What will the OCR do to the market?
At the time of writing these musings the Reserve Bank have just cut the Official Cash Rate to 2%, the lowest in New Zealand’s history! Great news for home owners and potential purchasers, not so great news if you are saving.
There is a particular question and statement that I’ve heard almost continuously this year, especially with the number of OCR cuts, the question is “What will this do to the market?"
Normally I would say that the market will increase pace but on this occasion with the re-introduction of Loan Value Restrictions (LVRs) it looks like they will offer a counter balance to keep the market busy but not too busy. As is the way, we won’t know for sure for a couple of months.
And the statement that I have heard time and time again is how high the prices have risen.
My answer to that is to look at January 2008 and compare it with January 2016. Prices were much the same, however this doesn’t take into account how far prices actually dropped in that time. In real terms comparing one to the other shows there was no growth for 8 years. (Not strictly true as prices dropped and then came back up again) This is just a typical housing cycle and as sure as eggs are eggs, without the introduction of an LVR prices would continue to rise rapidly with the LVR, it is likely growth will continue but at a slower rate.(see above)
In terms of the current market, July sales show us what most of us already knew, the Upper Hutt market continues to grow, not only in terms of prices but also the number of sales.
There were 93 residential sales last month taking the yearly total to 612, a huge increase of 131 when compared with the 481 sales of 2015 for the same period.
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