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Falling market offers opportunities for investors

At a challenging time in the property market, a bigger adjustment in price than has been seen in the last two months is yet to come, according to Ray White Group chief executive Carey Smith.

Tuesday, March 18th 2008, 12:00AM

by The Landlord

However rather than seeing the softening underway as bad news, Smith says that whatever is happening in the market, someone will benefit.

While the Real Estate Institute reported the number of house sales hit a seven-year low in January, Smith says as long as New Zealand is considered a safe country, the property industry would always be terrific.

“We have one of the fastest-turnover property markets in the world – Kiwis are very thirsty for it, and a lot of wealth has built up in property, which will keep driving the market forward. People will move away from property only if the banks do, and banks prefer to lend for property over other investments because it’s less volatile.”

BNZ chief economist Tony Alexander is also upbeat, saying later this year people will start to buy again – motivated by fear of missing out. “This is an environment of opportunity.

“Stay close to canny investors – they’ll be setting themselves up in this phase.”

Alexander says buyers will come back in spring when inexperienced property investors have been weeded out.

Professional investors with 20 or 40 houses will be ahead of the spring buyers. Alexander says they’ll be buying about July.

Smith says the biggest issue for property investors at present is New Zealand’s interest rates, the highest in the OECD. “For people coming off five-year, or even two-year, fixed-interest rates, they’re facing an increase to 10% from 8% or less. In real terms, that’s a 20% increase in rates as they refinance, which puts real pressure on people who are marginally capped.”

New data shows a marked decrease in housing loans applications attributable to high interest rates following a series of hikes in the official cash rate in 2007, combined with decreasing rates of homeownership.

Smith expects to see people staying in rented accommodation for longer.

With the possibility of a proper slump, he expects a decrease in interest rates this year – due to election-year promises if nothing else. However, Alexander sees no prospect of rate cuts because of the inflation outlook.


« Property investors refocus on cash flowFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 4.44 - - -
AIA - Go Home Loans 6.54 4.95 4.95 5.15
ANZ 6.49 5.55 5.55 5.69
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 4.95 4.95 5.09
ASB Bank 6.44 4.95 4.95 5.15
ASB Better Homes Top Up - - - 1.00
Avanti Finance 7.15 - - -
Basecorp Finance 7.25 - - -
BNZ - Classic - 5.99 5.69 5.69
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 6.54 - - -
BNZ - Rapid Repay 6.54 - - -
BNZ - Std 6.44 4.95 4.95 5.09
BNZ - TotalMoney 6.54 - - -
CFML 321 Loans 4.99 - - -
CFML Home Loans 6.70 - - -
CFML Prime Loans 7.20 - - -
CFML Standard Loans 7.99 - - -
China Construction Bank 6.44 4.99 4.99 5.29
China Construction Bank Special 6.44 5.99 5.99 6.29
Co-operative Bank - First Home Special - ▼4.85 - -
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Owner Occ 5.95 ▼4.95 4.99 ▼5.25
Co-operative Bank - Standard 5.95 ▼5.45 5.49 ▼5.75
Credit Union Auckland 7.70 - - -
First Credit Union Special - 5.29 5.19 -
First Credit Union Standard 6.94 5.79 5.49 -
Heartland Bank - Online 5.99 5.89 - -
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 7.45 ▼5.90 5.80 -
ICBC 6.50 4.85 4.95 5.05
Kainga Ora 6.44 4.99 4.99 5.35
Kainga Ora - First Home Buyer Special - - - -
Lender Flt 1yr 2yr 3yr
Kiwibank 6.35 5.79 5.85 6.09
Kiwibank - Offset 6.35 - - -
Kiwibank Special - 4.89 4.95 5.29
Liberty 6.90 6.80 6.50 6.45
Nelson Building Society 6.94 4.99 4.93 -
Pepper Money Advantage 10.65 - - -
Pepper Money Easy 8.16 - - -
Pepper Money Essential 7.40 - - -
SBS Bank 6.49 5.55 5.55 5.75
SBS Bank Special - 4.95 4.95 5.15
SBS Construction lending for FHB 3.94 - - -
Lender Flt 1yr 2yr 3yr
SBS FirstHome Combo - 4.29 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 8.89 - - -
TSB Bank 7.19 ▼5.75 ▼5.75 ▼6.09
TSB Special 6.39 ▼4.95 ▼4.95 ▼5.29
Unity First Home Buyer special - 4.29 - -
Unity Special 6.64 4.99 4.99 -
Unity Standard 6.64 5.79 5.79 -
Wairarapa Building Society ▼6.75 5.19 4.95 -
Westpac 6.59 ▼5.49 5.55 ▲5.59
Westpac Choices Everyday 6.69 - - -
Lender Flt 1yr 2yr 3yr
Westpac Offset 6.59 - - -
Westpac Special - ▼4.89 4.95 ▲4.99
Median 6.59 4.99 4.99 5.29

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