Ocr Flat, Price Growth Down | Impression Real Estate
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Ocr Flat, Price Growth Down

Posted by Impression on 26, Aug 2021

The housing market is being pulled in opposite directions right now.

There remains strong demand from buyers and interest rates are still relatively low, with a continuing shortage of properties helping to keep pushing prices upward. Rents are also strong, with rental affordability declining across the country, and wages are rising. Lockdowns tend to cause some pent-up demand.

But larger forces are counteracting those drivers. Construction is forecast to begin catching up with demand over the next few years, which should increase total housing stock. The Government has flexed its muscle to make property investment less attractive, removing interest deductibility (see more below), while the Reserve Bank has plans to introduce debt-to-income ratios.

The Reserve Bank was expected to raise the official cash rate (OCR) for the first time in seven years, after New Zealand’s strong post-covid recovery. That’s been put on hold thanks to our latest outbreak, but it will almost certainly happen soon if we manage to get this spate of cases under control. Some of the big banks have already moved their home loan rates up, and it’s likely that interest rates will continue to rise into 2022. Higher interest rates will mean lower affordability for buyers, which is forecast to put a serious dampener on prices – flat or even declining property values into 2022 and perhaps beyond.

Where does all this leave property owners? You have almost certainly experienced huge growth in the value of your home or rentals over the past year, and if prices do drop, it’s unlikely to wipe out those substantial gains. The sums on investing in property may be less appealing than they were in the past, but owning a rental might still help you reach your financial goals. Be strategic with your money and think about where to invest to achieve the best results for your financial future. It’s an ideal time to talk to a financial adviser about this, and about how you can cushion the impact of rising interest rates.

If you want to know more about the potential returns for rental properties, we can help, so do get in touch with one of the team today.

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