This week the Reserve Bank raised the official cash rate for the first time since the global credit crunch hit home. This is significant as an indicator that the Government sees the light at the end of the recessionary tunnel. The economy appears to be recovering in a subdued way which is predicted to solidify in the next 6-12 months. The OCR now sits at 2.75%.
A quick check of the current interest rates from the main banking institutions shows that the rise in the OCR has not yet led to any lift in floating or fixed term interest rates. There is the suggestion that this OCR rise has been expected and current mortgage rate offerings have already built this in. There was a small flurry of activity a few weeks ago which saw a number of banks raise shorter term fixed rates to catch borrowers moving from floating to fixed with this announcement.
BNZ chief economist Tony Alexander says in the next 12 months the Bank of New Zealand expects the average bank floating rates to be around 7%, and in the next two years 7.9%. So there is no great panic to move to longer term fixed rates currently sitting in the 7.5-9% range. Floating rates would have to rise significantly to make borrowers on floating or shorter term rates worse off.
The Real Estate Institute is saying that the increase in the official cash rate, which will eventually translate into higher mortgage rates, is good for the property market. Real Estate Institute president Peter McDonald claims the rising OCR will not adversely effect house prices.
“… home buyers are being promised a market environment in which they can safely plan long term,” he says. His reasoning in that the Reserve Bank has indicated any further increases in the OCR will be “only gradual if needed at all.”
He says because more than 30% of mortgage debt is now on floating rate and long-term interest rates are higher than short-term interest rates, the OCR will not need to be increased at the same speed as in previous recoveries.
“Interest rates are only one of many factors which influence the property market,” McDonald says. “While (Reserve Bank governor Alan) Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession.”
“It must also be reassuring for home buyers and investors that the Reserve Bank has found clear signs we are well into a recovery with businesses planning increased investment and unemployment still trending downwards,” McDonald says.
“So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead.”
There is strong evidence of pent up demand in the local market in North Wellington with good traffic on the property websites. Now that we have got through the budget announcement and the uncertainty created by John Key’s focus on property and how that fits into the tax equation, buyers should move past the hype and look at the basics.
Softer prices, low interest rates, plenty of choice, a recovering economy, owners willing to negotiate = a great time to get onto the property ladder and good deals!
June 11 2010 | General Real Estate | No Comments »
Descriptions of the New Zealand real estate market having a mini-boom are absolute rubbish, according to First National in their media statement released on the 15th November 2009.
Real Estate Institute statistics out this week show the national median price hit $355,000, a 10-year high. Bank economists are warning of measures needing to be taken against another housing boom and some commentators are saying it’s a “sellers market.”
First National general manager John Stewart says, “There is no boom and talk of a sellers market is rubbish. There are a few well presented houses in each market sector, suburb and price bracket that people are fighting over but there are fewer houses selling overall. Those not winning the battle for these prime properties are sitting back and waiting for the next “cherry” to pick whereas during boom times they rush off and buy the next best. In our experience, and while there is regional variation, most homes are still selling at 10 – 15% less than two years ago and that is not changing as quickly as some commentators have been saying in recent days”.
“Perhaps the bank economists are trying to justify interest rate increases.”
“It concerns me that at a time when a new Real Estate Agents Act is about to take precedence, with the driving intent of professionalising the industry, that we are seeing such emotional and ill-informed commentary from supposedly responsible bodies”, Stewart added.
“To base a view that real estate is in a “boom” cycle and needs reigning in on such low sales volume and around the results of competition for the precious few well priced and presented properties in each market is unprofessional. Volumes had not recovered to boom status either“, he said.
“Comparing six-monthly averages, First National’s volumes have plateaued at 40% below the peak of 2007, although they are 21% higher than the lows of last year’s slump.
People are blaming lack of listings for limiting sales but in areas where listings have improved, sales volumes have not always followed indicating many buyers are still wary of committing themselves.
Houses under $400,000 made up the bulk of sales activity and it was of concern that volumes in this section of the market were in many areas dropping.
With Christmas traditionally a quiet time for the property market, vendors holding firm to unreasonably high prices would be disappointed”, Mr Stewart said
Rental demand has increased over the past three months
with both vacancy rates and rent drops decreasing
First National Group’s quarterly property management survey of its network offices across NZ shows vacancy rates have decreased from an average of 6.3% to 4.9% in the past three months.
First National Group General Manager John Stewart said many people looking to buy were now renting longer, some being apprehensive about taking out loans and job stability. Additionally, some landlords had retrenched, down-sold properties and moved into houses they previously rented out, resulting in displaced tenants seeking new homes.
58% of offices reported rents being static but 32% reported rent increases, varying in amount between 1% to 20%. The most notable average increase was in Taranaki where rents for properties around Stratford have gone up an average of 15% in the past 3 months.
However, business closures, for example Bridgestone Tyres in Christchurch, would continue to affect house sales, causing unemployed people on one hand to sell or need to move to seek a new job and creating rental vacancies as tenants move on.
• Oversupply of 2brm properties was reported in Rotorua, Manawatu, Johnsonville, Cromwell and Coromandel.
• Shortages of 3brm properties was reported in Waiheke Is, Hawera, New Plymouth, Coromandel and Richmond.
• A severe undersupply of 1brm properties was reported in Papakura and Whangarei.
• Tough economic times causing people to downgrade their rental was cited by areas including Rotorua, Taranaki and Whangarei.
About First National
Established in New Zealand since 1985, First National has become the first stop for tens of thousands of property buyers and sellers throughout the country.
From Kaitaia in the north to Riverton in the south, First National Real Estate has the country covered! Each is independently owned and operated, just like their counterparts in Australia, where First National Real Estate is the largest real estate organisation of them all.
Essentially, we are a co-operative – a business and social network of successful, like-minded people who are good at what we do. While most property sales are local, our members benefit from a comprehensive referral network, not only throughout New Zealand and Australia, but also in Singapore, the United States and Canada.
Our members enjoy the sense of camaraderie that exists within the group nationwide and take great pride in flying the First National Real Estate flag.
November 16 2009 | General Real Estate | No Comments »