Mortgage rates may not drop much despite OCR cut, experts warn (Source)

There are plenty of outlooks being aired ahead head of next week’s OCR announcement. The economists interviewed in this article all predict the Reserve Bank will cut the OCR 50 basis points to 4.25% on Wednesday. But they also believe there won’t be as big a movement in mortgage interest rates as a result of the cut.

Our view: It has been reported that the OCR will reach around 3.5% by mid-2025. If this is the case, there is still some work to be done by the Reserve Bank between now and then. Banks often reduce their rates before the OCR announcements even take place. As per the following article, BNZ has already cut their rate ahead of the November 27 announcement. A reduction in mortgage rates can give the housing market a boost and help stimulate the economy. Sentiment in the housing market is more positive now that the OCR is trending downwards, and interest rates are declining. Even if the cuts turn out to be a bit slower next year, the noose that held many back has been released to a point where people are starting to feel more confident and some are securing some great homes at a great price as a result.

BNZ cuts home loan interest rates (Source) 

BNZ moved ahead of the OCR announcement and cut its six-month fixed rate hard to a market-leading level at 5.99% p.a (down’ from 6.49%) - the lowest, advertised 6-month rate of the five major banks.

BNZ said its customers are paying close attention to interest rates, with more than 90% of customers taking out home loans on fixed-terms of 12 months or less.

Is this the return of the property investor? (Source) 

After a quiet few years, property investors are getting back into the market, property research firm CoreLogic says.

It has released its latest data, revealing property investors have the highest market share since the first quarter of 2021, with the investor comeback particularly notable in Auckland where prices had fallen quite significantly, and people were able to buy new properties at a possible discount.

CoreLogic economist Kelvin Davidson points to a number of factors working in investors' favour: falling mortgage rates, easing loan-to-value restrictions, the return of mortgage interest deductions and the reduction in the bright-line test.

Lower term deposit rates at the bank might also be prompting people to think about their investment options, and what else they could do with their money.

Our view: Property provides people with a tangible asset to invest in and is a popular form of investment in New Zealand. Term deposit rates are dropping, and so people will be looking for alternative investments that offer higher returns. If this is you, give us a call and we can talk you through your options.

Overhang of unsold properties shrinking as number of properties being withdrawn from market declines (Source) 

The spring surge in sales turned up in October, with the Real Estate Institute of NZ recording 6681 residential sales for the month - up 10% on to September 20% on October last year.

The numbers offer two strong signals the oversupply of properties creating the buyers’ market is starting to shrink.

Firstly, the overhang of unsold properties at the end of each month (while still high) has fallen 16 per cent since June.

Secondly, the number of properties being withdrawn from sale each month, which peaked at 3981 in May, fell steadily to 2580 in October.

While those trends tentatively suggest supply and demand are returning to a better balance, they could be disrupted by the number of new listings coming to market.

According to Realestate.co.nz, new listings surged to 11,572 in October, up 21% compared to October last year – pushing the total stock of properties advertised for sale on the website to a 10-year high. There will need to be particularly strong levels of sales in November and December for supply and demand to keep moving closer to being in balance.

Our view: It has been widely reported that trades are seeing a decline in business especially new builds. If this is considered, the addition of new builds to come to market will likely decline and result in less choice for buyers and more competition for properties on the market.

China's enthusiasm for Australian housing cools (Source) 

Across the Tasman, buyers from China are still the biggest single nationality buying Australian residential real estate, but they have led the slowdown in foreign residential purchases, which is reported to have fallen by about 15 per cent, according to Australia’s Foreign Investment Review Board figures. Their enthusiasm has been cooled by a slowing Chinese economy and the jump in Australian house prices, the AFR reports.

Property development: High costs make new apartments more expensive than old ones (Source) 

It’s a challenging market for apartment developers in Australia as surging construction and finance costs make new apartments more expensive.

“Only the high-end, luxury developments are stacking up financially at the moment,” says the director of one planning consultancy.

That is going to worsen Australia’s chronic housing shortage. Costs won’t fall – although the rate of gain is likely to slow – and developers will hold off new housing projects until established housing prices rise enough to make new off-the-plan homes competitive once more.

Have an enjoyable weekend!

From the team at Erskine Owen.