I have never met an investor who said: “I wish I’d waited longer before I started.” In fact, more often than not I hear: “I wish I’d started 10 or 20 years ago.” The truth is, if you are investing for the long term, it makes very little difference what the market is doing when you purchase a property, as long as you are purchasing the right type of property to fit your financial position and you’ve got a good strategy in place to help you reach your long-term goals.

At the risk of oversimplifying things, let’s compare two different scenarios using the median price for New Zealand property over a period of time for the purpose of this exercise.

Example: Investor A bought a property at the peak of the boom in 2007 just before the global financial crisis (GFC), when the New Zealand median value was at its highest point of $352,000.

Investor B bought a property at the bottom of the slump in 2009 when the New Zealand median value was at its lowest point of $325,000.

The median value in New Zealand according to the latest information from the Real Estate Institute of NZ (August 2020) is $675,000.

This means that Investor A’s equity would have increased by $323,000 compared to Investor B whose equity would have increased by $350,000.

‘If you are waiting for the mortgage holidays to come to an end in the hope that you could pick up a bargain, you are dreaming’

As you can see, if Investor B managed to time the market perfectly, they would currently be $27,000 better off than Investor A, which is not to be sneezed at. But if only it were as simple as that. Prior to the GFC, bank lending criteria was very relaxed – “low doc loans” (aka “liar loans”) were commonplace and meant that you didn’t even need to have provable income. After the GFC however, bank lending criteria became very tight, which meant that many people who could have got lending in 2007, couldn’t in 2009.

Every week I get asked “Is now a good time to be buying? Or should we wait until X, Y or Z happens?”

My answer is usually “If you are able to get lending at the moment, and if you find the right property for your financial position and long-term goals (price, rental return, location), then why wait? What if X, Y or Z doesn’t happen?”

Looking Ahead

For all intents and purposes the property market should have been dead this year. We have just finished winter during a general election year, and we are also in the middle of a global pandemic while our borders are closed. However, we have seen huge demand from buyers almost right across the country throughout this period, combined with a shortage of listings in many places. If the market is performing this strongly now, what do you think will happen once we get past the holiday season, and the market begins its usual upward trajectory of activity early in 2021?

Some homeowners could be forced to sell their properties due to the economic fallout of this pandemic. Will they need to sell their property below value? Unlikely. Not with buyer demand being as high as it is, and with the current shortage of listings in so many parts of New Zealand. So, if you are waiting for the mortgage holidays to come to an end in the hope that you could pick up a bargain, you are dreaming.

If the property market continues to be strong, I expect the Reserve Bank to reinstate the restrictions on deposits by May 2021. If we have another global financial crisis due to the pandemic, then it is highly likely that banks will tighten their lending criteria. So, although you might be able to get lending today, you might not be able to later. If you know what you are looking for, don’t muck around.