There’s always plenty to watch in the housing market, especially when somebody becomes an investor and looks to keep growing their portfolio. This short article runs through some recent developments that I think are worth noting.
First, inflation has begun to slow down more significantly, but it’s still well above the 1-3% band that the Reserve Bank (RBNZ) has to target as part of its mandate. Therefore, although the official cash rate (OCR) – currently 5.5% – has probably stopped increasing, it’s too early to start thinking about cuts. Indeed, the RBNZ hasn’t pencilled in any reductions in the OCR until the second half of next year, i.e. perhaps 12 months away yet, or more.
Second, it’s fair to assume that mortgage rates will also be ‘higher for longer’. This should be factored into investors’ budgets and cash flow projections. However, it’s also worth noting that many borrowers still choose a 1-2 year fixed rate when they take out a new loan or reprice an existing mortgage, even though rates for 3-5 year terms are lower. One reason for this could be a ‘bet’ that actual mortgage rates fall a bit sooner than expected and a desire to avoid locking in for ‘too long’ just at the time when mortgage rates are peaking.
Third, despite some recent survey results that might suggest otherwise, we’re not seeing any material evidence that landlords are drastically reducing their portfolios. Indeed, the overall flow of new property listings coming onto the market each week remains low (even for the time of year), which is not what you’d expect if existing investors were ‘abandoning ship’ and selling property.
Fourth, investors might not be selling significantly, but purchasing activity also needs to grow. That’s not surprising, given factors such as low...
