Strong Housing Market To Survive Rate Hike

10 June 2004

Strong Housing Market To Survive Rate Hike

The housing market will feel no major effect from today's rise in the Official Cash Rate, according to leading Canterbury real estate firm Simes Ltd.

The Official Cash Rate was today increased from 5.5% to 5.75%.

Simes Director Peter Cook says just like the previous two rises in the OCR this year, today's increase should have no measurable effect on the housing market.

"Whilst some media and commentators have referred to a real estate boom and bust scenario, we do not see that occurring. In the last year we have experienced a 22% rise in the average house price. The most pessimistic commentators are predicting a 5% fall in values over the next few years. Even if that does eventuate, that is by no means the making of a bust in the market."

Peter Cook says many people have made tremendous capital gains in the real estate market over the last few years and they will continue to have confidence in the real estate market as an ownership package. The economy has already outperformed predictions and, despite falling immigration and a high exchange rate, that's expected to continue.

While the rate rise will impact on mortgage rates and may cause some people to be a little more cautious in their borrowing, Peter Cook says banks will continue to tailor their packages to ensure affordability.

"Banks see the mortgage sector as a very important and secure market sector of lending. Gone are the traditional days where people tremble at the knees while waiting for an appointment with the bank manager to achieve only a very fixed mortgage package. Mortgage packages in today's climate are designed to be flexible and provide for adjustments according to the borrower's circumstances. Given that employment opportunities are excellent and likely to remain so, most homeowners will continue to see the homeownership option as the best means of saving equity in the future."

While the real estate market is set to stabilise over the next year, Peter Cook says sound market demand is continuing.

"While housing has and will continue to be the most popular investment for the majority of New Zealanders, people should continue to be aware of the importance of rental stability and affordability of rental housing."

ENDS

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