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. PROPERTY GAUGES 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 New Builds
Existing Homes
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. Source; www.harcourts.co.nz |
James Twiss
Licensed Business Owner of Harcourts Four Seasons Realty 2017 Ltd Greg Roberts
Licensed Business Owner of Harcourts Four Seasons Realty 2017 Ltd Archives
September 2020
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