BNZ Chief Economist Tony Alexander sees interest rates remaining lower for longer as global economic turmoil leaves room for the Reserve Bank to hold interest rates well into 2012.
Releasing the BNZ/REINZ residential market survey for November, Alexander said there had been little change in the overall state of the market in the past month.
But he said agents were seeing more interest from first home buyers and that they saw prices continuing to rise, although they saw the market more in favour of buyers than sellers.
Agents also noted an increasing number of people wanting to trade down, he said.
Rental property investor interest remained subdued in the wake of tax changes last year.
Alexander said there remained the possibility the Reserve Bank could cut interest rates if the European financial crisis worsened markedly, but a cut on Thursday was unlikely.
He saw banks in New Zealnad passing on any cut in the Official Cash Rate in the form of lower floating mortgage rates, given economic growth and borrowing demand remained subdued. That outlook of lower interest rates for longer meant he preferred floating to fixing for now.
Elsewhere, he cautioned The Economists' comments about New Zealand's housing market being 25% overvalued didn't necessarily mean prices would fall 25%.
He pointed to a lack of new housing supply coming on to the market.
See more in the interview above.
Here are the key details from the BNZ/REINZ market survey:
Our latest survey of New Zealand’s 10,000-plus licensed real estate agents has shown little change in perceptions of the state of the market over the past month, but some fairly clear buyer and seller trends. Over the past month agents have reported no change in the number of people going through Open Homes, mildly improving auction clearance rates, a strong percentage of Written Sales turning Unconditional, and continuing growth in the number of potential vendors seeking appraisals.
But investors still show no change in activity whereas a continuing strong net 29% of agents report more first home buyers entering the market. This is probably the strongest feature coming through in our surveys over the past few months. A net 17% of agents say they feel sellers are more motivated than buyers – meaning they perceive that there is a buyers market. But a net 10% also report that they feel prices are rising – a result backed up by recent data from REINZ and this week’s Auckland report from Barfoot and Thompson.
We interpret this to mean that sellers may be placing pressure on agents to get their property sold, but are unwilling to cut their asking price to speed the process up. In the second section of our survey and this report dealing with reasons behind buyer and seller decisions the only strong trend to appear recently has been a rise in the number of people buying because they wish to trade down, and a rise in those selling for the same reason.
There has also been a lift in agents reporting concerns about getting finance as a reason why buyers are holding back. In the brief third section containing responses broken down at the regional level when the number of responses allows, Auckland continues to stick out as showing strong indicators while Wellington is also firm apart from sellers being reported as substantially more motivated than buyers. Investors appear to have no interest in Christchurch.
16 Comments
both debt and central bank are planks of how our system works....that and growth being the third.
So in fact the reverse is true, ppl need confidence that there is a central bank behind the debt / fiat currency as a lender of last resort., hence why the EU is such a mess at this stage, the ECB wont or cant backstop.....though its easily arguable that this is flogging a dead (and buried) horse.
regards
I'm sorry to be terribly cynical about this, but as far as I am concerned, when a BANK economist says you should do x with your mortgage, it's probably better that you do the exact opposite.
It may well be time to fix your mortgages as floating rates are about to rise.
Maybe he's double thinking you.....
;]
Better to stand on your own 2 feet and think.....he's blinkered in the neo-classical mold, however he shows some signs of maybe just maybe starting to think outside of that....so his eyes are open I think...somewhat...
I'll make my own call, but 6months fixed right now makes some sense I agree....if only to cover while the EU implodes....
regards
Well my cynicism has nothing to do with any of your neo-classical mumbo jumbo, Steven, it's far more simple than that! It’s all about a bank employee encouraging customers into taking action that will increase the profit of the bank!
You should also consider my comments in light of today's thread here:- http://www.interest.co.nz/news/57076/nz-banks-likely-have-rely-domestic…
and this statement from the RBNZ:-
There may be upward pressure on term deposit rates over the near term as New Zealand banks struggle to raise cash from offshore wholesale funding sources due to the European sovereign debt crisis.
Business and mortgage lending rates may also rise if those wholesale markets remain problematic well into 2012, the Reserve Bank of New Zealand said in its December quarter Monetary Policy Statement.
So AB says rates are going to stay down for the near future. There's a chance that they could drop even more. Only Auckland is seeing a buoyant property market. NZ Business is in dire straights. The NZ$ is way too strong. Europe is on the brink.
'Scuse me, how many more signs do you need that rates are going to stay low for longer? A man in a white kaftan with a beard who performs miracles coming to you and telling you?
It doesnt take a rocket scientist to understand that you are better off floating your mortgage at this time and in the forseeable future, but it doesnt preclude the fact that banks will continue to plateau or raise their rates because of the financial crisis and uncertainty that grips the world markets. New Zealand really is at the mercy as to what happens overseas, and we need to buckle in and hold on tight as it is still have a frightening ride ahead of us. Even if the Reserve Bank drops the OCR by 0.25 base points, the impact on the mortgage lending rates will be negligble. The Banks have signalled quite clearly, that for them to maintain their profit margins, the anticiapated drop in the OCR will not be passed on to their customers.
"and in the forseeable future" - you are not forseeing a European collapse and lending freeze? If that happened it could seriously increase the cost of borrowing - which will be passed on to floating mortgage holders, not fixed. So I wouldn't say it is that obvious to remain floating (although that is what I will be doing).
In the forseeable future, I hope there isnt a cataclysmic collapse of the European union (and for that matter the rest of the world isnt safe either) otherwise no one will care about what rates are, because they will be unobtainable to the masses. All one can do is asess what is happening globally, assimilate the information and make an informed decision. To me it is obvious, because if we choose and accept the former, we are all up shit creek without a paddle!
Yes I remember listening to Tony in about July 2008 telling us how great the economy was and we were just in a small slowdown etc. In question time I asked if a 1997/98 style crunch in both interest rates and growth was imminent in the not distant future, he was adamant it wasn't.
It only took two months to prove him wrong.
Moral is never take Tony's advice he is not as smart as he thinks. Listen to what he has to say. Never rely on his advice. Same goes for our friend Bernard!
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