Moving to a larger home has long been an expensive step, but new analysis suggests the cost of trading up has fallen in some parts of New Zealand.
According to Cotality, it still costs more than $100,000 in most parts of the country to move from a typical three-bedroom house to a four-bedroom home. However, the value gap has narrowed in some markets.
Measuring the trade-up premium
One way to estimate the cost of upgrading is to compare the median values of three-bedroom and four-bedroom houses.
While every property is different, this approach provides a useful indication of the additional investment households may need when looking for more space.
The gap between those property types can expand when larger homes outperform the broader market, or shrink when values soften.
Why slower markets can create opportunities
Although many homeowners become hesitant during periods of economic uncertainty, softer property markets can sometimes work in their favour.
Cotality noted that while many households focus on the lower price they might receive for their current home, they may overlook the fact that the larger property they want to buy has also fallen in value – and potentially by an even greater amount.
As a result, the cost of upgrading can become more affordable, even if overall property prices remain subdued.
Many prospective movers are currently sitting on the sidelines because of concerns about job security and broader economic conditions. However, when confidence eventually improves, owner-occupiers are likely to become more active again.
Those who act early may be well placed to benefit from the recent reduction in the trade-up premium seen in a number of locations before competition strengthens.
Of course, upgrading isn’t just about the purchase price. It’s also important to consider interest rates, moving costs, legal fees and whether the larger property will suit your family’s long-term needs.
Thinking about moving to a bigger home? Contact us to assess your borrowing capacity, compare your finance options and determine whether today’s market conditions make trading up a smart move.
