Some urgency may be returning to the housing market, with agents and mortgage brokers reporting lifts in buyer enquiry following last week’s better-than-expected inflation figures.
Anticipation of an early cut in the Official Cash Rate is building after annual inflation slowed to 3.3% in the second quarter of this year – its lowest point in three years.
Banks are already primed to lower the cost of borrowing, with Westpac dropping its one-year fixed rate to 6.89% and ANZ, BNZ and Kiwibank dropping theirs to 6.85%.
Jared Cooksley, director of Ray White Mt Eden, in Auckland, told OneRoof that confidence had shifted following news of the drop in inflation.
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“When buyers feel they don’t necessarily hold all the cards, you’ll see them acting a little more swiftly,” he said.
One of Cooksley’s agents, Dean Tuffley, sold a four-bedroom home on Puriri Avenue, in Greenlane, under the hammer this week for $1.385 million, with 10 bidders registering for the auction. Another, Robyn Ellson, sold a house on Second Avenue, in Kingsland, this week after receiving multiple offers from buyers.
A four-bedroom house on Puriri Avenue, in Greenlane, sold under the hammer this week for $1.385m. Photo / Supplied
A three-bedroom home on Second Avenue, in Kingsland, Auckland, sold after receiving multiple offers. Photo / Supplied
Harcourts salesperson Alex Dunn, who mostly sells in South Auckland, had noticed a bit FOMO in the market, with some buyers concerned prices will start to pick up again before the end of the year.
“Previously, it was like, ‘I can take my time, I’m not in an urgency to buy because possibly I can buy cheaper in two or three months’. Now, the thought is, ‘I better buy because it might be more expensive in two or three months’.”
He had received two enquiries from first-home buyers within an hour of one of his listings – a three-bedroom home at 1/10 Ranfurly Road, in Papatoetoe – hitting the market on Friday.
Another listing, a three-bedroom home at 1/7 Bunnythorpe Road, in Papakura, had received more interest this week than any other since it was listed three weeks ago.
A three-bedroom home for sale at 1/10 Ranfurly Road, in Papatoetoe, Auckland, was attracting attention within hours of hitting the market. Photo / Supplied
Interest in 1/7 Bunnythorpe Road, in Papakura, also surged this week. Photo / Supplied
First-home buyers continued to be active, he said, but there had also been a noticeable return of investors to the market, on the back of recent changes to the bright-line test and the return of interest rate deductibility.
The latest inflation figures, he said, had solidified people’s thinking that interest rates would drop soon.
Kiwibank chief economist Jarrod Kerr said buyers were right to feel optimistic. He is forecasting a cut to the OCR in November, and seven more successive cuts of 0.25 points next year.
“[Interest rates] will decline a little bit now and will decline a little bit further as the Reserve Bank cuts the OCR in November, but next year we will see some substantial declines in interest rates which will act as an accelerant for the housing market.”
Kerr said bank interest rates of 7% were restrictive and should be taken back to a more neutral setting of around 5%. “That’s a big move. They could do that quite quickly or they could take their time, depending on what inflation is doing.”
Kiwibank chief economist Jarrod Kerr says interest rate cuts will act as an accelerant for the housing market. Photo / Supplied
Once interest rates dropped, he expected a surge in investor activity. “I think if there’s any group going to bounce back, it will be investors and then, of course, owner-occupiers upgrading. Confidence for all in the market will improve.”
Kerr expects house prices to creep back up again, and is forecasting rises of between 4% and 7% next year.
EasyStreet Mortgages mortgage adviser Gareth Veale said a drop in interest rates would mean more borrowing.
“Say we are at 7% at the moment and we drop to an interest rate of 6%, the amount of borrowing that you can do increases by a good percentage. You can borrow 15% more for the same cost,” he told OneRoof.
“The ability for people to get those bigger mortgages and service them increases and because people can get more money, they will pay more and stoke the market.”
He already had a client call him this week to talk about upgrading her house now interest rate decreases were on the cards. “There’s definitely a feeling that rates will reduce.”
Some banks were offering lower one-year rates of 6.72% down from 7% and that was before the OCR had even shifted, he said. Not all the rates were advertised, but there was wriggle room behind the scenes.
However, his advice to people was to fix for six months.
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