Northland housing market ripe for picking with low interest rates

First home buyers Tony George and wife Jency Jacob are expecting to get into their new home at Totara Parkland in the next few months. Photo / Imran Ali

First home buyers are not only snapping up affordable properties but also building new houses in Northland as a result of historically low interest rates and the removal of the loan-to-value ratio restrictions.

Figures released by OneRoof.co.nz and data partner Valocity show first home buyers constituted 37.2 per cent of the total mortgage registrations in Northland this year up until the end of September— higher than the national figure of 35 per cent.

Investors accounted for 22.5 per cent of the total mortgage registrations in the region, refinancers and switchers at 16.5 per cent each, and house movers 7.5 per cent.

"The FOMO factor – fear of missing out – can be seen to be at play, as first home buyers decide now is the best time to get a foot on the property ladder," the report said.

Karetu recorded the highest increase in median property value of 170 per cent in the one-year to the end of September but the number and value of houses sold are unavailable as there's a bit of a lag in processing sales figures.

Mareretu, 38km south of Whangārei, and Paewhenua Island had the biggest fall at -35 per cent.

Northland, West Coast, and Otago were the only regions to show decline in values post Covid.

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In Northland, the value change in the 1-year to March 25 was 8.1 per cent but dipped to -1 per cent post Covid with biggest fall of -2.9 per cent recorded in Whangārei.

The median house price in Northland currently sits at $565,000.

Whangārei social worker Tony George decided to build a four-bedroom house in Totara Parklands in Tikipunga and said with low interest rates, his mortgage repayment would be slightly more than what he was paying in rent at Morningside.

Tony George with wife Jency Jacob and daughter Tirzah Tony inside their partially-completed home in Tikipunga. Photo / Imran Ali

Work on the house started in August and is expected to finish by February.

"Me and my wife started a savings account to keep any extra money we had and at the end of last year, my KiwiSaver matured. My wife increased her KiwiSaver contribution to 8 per cent.

"After three years, we managed to collect a healthy deposit and with a less than 3 per cent interest rate— almost half the normal interest— we were able to secure a land and house package for about $740,000.

"At the end of the day, it will be our own home. Rents and house prices are going up because Whangārei is getting more popular and while the housing market may be down for maybe another year, it's going to then go up.

"People need to be focused and have a goal when it comes to home ownership. Have a plan," he said.

Editor of OneRoof.co.nz Owen Vaughan said while first home buyers in Northland have done very well post Covid, he warned affordability as a result of a number of factors could see investors back into the market.

He said investors were currently looking at lower-priced regional housing markets like Gisborne and Whanganui which further helped first home buyers in Northland in terms of less competition.

Building rather than buying was also a good strategy for first home buyers as it added value to the property, he said.

OneRoof editor Owen Vaughan said building rather than buying was also a good strategy for first home buyers as it added value to the property. Photo / NZME

Bayleys residential sales leader in Whangārei, Rachael Dennis, said a combination of historic low interest rates have prompted many people to change their investment strategy from interest bearing accounts to the known rental returns of investment property.

"That, combined with Kiwis returning home and easing LVR restrictions, has brought a new wave of buyers into the market.

"This oversupply of buyers, along with a shortage of properties for sale, has put huge pressure on the market, resulting in a significant rise in sale prices across Whangārei in all price ranges."

Dennis said it was certainly not only Auckland buyers snapping up property in Whangārei.

A recent sale in Maunu of a lifestyle property for a $1.4 million saw three local buyers compete, she said.

First home buyers in Northland are taking advantage of low interest rates and a lack of competition from investors to get on to the property ladder. Photo / Michael Cunningham

According to OneRoof.co.nz and Valocity, 2720 residential properties valued at $1.6 billion were sold in Northland in the last one year.

Kerikeri recorded the highest value of residential properties in the last one year— $167.6m from 202 sales— followed by Kamo where 208 houses were sold worth $122.4m.

Tikipunga came third with 117 house sales valued at $55.3m.

Another factor that intensified competition in the market was a shortage of stock but listings were now back to solid levels, the report said.

"The problem is that demand still outweighs supply, and homes are selling fast."

Although the removal of the Loan-to-Value-ratio (LVR) has helped, the report said it has been more of a psychological boost to the market than a practical one, as banks were still cautious about the amounts they are prepared to lend, and were more rigorous in assessing future income post Covid.

"Off-the-cuff forecasting is something that's best avoided, but those thinking about their next purchase, and how much debt that might involve, would do well to look at longer term implications of their decisions and not let 'speculation' fever take hold."