What…. a…. week…. If you are reading this from anywhere in the central North island and up, you have very likely been battered by treacherous weather. I first of all want to send my deepest condolences to the people who lost their lives, family members or homes in the floods in Auckland. I must say it was a surreal feeling seeing Auckland Airport on friday night knee deep in water. This amount of rain almost seemed to come from nowhere, I for one didn’t hear much of a warning leading up to friday.
Back to Real Estate, the property market and all things related. This week I was fortunate enough to attend a seminar online with Chief Economist Tony Alexander. Whilst there was an abundance of amazing advice, insight and forecast into what the next six months to a year may look like – I did takeaway Tony’s urge for first home buyers to capitalise on the position of the market.
Tony’s reasoning whilst alluding to the obvious fact that house prices have softened, more hinted at the lack of Investors in the market competing with first home buyers for the same type of properties. From what we’ve seen, investors have run away to hide in the hills in the last six months to a year. This is due to a multitude of reasons – high interest rates, lack of interest deductibility tax benefits now and the costs related to achieving healthy homes standard of living for holding a tenanted property. Investors will need to see at least one of these alleviate to return in the masses, however lower interest rates is the only one that seems likely to happen any time soon.
Hence, here is a window of opportunity for first home buyers looking to get into an entry level property to be able to not only have the luxury of more choice but with less competition, better value for their money.
Now there is an argument that high interest rate in the mid to late 6’s have an affect on serviceability but the truth is an interest rate with a 6 in front of it isn’t really that high. The reality is interest rates will likely go up again before they go down, however ASB were the first bank last week to reduce their long term interest rates to lower than their short term rates. Their 60 month (5 year) fixed rate is 6.49%, the lowest fixed rate you can currently lock in and at 35 basis points (0.35%) lower than their current 1 year fixed rate. Westpac have now followed suit and I expect other major banks to also change their approach in the coming weeks.
Naturally this would tell us that advising economists to these respective banks are cautiously seeing a peak of the official cash rate and therefore a peak of home loan rates in the not so distant future. My advice would be to remember that you aren’t going to be forking out for high interest rates the entirety of your 30 year home loan, interest rates will go up and down over that period many times.
The great investor Warren Buffett (If you don’t know who he is, look him up) once said “Be fearful when others are greedy, and be greedy when others are fearful” there certainly is a lot of fear in the property market currently. Here is where I should remind you that I am not a financial advisor, I am merely a guy on the internet sharing his learning and thoughts.
If you are a first home buyer who is looking to get on the property ladder, feel free to shoot me a message and ask any questions you may have – sometimes the best way to put your mind at ease about things is just to ask someone.