Market stabilises as mortgage rates adjust
BNZ chief economist Mike Jones (pictured) has confirmed the bank’s view of a 7% increase in national house prices, bolstered by economic recovery and adjusted mortgage rates.
“Amid the many moving parts, the overall vibe of NZ’s housing market seems to be tilting in the direction of our long-held view... We continue to pick around a 7% lift in national house prices this year,” Jones said.
Lower mortgage rates roost homeowner prospects
Recent insights revealed that mortgage rates have decreased to levels that encourage renewed market activity, with recent data from the Reserve Bank (RBNZ) suggesting a significant shift in the borrowing landscape.
“Mortgage rates appear to have fallen to a level which is encouraging housing market activity... the numbers are starting to work for people again,” Jones said.
This positive change in financing conditions contrasts with the increasing costs associated with property ownership, such as local authority rates and maintenance expenses.
However, the overall financial situation for homeowners remains positive due to these lower rates.
The latest data showed monthly housing turnovers reverting to near-average levels, with regions like Canterbury, Otago, and Waikato experiencing higher activity.
Housing demand firming up
Evidence pointed to a strengthening demand within the housing sector.
The time it takes to sell a property is decreasing, nearing the historical average, suggesting a market moving towards equilibrium.
Moreover, the REINZ House Price Index indicated modest monthly gains in property values, hinting at a gentle yet steady upward trend. This shift is supported by robust sales figures and an uptick in new lending, particularly among first home buyers and investors.
Navigating uncertainties and new norms in real estate
Jones articulated cautious optimism about the market’s trajectory.
He noted potential disruptors like global trade tensions or political uncertainties, which could influence buyer confidence and affect market dynamics.
The relationship between house sales and prices may also diverge from historical patterns due to the unprecedented supply responses observed in this cycle.
Further OCR cuts expected, mortgage rates to drop
Looking ahead, further reductions in floating mortgage rates are anticipated as the Reserve Bank continues to adjust the OCR.
Jones projects the OCR could drop to as low as 2.75% by the third quarter. This scenario would influence both short and long-term mortgage rates, potentially steepening the traditionally upward-sloping mortgage curve during an easing cycle.
Home buyers and investors might find longer fixed-rate terms increasingly appealing as the market stabilises.
