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The Rebuild Is On: Looking Ahead

Well folks, I suggest we can call it official: the re-build has commenced in earnest.

I have been back on board for only two weeks since the Christmas break and cannot believe the activity around for a January.

I always remember, in my old banking days, taking the whole month of January off as it just wasn’t worth turning up to work – there was nothing to do. People didn’t want mortgages that early in the year. Admittedly, that has changed to a degree with solicitors and builders returning to work earlier or remaining open with skeleton staff, but I looked back at our figures to the same period last year, and activity has doubled. All five of our mortgage brokers were back on board this week and January 2013 figures are the same as for a typical March, which is always one of our peak months.

This all bodes well for a very successful year as a sense of urgency to get things done is apparent. I believe the activity is, and will be, in all areas of the property market: construction, section sales, investment property, first home, commercial property and typical ‘mum and dad’ family home purchases.

All areas of Canterbury will do well. I am seeing less resistance or stigma towards TC3 areas as people and banks get familiar with new Canterbury land zonings. A banker commented to me the other day about the differing geotechnical make-up of the land we build our homes on having always existed – it’s just that now we are more aware of it.

All regions in New Zealand have TC3-style land, but where there hasn’t been a major natural disaster such as an earthquake, there has been no need to identify these areas.

The number of Kiwisaver First Home Buyer withdrawals are gaining momentum as members hit the three-year minimum mark for qualifying. This is certainly helping the first home buyers’ market. With Kiwisaver and low interest rates, it has never been easier for the first home buyer to jump on the train to property ownership. If they buy modestly (under $300,000), the first home buyer can also apply to receive the Housing New Zealand First Home Buyers’ Subsidy, which is now as much as

$10,000 for a fully qualifying couple and can be used in conjunction with their Kiwisaver funds. Clients of mine, a couple who had both been contributing since Kiwisaver was introduced and putting in the maximum 8% of earnings, had a total of $49,000 for their deposit, which was just fantastic!

Does it remain a good time to invest in rental property?

I believe the short answer is ‘yes’. Conditions are still ideal: i.e. high yields and demand and low interest rates. The Reserve Bank is forecasting only modest increases in the OCR over the next couple of years, up from the present 2.50% to about 3.25%, meaning that the 5.25% for one year presently available should in theory peak at only 6.00%.

Nobody really knows of course. External variables, like the state of Europe and the United States, are factors that are as important as our internal situation. Are you are worried about interest rates increasing? I have seen 5-year fixed rates offered as low as 5.74%, so there is some safety in fixing for longer terms. I believe New Zealand is a different country now that rates are between 5% and 6%, compared to 5 years ago in 2007 when the Global Financial Crisis hit and our rates were 8% to 9%.

Yes, property prices are increasing (in Christchurch), but so are rents. Yes, the first home buyer is providing competition in that popular $360,000 three-bedroom family home space, so you do need to be prepared and ready to jump when the right opportunity comes along. As weekly rents increase to about $600 per week, I wonder how affordable the nicer family home is going to be. Well, I see tradespeople coming to the city earning a pretty good income –$30 per hour for 50 hours per week, so I feel they can certainly afford up to $200 per room. However, for the typical New Zealand family on the average wage, this level of rent is unrealistic.

What’s happening at Tony Mounce Mortgages?

We too have been gearing up for a busy year ahead, and have just employed our 10th staff member, Raewyn Fisher, (presently Manager Westpac Eastgate) who will be starting with us at the end of February.

We are proud to announce that, in line with all other major lenders, we are now able to offer Kiwibank as an option for our clients. Kiwibank, like BNZ, does not traditionally deal with brokers, but Kiwibank has decided that Tony Mounce Mortgages adds value for their clients. This means that Tony Mounce Mortgages provides the greatest choice in the broker space for its clients. Kiwibank offers a good product range, including offset mortgages, and competitive pricing.

That’s me signing off till next time. Happy house hunting!

 

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