Is now a good time to sell your property?

Is now a good time to sell my property? Let’s take a look at some of the benefits of hitting the market […]

Hannah Williams

June 2, 2023

News

4 min read

Is now a good time to sell my property?

Let’s take a look at some of the benefits of hitting the market …

Click below to navigate.

More property traders are attending our auctions

RBNZ hiked the OCR for the 12th time in a row to 5.50% last week and Adrian Orr is now indicating it’s the end of the OCR hikes. A number of economists are now also predicting interest rate cuts within the next few months. This has brought some positivity as the market seems to be a bit more predictable/stable – especially for the property traders and they are now back in the auction rooms looking for their next project.

50% more funding is available for first-home buyers

RBNZ has increased the funding threshold for high LVR loans from 10% to 15%, which means the banks now have 50% more funding available to help the first home buyers looking to purchase an existing property with less than 20% deposit. All the major banks are now open for over 80% lending applications. Some of the lenders have also reduced their servicing requirements for these loans and we are noticing an increase in borrowing capacity by 5-10%.

Kainga Ora First Home Loans

Kainga Ora has reduced their LMI(Lender’s mortgage insurance) fee from 1% to 0.50% to help more first-home buyers.

This is one of the best loan products for the first home buyers to get onto the property ladder at the low-interest rates.

Record numbers of first-home buyers in the market

The first graph below shows the trend in monthly mortgage approvals to first-home buyers expressed as a percentage of total housing sales. The blip in the middle was during the period of strict pandemic lockdowns when the numbers went a bit haywire, but the overall trend for first-home buyers is clear and rising steadily from a market share of less than a quarter in 2014 to 44% in April this year. The second graph below shows the relationship between REINZ’s monthly median selling price and the estimated average price paid by first-home buyers.

Investors getting warmed up

Banks now only require 35% deposit(down from 40%) for existing residential property. This seems to be encouraging news for the investors, especially for the ones with lots of equity in their existing properties or with cash on hand. Serious long-term hold investors are now active and attending the auctions to purchase their next investment property prior to the Debt to Income ratio policy coming into effect in April 2024.

CCCFA rules being relaxed

Banks are now willing to discuss the discretionary spending and you don’t need to stop drinking coffee 3 months before your loan application. We are noticing a decent increase in borrowing capacity for the ones willing to cut down on their unused subscriptions, weekend bar hopping, and takeaways.

Before you get carried away with all the positivity, let’s read between the lines.

Even if the OCR has peaked, it does not mean it will decrease rapidly from here. In fact, the Reserve Bank had this to say:

"The Monetary Policy Committee reached a consensus that interest rates will need to remain at a restrictive level for the foreseeable future, to ensure consumer price inflation returns to the 1 to 3% target range while supporting maximum sustainable employment."

Reserve Bank of New Zealand

Inflation is currently sitting at 6.70% and Reserve Bank is forecasting the OCR seems to have peaked and will decline from here to be just above 3% in 2026. However, the minimum wages have gone up by 7% in April and the living wage is expected to go up by nearly 10% in September. The government will stop the fuel subsidy of $0.30 per litre on the 01st of July. What about the lolly scramble from the Government as we are approaching the elections? We will see the impact of all these changes in the next 2 or 3 quarters.

Interest rates may remain high for longer than expected.

RBNZ is indicating the first rate cut from mid-2024 which means the short-term interest rates may stay at the current level(if not higher) for the next 9-12 months.
Banks were really quick on passing the OCR increase on to the floating interest rates and the last I checked- Westpac and ASB raised their 1 year fixed interest rate to 7% p.a. It will not surprise me if other banks also raise their 1 year fixed rate in the coming days.
The next 12 months will be painful for the existing mortgage holders as their fixed home loans come up for renewal at an average of 2% p.a. higher interest rate.

Low number of listings online (Less competition)

The current listings in south Auckland are down by approx. 20% but the sales volume has not dropped. Ray White AT Realty Group which operates in south Auckland has closed 113 sales in the month of May and there were about 177 registered bidders at the auctions in the last couple of weeks alone. Less competition increases your chance of selling your property at a good price.

Please note- this is not financial advice. If you are looking to explore your finance options- please feel free to reach out to me personalized financial advice.

– Sanjeev Jangra

Loan Market Mortgage Advisor.