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Long-term Property Market Remains As Safe As Houses

“It’s no surprise that house price growth will likely ease, and it will get a bit tougher to borrow money. Nonetheless, the New Zealand property market remains an attractive proposition for those taking a longer view,” says Tim Kearins, Owner of Century 21 New Zealand.

Tim Kearins, Owner of Century 21 New Zealand

His comments follow the Reserve Bank releasing its bi-annual Financial Stability Report - headlining ‘Financial system well-placed to support economic recovery despite uncertainty and risks’.

“While it is a time of turmoil in many respects, let’s not forget that New Zealand enjoys great political, financial, economic, and social stability. That has helped underpin a relatively prosperous housing market over the years. Yes, the Reserve Bank stands by its forecast that the rate of growth is likely to slow, but Kiwis’ confidence in the housing market will continue as will their demand,” says Mr Kearins.

The Century 21 leader agrees the likes of 25% annual median house price growth was never sustainable, but the good news is any easing will likely be sure and steady.

The Reserve Bank is not predicting a sharp correction, but it does raise some concerns about recent buyers borrowing more to their relative income, making them more vulnerable to higher mortgage rates.

Hence, the central bank has said it will consult on the merits of implementing debt servicing restrictions and expects banks to be more cautious about high debt-to-income loans.

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“No one wants to see young Kiwis over commit and then get caught. In that regard, the Reserve Bank’s soundings and possible actions are designed to minimise such risk,” he says.

Early last month, the Reserve Bank lifted the Official Cash Rate by 25 basis-points to 0.50% - the first OCR hike by the central bank in over seven years. Interest rates remain low, with all eyes on the next OCR review on 24 November.

“Mortgage rates are still very low, rents are at record highs, housing demand remains strong, and despite the pandemic and lockdowns, economic confidence and unemployment are in relatively good shape. All things considered, we’re not expecting a red-hot summer, but it will be a busy one.

“Yes, there are massive stresses in certain sectors and regions, but history shows us that residential housing in New Zealand is a safe and proven medium to long-term investment. The Reserve Bank’s latest Financial Stability Report doesn’t change any of that,” says Tim Kearins.


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