Reserve Bank of NZ dropped OCR rate to 3.5% (June 2008 OCR 8.5% to 29 Jan 09 OCR 3.5%)

Here is a couple of commentator's opinions on the current New Zealand property market, both published in the last few days:

1.  Kieran Trass' monthly "Property Cycle Commentary", http://www.tellmethetime.com extract from the February 2009 commentary, just released this week …

“IF YOU ARE PLANNING ON SELLING property then you probably will have a window of opportunity in the next 3 – 6 months to exit properties at better values than you could have achieved last year.

IF YOU ARE PLANNING ON BUYING property then you probably should buy sooner (yes now) rather than in 6 months time when it is likely that property sales volumes will have recovered to some degree and we know that volumes LEAD values. It does appear that very soon you will be able to get fixed interest rates low enough to achieve a positive pre tax cashflow! A word of caution though… I’m not convinced we will continue to see such low interest rates once our economy shows good signs of recovering from the current recession (probably in 2010). Of course we do expect rents should be starting to rise again by 2010 so that could potentially offset any interest rate rise.”

2.  Excerpt from the BNZ's Chief Economist, Tony Alexander, released on 19th January, 2009 :

“If I were borrowing at the moment I would still fix six months though I would have a high expectation of breaking the rate before it matures. If I couldn't be bothered going through that process then I would just float and look to lock in at a long-term fixed-rate sometime almost certainly before the middle of this year. Just to clarify what fixing long term means. A two-year fixed interest rate is not long-term and neither is three years. I would look to lock in either a five-year or seven-year fixed interest rate at some point within the next few months. Our view is that wholesale interest rates probably will bottom out before the middle of this year and one’s personal goal is to be able to recognise the low point in the interest-rate cycle when it occurs.

This is not to be as easy as it may sound given the huge uncertainty about what is happening with the world economy and potentially extremely high volatility in the economic data measures over the first six months of this year. This means that at some point this year, just as we have seen wholesale rates plummet over the period of a few days and weeks, so too will they soar.

 So if I were a borrower at the moment I would fix six months or float and gloat.”

Personally, I believe it's a great time to be buying in NZ at the moment, with interest rates expected to bottom in the low 5's!!!  Investors are seeing 8-10%  (or more!!)  yields but most of them are still either asleep or over leveraged that they can't take advantage of the bargains. 

If you're ready to shop for +CF properties in NZ and need some help with finding properties or getting a savvy mortgage broker, drop me a line.

Vicky