No Change For Real Estate Market
Media release, for immediate release, 16 July 2004
NO CHANGE FOR REAL ESTATE MARKET
Rising interest rates come as no surprise to the real estate sector, says Simes Director Peter Cook.
He says the latest survey showing rates have hit 8% is not expected to have any measurable effect on the market.
The latest REINZ Mortgage Interest Rates Survey, released today, shows that as a result of hikes in the official cash rate by the Reserve Bank, interest rates have risen by 0.25% to 0.45% in the last month, to range between 7.50% and 8.10%.
Peter Cook says the real estate market has already factored in the increasing cost of borrowing, as home buyers knew rates were on the rise.
"There are many other drivers of inflation other than housing, however the housing market and rising interest rates are an easy one to hit. "
Peter Cook says increasing the OCR, which the Reserve Bank is predicted to do again in a matter of weeks, will simply attract more investment and money into the country.
Demand is still strong for Christchurch property, as illustrated by the recent sale of a commercial property at 35 Klondyke Drive, Hornby, in which the $892,000 sale price resulted in a yield of 7.97%.
"For many years the cost of borrowing has exceeded the return achievable for cash flows on property. In commercial and residential investment property, we don't believe the rate of return equalling the cost of borrowing will have any detrimental effect," concludes Peter Cook.