The Market is Harder, But There Are Options
Hooray, at last the election is over and we can now return to some sort of stability knowing who will govern for the next 3 years.
With spring upon us, all the main trading banks have launched their “spring campaigns” ranging from cash contributions to TV’s and play station giveaways. Moving into what historically has been the busy months, I’m hoping we can leave behind what has been a pretty tough winter period with sales at a record low and the number of buyers in the market also at a low.
On the interest rate outlook, the forecast is for interest rates to remain relatively stable for the rest of this year as increasing interest could have a detrimental effect on an economy that has shown some recovery. With the dairy sector taking a bit of a hit and the provincial areas of New Zealand slowing in real estate sales the need for interest rate increases to cool the market are not required at this stage.
One thing is certain, the restrictions the RBNZ (Reserve Bank of New Zealand) made almost 12 months ago have really affected the Wellington region with first home buyers being the hardest hit. Taking a lot of first home buyers out of the market has meant declining sales but also with the talk of capital gains tax a lot of investors have held back. Now we know who is governing for the next 3 years I think we can expect to see investors enter the market as house prices are still relatively low.
In regards to the RBNZ restrictions. I cannot see in the foreseeable future that these are going to change. One idea has been to raise the 80% LVR (Loan to Value Ratio) rule to 85% which will assist with some application, but going to 95% LVR is still not on the table.
As I have mentioned for most of the year, banks are approving applications up to 90% LVR and will continue to do for the right people.
These restrictions have made the market harder but there are other options in the market with a couple of really good non-bank lenders in the market that are not governed by the RBNZ regulations meaning they can approve what they want. This being the case it doesn’t mean they approve anything but they are another option.
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