Interest Rate Outlook
It is far too early to tell the impact the Reserve Bank’s lending restrictions have had on our market but our “gut” suggests that new lending and therefore activity has taken quite a hit in October, however it will take a full 6 months before the true impact is known.
Activity in September was very strong, up close to 20% year on year in sales, although a chunk of this can be attributed to consumers rushing in to beat the above mentioned lending changes. In fact we saw the average days to sell a property in NZ reduce to 34 across the country with some regions under the magical 30 day mark. Average days to sell a property are a major temperature gauge on the market with the lower the number indicating the hotter the temperature. September recorded the lowest average number of days to sell since 2006.
Further fuelling our supply / demand issue (which as an aside has been severely impacted by the Reserve Bank’s above rules restricting new construction lending) is the surging migration numbers of new people entering NZ, current run rate is for a net increase of over 20,000 in the 2013 calendar year, all needing somewhere to live. Again this reflects a 5 year high on previous years’ numbers. On top of which our economy continues to perform credibly and with real momentum fuelled by record global dairy prices, the continuing strong Auckland property market and of course the Canterbury rebuild which is in full swing.
While the floating interest rates have continued to survive and look to for the immediate future as the Official Cash Rate remains flat @ 2.50%, some of the longer term fixed money has continued to trend upwards creating more value in the shorter term fixed options currently on offer. With the Reserve Bank looking to use every option open to them other than to tweak interest rates upward it does look difficult to see value in the 3 – 5 year fixed options with 1 year rates as much as one full percent cheaper. The tried and true strategy of splitting debt into part short term fixed and part mid – long term still carries good weight as a valid option in the current market – as always though, every client’s circumstances are different so talk to us before making a call.
The Housing Corp sponsored Welcome Home Loan has really become popular as pretty much the only “stand alone” over 80% LVR lending option in the market today. There are a few hoops to jump through to qualify but we know them all so send your clients here first!
Deal of the Month
A client was referred to us who had been “mucked around” by another financier for close to 4 weeks with no success. The reality of this case is that it needed a guarantee from Mum & Dad to make it work, which was available. We stepped in, got it all sorted and had a happy purchaser – call us now, we deliver!