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When the pandemic hit in March 2020 inflation in NZ had just edged over 2% for only the second time in ten years and mortgage rates, already on a downward trend, were about to settle to record lows. For the next 18 months inflation was down and money was cheap. Perhaps not surprisingly the property market took off.
First home buyers were amongst those rushing to get onto the ladder. Properties were selling in days, often with multiple offers. Some landlords were letting investment properties sit empty, making more on the rising market than they ever did from rent, without the inconvenience of having to deal with tenants.What could go wrong?
Alongside this situation, Covid-induced shortages, giving way to global uncertainty over the Ukraine war, amongst other reasons, saw building costs and food prices head in the same direction . For nearly two years the party continued, but you know what they say about all good things. Now, with inflation close to 7% and mortgage rates at that or higher, there are many people sitting in houses which are worth a fair bit less than they paid for them, and depending on their borrowing, facing the dreaded 'negative equity'.
As if that wasn't enough, transitioning from a sub 3% fixed rate to 7%+ is adding a heavy burden to many who are already struggling with the increasing cost of living.
It's not all bad though - the thing about paper gains and paper losses is that they are on paper. If you can stick it out it is likely that time will iron out most of the bumps. For some this is even a time of opportunity. There are those who have been pleased to upsize in a down market; more expensive properties have come down in price by relatively more than cheaper ones. People have perhaps been able to add value and sell to buy a larger or more desirable property. And the dream of 'owning your own home' is possibly coming back within the grasp of some who had all but given up as the market appeared to race away from them.
Two of the great real estate cliches are that the best time to sell is never, and the best time to buy is now. One can only ever see the top or bottom of a market with any clarity when it's in the past, but perhaps those cliches might actually be true right now.
