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Is it still time to buy that investment property?

The current indicators:

  • Whilst house prices and volume sales for Auckland residential properties were down for October,November has shown signs of a pick up. Governor Wheeler has indicated no OCR rate hike in the short term to counter the heat in the market demand. Indeed ,there are signs that actually there will be a likely 0.25% cut in the OCR maybe around March 2016, Many banks have already factored this in to their current fixed rates.
  • House price unaffordability has hit new highs in Auckland and is now ranked number 2 in the world .
  • Whilst dairy export prices are low and have a difficult time ahead, GDP has remained at around 2.5% for 2015 and expected to be above 2% for 2016.
  • As long as mortgage interest rates remain low, people will continue to want to get into the market whilst they can. Fixed rates have come down to now 3.99% for a 1 year term. Rates are expected to remain stable for at least 18 months although increasing by 0.5% in 2016 as the banks recover some margin.
  • Auckland population was said to be rising by 25,000 pa . At the moment this seems an understatement as the annual net migration level for 2015 was at a record of 62,500( the majority coming to Auckland). Expectation is Auckland will be at the 2M mark by 2023.
  • 6,600 new apartments are being built over the next 2½ years around Auckland. But excess demand is expected to be at least 4000 in 2016 alone. So already there is a large shortfall.

 

What does this mean? Without the need for a crystal ball, we think prices in the Auckland area will continue to rise for at least 18 months. What then?…….