Finance And Property – What’s Happening Right Now?

According to the latest data from the Real Estate Institute of New Zealand, Auckland’s median house price is at an all-time high of $1.12 million. That’s an increase of 18.5% on March 2020.

The number of properties sold in March also hit new highs. In Auckland, the year-on-year increase was nearly 50%.

And the data also suggests that properties are selling at a faster pace than ever. In March, the median number of days to sell in Auckland decreased from 33 to 31, the lowest it’s been for six years.

However, the supply of housing continues to be an issue. Nationwide, the total number of properties for sale decreased by over 6%. Auckland was one of only a handful of regions to show a slight year-on-year uplift of 5%.

So, what does this all mean? In a nutshell, demand remains high while supply continues to be a problem.

However, this data reflects trends before the government announced policy changes to dampen down the red-hot market. The long-term impact of the policy changes will become apparent over the next few months.

For now, it’s clear prospective buyers need to act fast to secure their dream home.

So, if you are looking to move any time soon, contact us here at Mortgage Suite. Getting mortgage-ready can give you an advantage in a super competitive market. We provide personalised advice on the best mortgage options available.

What Difference Have The Government’s Housing Policy Changes Made?

At the end of March, the government announced significant changes to housing policy. These included extending the bright-line test and removing landlords’ ability to offset loan interest against rental income.

It’s very early days, but already there is anecdotal evidence that investor activity in the market is slowing down. It seems investors are taking a step back to consider the changes, especially as the government has indicated more changes may be announced in May’s Budget.

Similarly, first-home buyers also appear to be taking a more cautious approach. And it’s probably no surprise, given the widespread view that interest rates will rise later this year.

According to the latest ANZ Property Focus report, the possibility of rising interest rates will have more impact than the government’s recent changes.

ANZ’s Chief Economist Sharon Zollner sums up the situation as follows:

‘Interest rates are scarier because of the number of highly indebted households which would be vulnerable if they were to increase, or incomes were to deteriorate.

‘For investors, interest rate increases will no longer bring a larger tax offset.

‘There’s now a greater chance rises in interest rate increases could cause investors to sell up, meaning a faster braking impact on the housing market than previously.’

However, experienced investors with low gearing still see merit in buying and holding for the longer term.

The Reserve Bank’s next announcement on OCR is due on 26 May. While commentators predict the rate will remain at 0.25%, this is likely to change in the coming months.

Mortgage Borrowing Strategy

Mortgage rates have not changed over the past month, leaving the entire term structure of average mortgage rates at what we believe are record lows.

As has been the case for some time, the 1-year fixed-rate remains the lowest rate, and that makes it attractive, and we still like it.

However, with wholesale interest rates rising and the economy rebounding such that yet-lower interest rates are now very unlikely, the key question for borrowers is: does it make sense to fix for longer?

We think it does, and given the low margin between 2 and 3-year rates and 4 and 5-year rates respectively, we see merit in adding some 3 and 5-year terms into the mix.

Doing so will cost more, and while we think there will be plenty of time for those electing the cheaper 1-year to be able to re-fix later, adding some longer terms to the mix will increase certainty.

Do you have a fixed-rate mortgage due to expire? Or perhaps you want to change your fixed mortgage to take advantage of current low-interest rates?

Before you make any decisions, be sure to get in touch. Mortgage Suite’s expert advisers can provide help and advice based on the latest information.