Drop in property values is creating winners and losers in the market

But it's also a unique chance for advisers

Drop in property values is creating winners and losers in the market

New Zealand property prices took a dip at the end of 2024, reflecting continued mixed signals in the greater economy. This could be good news or bad news for homeowners, depending on where they are in the life cycle of buying a home. 

"Every market creates winners and losers," Cameron Marcroft (pictured above left), owner and senior mortgage advisor at Loan Market Central, told New Zealand Adviser. "For existing homeowners, the declines have reduced their ability to move. Their mortgage might now be higher than their property value. For some people, the drop in property prices is helping them. There are a lot of first time homebuyers in the market now. It's fairly buzzy at the moment. Especially in Auckland, with the correction in the market more and more people are coming into the market." 

In December, the national median home value in New Zealand fell 3.9% year-over-year to $803,624. Falling home prices, along with New Zealand's current low interest rate of 4.25%, have created an environment ripe for first-time home buyers. 

"It's definitely an opportunity; it brings in another type of demographic, another crowd into the market," Marcroft said. "Two to three years ago it wasn't like this. Property prices were peaking and for first-time home buyers, it was hard to buy." 

Bad news for sellers

While current market dynamics are creating a number of benefits to new entrants at the moment, there are also those who are experiencing limitations as a result. 

Nick Hakes (pictured above right) – chief executive officer of Financial Advice New Zealand, a financial advisory board representing professional advisers – said this is how advisers have the potential to add the most value to borrowers. 

"What advisors do, and they do this well, is that they take into account and appreciate where an individual or family is at their point of time, what's important to them and what they are trying to achieve. And that can be different for different people," Hakes said. Each circumstance, he said, depends on the borrowers' situation – first-time home buyer, upsizer, downsizer or those looking to retire, among other factors – and what they're looking to accomplish. 

"The benefit of working with an adviser is that they can look at a family balance sheet, know what's important to them and know the full picture of what a good life would look like to them," Hakes said.  

For example, if an existing homeowner was contemplating selling amidst current market dynamics, an adviser might help them understand that they "don't need to, because there are no immediate drivers to sell. You could wait and potentially get a better [selling] price if the prices start to recover," Hakes said.  

Marcroft agreed that each situation is unique. Some existing homeowners are "treading water right now, trying to hold on until values change," he said. Meanwhile, upsizers might find it advantageous to take on new debt at the moment thanks to the lower interest rates. 

For first time homebuyers, Marcroft said the process involves helping clients navigate the approval process and finding new clients who are considering buying for the first time. To do this, he said he often partners with referral partners, such as real estate agents, in addition to the firm's own network and word-of-mouth referrals, which is "snowballing at the moment," thanks to heightened demand.   

"Each person that comes in has different needs," Marcroft said. "We try to help them achieve their goals."