Property buoyed by economic climate
According to Steven Hart in his property podcast, ASB chief economist Nick Tuffley says population growth in New Zealand accounts for much of its current economic growth, which is perhaps why government is not keen to cut migrant numbers and take the pressure off the demand for housing.
Around 5,000 people settle in New Zealand every month, with many spending money on housing, furnishings, clothes and cars, and investments, which buoys commercial and industrial property.
Migrants, in conjunction with tourist, are masking the downturn in dairy income.
But it is the push for economic growth that is key here, and lower interest rates are one way to achieve that. In line with many economic commentators, Tuffley expects the Reserve Bank to cut the OCR in June to 2.25% to boost economic growth. That should translate into cheaper loans as the floating mortage rate should drop in tandem if the banks play nicely.
Tuffley also says any slowdown in the Auckland housing market due to investor loan-to-value ratio restrictions and tax rules was caused by a knee-jerk reaction.
Having got to grips with the new rules, investors – foreign and domestic – are easing back into the market.
Auckland housing will continue for the foreseeable future, with the population growing three percent a year, and housing construction failing to meet demand.
He is 50-50 on whether the Reserve Bank will extend the 30% deposit rule for investment properties outside Auckland. It all depends how hot the regions get.
The current crop of fixed rate deals from the larger banks are pitiful. The best two-year rate is from the TSB, offering 4.29 %
HSBC has the best five-year rate of 4.99 per cent and it has also just announced a rate of 3.95 % for 18 months – but there are strings attached such as a requirement for a minimum combined loan of $500 000.
If you are looking for a stop gap six month rate, the ASB is among those offering 4.85%.
All up, the current fixed rate deals are higher than they should be; the banks can do better.
There were 5,048 residential sales across New Zealand in January, up 4.3% on January last year according to the Real Estate Institute.
In the rural lifestyle and property market, 2,109 sales took place in the three-months ended January.
