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Buyers don’t be fooled by OCR cut

Century 21 New Zealand

Thursday, 10 November 2016

Buyers don’t be fooled by OCR cut

Head of Century 21 New Zealand, Geoff Barnett, is cautioning house hunters not to wait around for any further interest rate falls following the Reserve Bank cutting the Official Cash Rate by 25 basis points to just 1.75% today.

“Some people reading the headlines may think things are only going to get better and that by the end of summer house prices will have levelled off and interest rates will be still be rock-bottom. Well I challenge that assumption on both fronts. Prices will still increase in most parts of the country albeit not as steeply in Auckland, and interest rates will also go up in many cases, so now is the time to get in,” he says.

Mr Barnett points to leading retail banks over the past week lifting their fixed three and five-year mortgage rates off the back of rising international borrowing costs, with other banks likely to follow. Whether banks pass on any of today’s OCR cut is still to be seen.

“At the very moment the planets are lining up almost perfectly, and so people shouldn’t assume it’s somehow going to get even more perfect. For buyers, now is the time to strike. Likewise, for sellers now is the time to list, simply because when the rates start creeping up you start losing potential buyers from the market.”

Mr Barnett says Century 21 expects another strong summer across the country with consumer and business confidence up, and overall housing supply in the likes of Auckland still well short.

He says the latest loan-to-value ratios (LVRs) and now some rising fixed interest rates will apply a bit of brake pressure but believes that’s probably a good thing following some New Zealand areas witnessing 25%-plus annual increases which weren’t sustainable.

“The latest round of much tougher LVRs hitting the likes of property investors is having an impact for sure, but I actually believe these restrictions coupled with slightly higher interest rates probably make for a much more realistic real estate market.”

Mr Barnett says with some interest rates now rising, uncertainty in the US, and with the extra LVRs restrictions from 1 October now taking hold, he’s pleased the Reserve Bank Governor did not take the opportunity today to push any suggestion of also introducing loan-to-income restrictions.

“Let’s first see what impact any rising interest rates have on cooling the property market and lets also fully assess the latest LVRs impact before also adding loan-to-income restrictions. Rest assured they might not ever be necessary and one thing’s for sure they’d only shut out the likes of teachers from ever buying a home,” says Mr Barnett.


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