A Wellington couple have bought their first home for $300,000 less than it could have gone for last year, thanks to the city’s dramatic house price slump.
One local mortgage advisor says the current market is a “golden zone” for first-home buyers, who now have the upper hand in the market for the first time in years.
New OneRoof figures reveal the Greater Wellington region has experienced the steepest fall in house prices in the country.
This is partly due to a sudden pull-back by Auckland investors, who were largely responsible for much of the price inflation in the region after Covid-19, OneRoof has reported.
Average property values in Wellington City have dropped by $299,000 since the market peaked in March, with some suburbs in the capital taking a price hit of more than $400,000.
A Wellington man told the Herald this dip allowed him and his partner to buy their first home in the suburb of Island Bay after years of house hunting.
They purchased the two-bedroom property for $1.07 million in July this year.
The man said the previous owners had weighed up putting the house on the market at the end of last year, when a real estate agent thought they could get at least $1.4 million for it, but they decided to hold off.
He and his partner would never have been able to afford the property at that higher price, the man said.
They snapped up the house and fixed their loan interest rate at 5.39 per cent for two years.
“Now I’m questioning whether I should have fixed it for a little bit longer,” he said.
But despite the most recent Official Cash Rate (OCR) rise being the fastest on record and the cash rate now the highest it has been since December 2008, the man said he wasn’t too concerned.
“The economic environment and the unpleasantness around the uncertain future was never going to be anywhere near enough to stop us once the market started to go down.”
Across the country, first-home buyers accounted for a record portion of banks’ new mortgage lending in August.
A fifth (21 per cent) of the $5.4 billion of mortgage lending in the month went to first-home buyers – the largest portion since Reserve Bank records began in 2014.
Tommy’s real estate agent Nicki Cruickshank said there has been a steady increase in first-home buyers in Wellington this year.
“A property before that was $1 million and is now $800,000 dollars, so now they can actually afford to get into the market.”
She said the sharp fall in house prices in Wellington was a correction.
“We had the steepest rise and prices were even to my mind ridiculous and unsustainable. All it’s done is bring the prices back down to where they should be.”
Futurebound founder and mortgage advisor Jeff Elias said first-home buyers were not going to get a better market than the current one.
“First-home buyers do not realise they are in a golden zone right now and some of them are running scared because they are looking at the doom and gloom in the media, and looking at interest rate increases, and are sitting on their hands and doing nothing.”
He said interest rates were temporary and would eventually come back down.
“All this is is the difference between short-term thinking and long-term thinking.”
Elias said it was the first time in years that first-time buyers had the upper hand because they didn’t need to sell a house before they could buy.
Another Wellington mortgage advisor Michael Anastasiadis agreed it was a good time to buy for those who could get finance.
Once they have got a deposit together, Anastasiadis has been advising clients to prepare for a worst-case scenario of 8 per cent interest rates.
He said the demand for property has been consistent, but a lot of people were not in a position to actually buy.
“Because they don’t meet the 20 per cent deposit rate or their incomes aren’t enough to service the loan with much higher stress testing from the banks.
“There are so many people in that gap in between the 10 and 20 per cent deposit who we cannot help.”