And we’re back!!! But so is winter... Brrrrrrrrr!
Now I’m loving the long weekends we’ve been having, but the short weeks are a killer aren’t they? Trying to cram five days’ worth of work into four… Geez. (Talk about first world problems).
Anyway, I digress.
As usual, first up, let’s take a look at what’s been happening in the Wellington property market by the numbers (as of May):
- Property sales in Wellington are up 3.1% year-on-year, and up 7.2% compared to last month. This number typically tracks down coming into winter—so perhaps it’s a sign of pent-up demand being released, and would-be purchasers finally completing their journey. Future numbers will give us a bit more clarity on this.
- Median house prices for Wellington are also up compared to last year, but only slightly at 1.3%—now sitting at $795,000.
- Median time to sell is sitting at 50 days, up 11 on the same time last year, and up 9 from April.
All of the above suggests stock levels are still high, meaning purchasers have the chance to be a bit more discerning. No FOMO here!
I’m also getting some interesting anecdotal feedback from across my network. Disclaimer: with no hard data to back them up, please take these insights with a grain of salt, but I thought I’d share regardless:
- Attendee numbers at open homes have taken a bit of a hit, according to a few agents out there. With fewer potential buyers showing up, the upshot is that buyers should have a little more room to negotiate on price—and score a good deal—as competition may be limited.
- I’m also hearing talk of more investors looking to liquidate a portion of their portfolio—but getting the timing right is challenging. Between high stock levels, lower demand, and the juggling act required if you’ve got a tenancy in place, it’s an expensive exercise if the planets don’t align. With median time to sell sitting at 50 days, it all stacks up.
- Bank margins are stretched right out, and don’t have any more give—which is to say that any further changes to the OCR may not have an impact on housing interest rates. For the few concerned about what that means for bank profits, they’ll still get theirs! But bear in mind they’re competing for investors/shareholders, so need to maintain these levels in the interest of competition in this space.
And on that last point around bank margins…
To date, changes to the OCR have typically translated to some sort of drop in mortgage rates, but there are other factors coming into play—specifically swap rates.
The Reserve Bank uses the OCR as a tool to stimulate economic growth (making borrowing cheaper) or to bring inflation down (their primary purpose) by removing capital (through new borrowing) from the market. A change in the OCR can impact the floating rate, and very short-term fixed rates, along with commercial lending.
For all of you hanging your hat on further OCR cuts to reduce interest rates further, I suggest keeping an eye on the one- and two-year swap rates to give you an idea of bank borrowing costs.
The two-year bottomed out at 3.03% in mid-April, and are now at 3.29% as at the 18 June. The uptick recently is what bankers are referring to when they say their margin is being squeezed.
There are still some economists calling for further reductions in the OCR above and beyond the Reserve Bank forecast which may be forthcoming, but I think this will be used to stimulate commercial lending more than reducing fixed interest rates for housing.
What types of applications am I seeing currently?
- The lion’s share are first home buyers
- Lots of restructures and refinances
- Some separations
- Upgraders—clients trading up from their first or second home
- International enquiries (both for those returning, and those looking to acquire an investment property).
If any of these scenarios apply to you, feel free to reach out for a chat—I’d love to assist of course!