CHIEF ECONOMIST CORNER: THE LOWDOWN
Strong arguments can be made for why the OCR might not increase much, if at all, in the future. Inflation is low and technology is reducing firms’ pricing power. The world is struggling to generate growth strong enough to absorb spare capacity and in many places, key pro-cyclical sectors such as housing are now “rolling over”. We live in a world beset by low inflation and New Zealand is not immune to these forces. Additionally, prudential policy is increasingly doing the job the OCR used to do. Not only does all this mean that there is little pressure on the OCR to move up at present, it also means that the neutral interest rate (where the OCR will settle across the cycle) has fallen – quite a lot. The OCR is only one factor that shapes borrowing rates and they could change for other reasons, such as bank funding costs. But the OCR is still a material influence and while we can debate whether or not it will lift from current low levels, what is increasingly clear is that it is not going to move by much in any case.
MORTGAGE BORROWING STRATEGY
Average mortgage rates remained virtually unchanged again this month, and retain the by-now very familiar tick-shape. The 1 year rate remains the low point; and against our expectation of the next OCR hike being delayed till November 2018, it remains the “sweet spot”. It is not quite the proxy for floating that the 6 month could be considered to be, but it’s a lot cheaper and fixing annually is still fairly regularly. Longer-term rates remain very low by historic standards and offer certainty, but they are financially less attractive in this low inflation environment.
Auckland house prices are falling and momentum across the rest of New Zealand is easing up. There are still strong legs of support from natural population growth and migration. However, the interest rate cycle has turned, credit is harder to come by, affordability constraints have pressured the Auckland market, and LVR restrictions have knocked the investor market. That’s a powerful combination that is not set to ease up anytime soon. We expect the market to remain subdued into 2018.
Keeping you in the loop – Minimum Bank Deposits
Buying a piece of bare land is an exciting prospect, but hidden costs and issues could turn your slice of paradise into a headache. Check out our tips on what to look for when shopping for a section.
Take an expert
If a builder or architect is drawing up plans for you, take them along to view the section you are thinking about buying. While you might be considering day-to-day things such as the views, local amenities and neighbours, they can advise on the orientation of the site and whether it’s suitable for the type of building you are planning.
Consider the costs
A beautiful elevated property with stellar views may have captured your heart, but the cost of earthworks such as excavation and retaining walls on sections that are not mostly flat could be considerably more than you expect. There may also be extra costs for any section to connect with the local sewage lines, or hook up to the power, telephone and internet lines, so get a clear idea of what these might be before you buy.
Check the reports
Just like buying a house, it’s crucial to check a section’s certificate of title and LIM report for anything that might impact on the property, such as restrictive covenants on the type of house you can build and where, the materials you can use, erosion or flood risk, and the history of the section. A lawyer can help you make sure everything is in order before you sign on the dotted line.
Understand the plans
Whether you are considering a bare section in an existing development or out in the middle of nowhere, you need to know about future plans that might impact on your property. Contact your local council to find out about roads, reserves, subdivision plans or other development that might occur nearby, and make sure you understand how they might affect your property’s value and liveability.
Spend some time
It may seem like a peaceful spot in the middle of the day when you first visit, but make sure you check out the site at various times of day and in different weather to familiarise yourself with it. Is the traffic louder at peak hours of the day? Is it exposed to wind from a certain direction? Are there damp or swampy patches after heavy rain that might signal drainage issues? It’s important to find out as much as you can before buying to avoid hidden surprises interrupting your plans later on.
Real Estate Institute of New Zealand annual awards were held 24th August, 2017. With 37 categories, the awards for REINZ are a comprehensive guide to those businesses achieving outstanding success in their market places.
Twiss-Keir Realty was one of three finalists in the Small Agency of the Year – across all disciplines (rural, residential, commercial and property management). This in itself was a magnificent effort in one of the most hotly contested categories of the night.
Bindi Norwell, Chief Executive at REINZ says: “These awards are all about celebrating the best of the best throughout the country. As always, there was a high calibre of entries resulting in some tough calls for some of the judges.
“Congratulations to all our winners for your achievements over the past 12 months – these accomplishments are something you can be extremely proud of. Thank you for helping to raise the bar of the real estate industry and for all your hard work,” she concludes.
We are extremely proud of our efforts over the year and it is exciting to have recognition for all we do on a national stage.
The number of properties sold across New Zealand in July fell by a quarter (24.5%) when compared to the same time last year, and the number of properties sold in Auckland fell by 30.6% (for the same period) according to the latest data from the Real Institute of New Zealand (REINZ) source of
the most complete and accurate real estate data in New Zealand.
From a national perspective, this represents the lowest number of properties sold in a non-Christmas month (i.e. December/January) since August 2014. Bindi Norwell, Chief Executive, REINZ says: “The number of sales across New Zealand has dropped significantly in comparison to the same time last year. A key
reason for this is that the two biggest hurdles to purchasing a house right now are access to finance as the banks continue to tighten their lending criteria and LVR restrictions. This creates an intimidating barrier to entry to the real estate
market, particularly for those saving for their first home.
“No matter where we are in the country, agents tell us that there are a good number of buyers out there, but that these two issues are impacting both investors and first-time buyers alike. When you throw in an election, winter, school holidays and one of the wettest Julys on record, it’s little wonder
the number of properties sold last month fell so significantly.
“The LVR restrictions have done their job of slowing the market, but now it seems they are acting as a handbrake which is why REINZ is calling for LVRs to be reviewed for first time buyers,” says Norwell.
Every year 18,000 New Zealanders are supported by hospice services across the country. Hospice care has a unique whole person approach – which means physical, spiritual, emotional and social needs are equally important – a multidisciplinary team provides care for the person who is dying, their family and whanau.
To assist with this work, the Harcourts Foundation and Hospice NZ are proud to launch the Hospice NZ Grants Programme. The Harcourts Foundation will fund this unique programme, which gives all hospices around the country the opportunity to apply for grants to purchase much needed items.
Harcourts CEO Chris Kennedy says it is the highlight of his 25-year career with Harcourts to be entering a formal relationship with Hospice NZ. “It’s an absolute privilege to be able to assist Hospice NZ. I am personally in awe of the work they do, as is everyone who has been touched by hospice and their incredible teams.” The Harcourts Foundation has donated $55,000 to commence the Hospice NZ Grants Programme, and pledged ongoing financial support. In addition, many Harcourts franchises around the country will continue to assist their local hospices, both financially and through volunteer work.
The Hospice NZ Grants Programme was launched at New Zealand’s founding hospice, Mary Potter Hospice, in Wellington last week.
Hospice NZ CEO Mary Schumacher says the support of the Harcourts Foundation will help enable New Zealand’s 34 hospices to purchase equipment, vehicles and maintain their buildings and facilities. “This will truly make a significant difference to the people using hospice services and their families and whanau. Fundraising is an ongoing challenge for us, at a time when demand for our services is growing. “Support from sponsors allows us to keep all of our services free for those who need it, so this relationship with the Harcourts Foundation means so much.”
Harcourts Foundation ambassador Emma Revell says Harcourts teams from around the country are humbled to be supporting Hospice NZ. “Our Harcourts values are: People First, Doing the Right Thing, Being Courageous; and Fun and Laughter. We believe these align perfectly with Hospice NZ’s philosophy of helping people to live every moment in whatever way is important to them.”
Being part of New Zealand’s largest real estate group we can confidently say we deal with more people than anyone else on a daily basis and that gives you a big advantage when it comes to buying, selling or investing in and around Christchurch and North Canterbury.
We are proud of being a leading franchise of Harcourts New Zealand and being consistently acknowledged as the front of the real estate industry.
We are generous contributors to our local communities, through our involvement in the Harcourts Foundation.
Talk to us first and discover why we are the very best at what we do. Phone 0800 789 1011 or visit our website www.twisskeir.co.nz.
The programme of events is now confirmed for this year’s action-packed Farmers Rangiora Winter Festival, supported by McAlpines Mitre 10 Mega.
Spread over four days, there is plenty to enjoy for the whole family. The programme includes: Harcourts photo booth, ice skating, a drive-in movie, a cocktail evening and a full-day town festival with delicious food, great music, The Big Splash, activities galore and a farmers market full of stalls.
See you there.
Harcourts is proud to have been voted New Zealand’s Most Trusted real estate brand in the Reader’s Digest Most Trusted survey, for the FIFTH year in a row.
Don’t even think you are in the market until you have a pre-approved home loan in place. When you see the right opportunity you need to be able to act fast and having pre-approval helps make the process move faster.
Become a local expert
Don’t make your search to broad, pick three or four suburbs you’d like to live in and make it your mission to become expert in the local property market. Go to lots of open homes, get to know the local agents and follow up on what various homes sold for.
How easy will it be to sell?
Even as you are walking into an open home for a potential property you should be thinking about selling it, because one day you will. Is their anything special about it? A view, a cul-de-sac, close to a kindergarten, great local schools, access to beaches, etc? Keep this in mind when you’re looking to buy.
Think like an investor
You may be focused on the lifestyle you want and on finding the perfect place for your family, but your home is a critical investment and will become, what will most likely be, your biggest asset. You should be doing everything possible to buy it at the best possible price and achieve the best possible capital appreciation. Negotiate hard and be ambitious about future capital gains.
Try not to fall hopelessly in love with a home before it becomes yours, it just makes the disappointment of missing out harder to take. You may end up bidding at multiple auctions, only to lose out to higher bidders – don’t beat yourself up. Remember, there is always another home around the corner.
When Karl Leathley was thinking about refixing his mortgage recently, he turned to his mortgage broker for advice. Retail interest rates have shifted up over recent months, despite a flat official cash rate. Commentators have suggested it could be the start of a more sustained increase.
But when short-term rates are much cheaper than longer-term options, it is difficult to work out whether it is worth paying more now for long-term certainty. One-year rates are available at a median 4.85 per cent, compared to 5.87 per cent for five years. If your mortgage is over 20 years, that's a difference of $3 a fortnight for every $100,000 you have borrowed.
Leathley took his broker's advice to take a one-year fixed term, despite the risk that rates could be higher by the time it rolls off.
"We are looking at doing bits and pieces on our home and he didn't see the need for us to take anything long term. He said even if rates did increase in that time, it shouldn't be by much." According to economists, that was probably the best bet. They say a strategy of rolling short-term loans should provide the lowest interest bill at the moment.
Gareth Kiernan, chief forecaster at Infometrics, said one- and two-year terms seemed the best deals available. "If you are looking at longer terms than that, you've probably missed the boat, given the lift in those longer rates since late last year. I see HSBC is advertising 3.99 per cent for 18 months at the moment." Nick Tuffley, chief economist at ASB, agreed shorter terms were the better way to go at present. "Purely by price, we see fixing for one year and repeatedly rolling on to a fresh one-year term as the slightly better option versus picking a long-term fixed rate are present.
"Because the yield curve has steepened up so much over the past six months, the cost of certainty from fixing for longer terms is high."
ANZ economists said the one-year rate was still cheapest. "Intensifying competition for deposits does risk another leg up in mortgage rates given the importance of deposits as a source of funds, but this now looks to be factored into the term structure.
"As such, in our view, one year remains the sweet spot for borrowers. However, longer terms do offer more certainty." Its break-even analysis shows that the median one-year rate would have to have risen from 4.99 per cent now to 5.44 per cent in a year's time to make it worth fixing for longer than a year now. But Westpac said borrowers who wanted the certainty of a longer rate had a good opportunity at the moment, too. "These rates are most likely to be pressured higher by global market trends, so borrowers who prefer the security of a longer term still have a chance to lock in at historically quite low levels.
"Floating mortgage rates usually work out to be more expensive for borrowers than short-term fixed rates such as the six-month rate. However, floating may still be the preferred option for those who require flexibility in their repayments."
Source; Stuff website
Licensed Business Owner of Harcourts Twiss-Keir Realty
Licensed Business Owner of Harcourts Twiss-Keir Realty