Strong Competition amongst the mainstream banks has been a key factor in the limiting of interest rates rises until recently. The likelihood that we have reached the peak of the rising interest rate cycle is uncertain but with one last week and another signalled before the end year – we are not out of the woods yet.
Interest rates and their influence on the borrowing power and therefore housing affordability remains key. Whilst acknowledging the tightening credit situation, combined with increasing rates has been a major driver in the reduced demand for mortgages.
Nation wide sale averages remain 30% below the same month last year and thus with stock staying on the market longer and total listings remaining high compared to recent years /history has meant further weakness to property prices / values.
The property index nationwide is showing that there has been a 10.8% decrease since its peak at the end of 2021 with both the Wellington and Auckland regions falling by approximately 16% for the same period. Most of that decrease has been in the last three months with 2.5% decrease seen and the largest quarterly fall since October 2008. Even the previously resilient regions like Christchurch have seen a fall last month of 1.6%.
Conservatively lending practices, adhering to the tightest loan to value ratios restrictions on record, adjusting to CCCFA modifications and implementing internal debt to income caps will also appease the Reserve Bank who will be keeping a firm eye on how the housing market plays out.
Higher serviceability / interest rates affect the amount that a buyer can borrow from the bank not mentioning the reduction in confidence from borrowers not wanting to overstretch themselves. This will remain pretty much the pattern until interest rates stop increasing or we see them move in the opposite direction. Having said that deals are still being done and the data is showing that the activity remains relatively consistent month on month.
First time home buyers may be thinking of holding back waiting for the bottom of the market but the truth of it is that none of us know when the market has reached that level until it is climbing up the other side. Also remember that house prices / values are linked to the affordability issues because as interest rate rises then the amount that you can borrow decreases with every rise – so the truth being if you are looking to buy just buy!
Want to know what Victoria ca do to assist you in your Real Estate journey then give her a call – she is key to your next adventure.Victoria Day
Real Estate.