No person or persons who rely directly or indirectly upon information contained in this article may hold Global Financial Services Ltd or its employees liable.