Get into the New Zealand property market now - experts

The AM Show 12/11/2018

Property experts believe now is a strategic time to get into the New Zealand market. 

Confidence in house price growth across most of New Zealand has peaked, according to a new ASB Bank survey, which shows expectations are lowest in Auckland and Canterbury, reflecting flat or falling prices.

ASB chief economist Nick Tuffley says new laws, such as the foreign buyers' ban which came into effect in October, are likely to reduce demand and, he says, house price and interest rate increases are not likely in the next year.

"It follows that respondents are possibly factoring in a reduction in demand when they think about their house price expectations," Mr Tuffley says, commenting on the ASB Housing Confidence Survey for the three months to October 2018. 

"Particularly in the areas where there has been some strong price growth recently, from the point of view of financing a mortgage, you're likely to face some pretty low-interest rates for some time," he told Newshub. 

However, he said house price growth continues to be moderate outside of Auckland and Canterbury. Apart from those two regions, "interest rates remaining pretty low," he said. 

It comes after ANZ Bank recently dropped its interest rate to 3.95 percent, which is the lowest it's been since after the Second World War. The new rate is for a fixed one-year term and is available only for a limited time. 

The news was exciting for home buyers, and experts suggested it could lead to a mortgage war as other banks often follow suit when their counterparts drop rates. 

Photo: Getty

In August, KiwiBank toyed with lower rates, temporarily dropping its one year rate to 3.99 percent. Southland Bank offered 3.95 percent fixed for two years, while HSBC offered 3.85 percent for one year.

Mortgage holders haven't had it this good since 2016, when rates hit historic average lows of 4.33 percent fixed for one year and 4.35 percent for two years.

Fewer people are expecting higher interest rates in the year ahead, the report says. Bank mortgage interest rates have fallen across most fixed terms in recent months, and questions remain around when the Reserve Bank (RBNZ) will raise the Official Cash Rate. 

"Both these developments are likely to be shaping respondents' interest rate expectations," says Mr Tuffley, adding that bank competition also "appears to have increased over this timeframe."

Mr Tuffley notes that "looking forward, we expect respondents' perceptions around whether it's a good time to buy will remain contained by the fact that prices remain stretched relative to fundamentals in many centres."

Is it just a marketing ploy?

Newsroom Pro managing editor Bernard Hickey says ANZ is responding to some of the other smaller banks' interest rates. He told The AM Show ANZ will have noticed TSB and KiwiBank's lower rates.

However, the current rates are "not dramatically low compared with how we've been for the last couple of years," Mr Hickey says.

"The key thing here is that New Zealand's wholesale interest rates - which are what these mortgage rates are based on - they haven't moved much in recent weeks."

Banks are keen to boost business after a slump in Auckland over the last couple of years, he added, particularly in spring when "a lot of activity happens".

"We've got to remember too that the banks are flush with cash and they're also taking a bit of heat about having too much profit," Mr Hickey adds. "I suspect they're just nipping and tucking away at their rates just to show us they can give us some of that money back."

He said banks are "frustrated" by the restrictions on them from the Reserve Bank, which doesn't want lending growing too fast compared to incomes.

"You should always challenge your bank. Never accept the first rate, because they rely on people being lazy to make their profits."

Watch the full interview with Bernard Hickey above.

The AM Show with Duncan Garner, Amanda Gillies and Mark Richardson, weekdays 6-9am on RadioLIVE and streaming live to the rova app on Android and iPhone.

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