Seven reasonswhyfirsthome buyersarebackinthemarket

Fearsofshockinglyhigherinterest ratesarerapidly disappearing.

Tony Alexander ECONOMIST &ONEROOFCOLUMNIST

ANALYSIS: In the financial marketsrecentlythe focus hasbeenon stronger than expected jobsfiguresin the United States –asdiscussedhere last week.Thosefiguressuggestthat inflationisn’t going to headback to 2%as quicklyashoped, andhas fedthroughintoasizeable jumpin borrowing costs for NZbanksthis week.

We have probablyseenthe peaks for fixed ratesoftwo yearsand beyondthis cycle. Butnooneshould expect the declinein ratesfromheretobeeither swift or in astraightline. We could easilysee somesmallrisesarounda declining trendfor thenext couple of years. Thereisa lotwedon’t knowabout inflationthesedays andthelinks between growthand pricing pressures aredifficulttopin down.Thisis ac fo of Fro aroundthe al ex is lowsin 2020 de around.Onedaytheywillprobably switch back in the otherdirection,but we have no wayofknowing when that will happenandit will probably takea few years.

Forthe NewZealandhousing market,the generaldirection interest ratesare nowmovinginis positive, butthe supportaffordedtoturnover and pricesis going to takesometime to showthrough. Imakethis comment even thoughthereweresomestrong resultsfrom my most recentsurvey of mortgagebrokers aroundthecountry undertaken withmortgages.co.nz

Each monthsince June2020 Ihave asked brokers to give me theirinsights intobanklending policy changesand themarketpresenceofbothfirsthome buyers andinvestors.Wecaneasily tracktheboominlendingand buyer demandduringthepandemic,the impactofthe March2021tax changes advice.Thatfell away to anet13% seeingfewer come January. Butnow, or more accuratelyjustlast week,a net30%have reported theyare once againhavingmore young peoplewalk throughtheir doors. Whyare theyoung buyers returning? Formanyreasons.First,bankshave step away from thecreditcrunchwhich the ReserveBankandgovernment imposedlatein2021.

Fourth,thestockofpropertyto choosefrom isthehighestsincelate2015.Fifth, competition atauctionsand open homesfrom other buyers including investors isminimal. Sixth,houseprices sohightheabilityofmanypeople to meet lending rulesandfunda housepurchaseisstillpoor. So,we arenot going to seea rush ofbuyers. Plus, we have beenherebeforeand theimprovingscenewassmashedby October18’shigherthan expected inflation.