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Property market report

Some economists expect the housing market to remain flattish in the first half of this year then pick up in the second half.

Expectation of price growth is tempered by mortgage interest costs, living costs and loan value restrictions.

High mortgage rates and stretched affordability are restraining demand, essentially nullifying the demographic and policy tailwinds blowing in the market's favour.

Against this backdrop, the market is struggling to absorb a flood of new listings. Unsold inventory is at a seven-year high.

There is much conjecture about new home supply, immigration demand and the return of investors to the market that will certainly add sugar to the latte conversations.

Loan rates are outlined.

ANZ            Floating 8.64% 1 year 7.84% 3 year 7.25% 5year 7.34%

ASB            Floating 8.64% 1 year 7.29% 3 year 6.65% 5 year 6.55%

BNZ           Floating8.69% 1 year 7.84% 3 year 7.25% 5 year 7.15%

Kiwibank  Floating 8.50% 1 year 8.25% 3 year 7.55% 5 year 7.45%

TSB            Floating 9.44% 1 year 8.04% 3 year 7.45% 5 year 7.39%

Westpac   Floating 8.64% 1 year 7.89% 3 year 7.25% 5 year 6.99%

I have included a letter received from the Reserve Bank that may help clarify their position:

Thank you for your email to Governor Adrian Orr.

As you may have seen, last week the Monetary Policy Committee agreed to hold the Official Cash Rate (OCR) at 5.50%. As the MPC said in its media release:

The Committee remains confident that the current level of the OCR is restricting demand. However, a sustained decline in capacity pressures in the New Zealand economy is required to ensure that headline inflation returns to the 1 to 3 percent target. The OCR needs to remain at a restrictive level for a sustained period of time to ensure this occurs.

The Committee is not explicit about when the Official Cash Rate may change up or down, but our projections suggest that any cut to the OCR may be later in 2025. This assumes that inflation continues to fall as expected, to the 2 percent midpoint later next year.

The Committee’s top priority is to control inflation- the MPC does not target house prices when it raises or lowers interest rates. We aim to slow down overall demand in the economy to better match the ability- the capacity- of businesses to supply the goods and services people want. Households are probably less willing to accept large price increases and more likely to shop around, so businesses are less able to increase prices. This helps keep inflation near target.

Monetary policy is working, with the economy slowing and inflation falling. However, the rising cost of living still needs to be brought under control. Annual inflation is 4.7% and our target is 1 to 3%, with a focus on the 2% midpoint.

As we have said before, high inflation is a thief in your wallet- it is like a wage cut and a tax on your savings. Low and steady inflation gives people and businesses greater confidence to invest and tends to lead to steady growth and more jobs over time.

Monetary policy is a blunt tool. It is calibrated to the economy as a whole, rather than towards certain sectors of the economy. As a result, while monetary policy can improve outcomes for New Zealanders in aggregate, there may be those that benefit more from certain policies settings than others. We term these differing effects on parts of society ‘distributional effects’.

We acknowledge your concerns about the Auckland property market.

In fact, there is a requirement for the MPC to seek to understand the effects of monetary policy decisions on the sustainability of house prices.

In the MPS statement, the Committee noted that that annual house price inflation remains modest. There is heightened uncertainty around the outlook for house prices. This reflects continued restrictive interest rates, the scale of decline in residential investment, and the net economic effects of currently strong net immigration.

The MPS also noted the reintroduction of interest deductibility and the easing of the bright-line rule are two policy changes that shift incentives for purchasing and building housing.

Stats NZ Property Transfer Statistics show annual about 37,000 transfers in Auckland in calendar 2023, down from almost 41,000 the previous year and a recent high of 53,700 in 2021. Sales are below levels seen pre-Covid, of about 40,000 a year.

In short, the Official Cash Rate will remain at 5.5% for a sustained period to ensure that inflation is low and stable. We do not target house prices, nor property sales volumes, but the MPC must and does understand the effect of its decisions on sustainable house prices.

Let’s look at the sales:

Coatesville                              $4,826,250

Helensville                              $890,000 to $1,800,000

Huapai                                     $730,000 to $1,445,000

Kumeu                                     $920,000 to $3,150,000

Muriwai                                   $1,815,000

Parakai                                    $700,000

Riverhead                               $1,120,000 to $2,235,000

Swanson                                 $710,000 to $1,795,000

Waimauku                              $1,420,000

If you are looking to achieve a great result for the sale of your property please contact me today for a free pre-sale property checklist and appraisal that will provide a starting point in your decision-making.  After 18 years working with buyers and sellers, I have a depth of knowledge and experience to share with you. No cost, no obligation, just some honest feedback.  Call me, Graham McIntyre AREINZ directly at 0800 900 700, via text at 027 632 0421, or through email at Mike Pero Real Estate Kumeu/ Hobsonville. Licensed REAA2008.

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