Just moved to New Zealand, which by various accounts is either the most, or top three, over-valued housing markets in the world (see, e.g.,
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12125648This is a new issue for me, coming from the US where my first home purchase was bought when prices were low post-GFC.
My very vague understanding is that "overvalued" does not mean "inevitable crash" i.e. prices could continue to rise.
How, if at all, do I account for the "overvalued" factor in trying to decide whether to buy? Or is it just not a factor, assuming the rent vs buy calculation says buy? (I'm using the NYT calculator, assuming a 5% growth in house prices, which is conservative based on the last year (20% growth in my city, Dunedin) and 5% growth in rent (ditto).
If you're interested in more numbers:
- current rent is $430, but we expect it to go up in November to at least $450, possibly as high as $500, based on huge growth in rent prices here over the past 12 months
- house is uncomfortable - freezing, not sunny, gross bathrooms - but good location
- we have up to $180K for down-payment (banks require 20% here)
- annual gross income around $120K
- NZ banks don't offer 30 year fixed loans like in the US - we are looking at a 3 year fixed @ 4.29%
- we do not know how long we will be here for - depends on work/life satisfaction over the next few years. Minimum 3 more years, possibly this is "it" while the kids are in school.
- university town so demand for rentals generally exceeds supply - mayor has recently acknowledged city is facing a housing crisis
- "super seller's market" according to the agents - houses are going for $100K over their estimated online value, multiple unconditional offers etc.
Any and all advice gratefully received, this is all really new to me. Emotionally, I would love to be out of our dumpy rental, but we're trying to be level headed about the decision...