My word, that guy from The Apprentice and his mate from Twitter (or X, or whatever it’s called….) have been busy over the last few weeks, haven’t they?
I’ll come back to those roosters shortly—but first up, let’s take a look at what’s been happening on New Zealand shores.
There hasn’t been a whole lot of change since my last update, but that’s arguably a good thing with everything going on overseas.
Here’s what’s been happening in the New Zealand and Wellington housing markets in recent weeks, with hard data courtesy of the folks at REINZ:
At a national level:
- Median price dropped by 2.4% on an annual basis, to $772,000
- Median time to sell is sitting at 54 days
- Inventory levels rose 13.6%, year-on-year
- Sales of properties is up 3.4%, year-on-year.
And here in Wellington:
- Median prices fell by 0.5% on an annual basis, to $795,000
- Median time to sell is sitting at 45 days
- Anecdotally, Council rate increases, along with an anticipated increase in property values (as a result of reduced interest rates), never eventuated. This has resulted in property investors revisiting their portfolios and liquidating less favourable assets.
- That, in turn, has seen first home buyers feature heavily in property transactions. Maybe more to come too!
More broadly speaking, I’m expecting a slow and steady housing market recovery over the next little while. There’s potential for improvement over the second half of the year, but there are a few factors currently keeping a strong recovery in check:
- Soft employment market (wage growth muted, unemployment rising)
- Population growth deceleration (net migration is down)
- Global uncertainty.
The above is being offset by a falling OCR and bank interest rates. Borrowers coming off interest rates in the high 6%s and 7%s are liking the 4.99% two-year fixed rate on offer—just delightful!
Turning now to the global situation, it’s US trade wars that seem to be dominating the headlines at the moment
It’s a bit of macro-economics, but worth touching on—because if Donald Trump’s sabre-rattling leads the US into recession, the impact will, unfortunately, be felt everywhere.
Right now, his flip-flopping back and forth is creating uncertainty and volatility—and that’s doing no favours for the share market.
We’ve already seen a market correction i.e. more than a 10% drop in the S&P500. The S&P500 encompasses the 500 largest companies on the US stock exchange, and is generally considered a good barometer for the economy.
Fun fact: there have been 34 market corrections since 1960, so an average of one every two years or so. A “bear market” is when the S&P 500 drops by 20%; of those 34 corrections, 10 have resulted in bear markets. Whether we’re about to see an 11th is TBC.
A special note here for first home buyers—with all this volatility, it’s important to keep an eye on your KiwiSaver (and related fund setting) and share portfolio if you’re looking to use those funds to purchase a property in the near-term. If you’re relying on those funds for your deposit, you want to make sure your balance hasn’t been eroded when the time comes.
If a recession hits the US, that will translate through to slower global growth, which may see central banks reduce interest rates as they look to stimulate local economies.
If the tariffs go on (particularly in the tit-for-tat nature as currently being seen) and the economic outlook remains stable, interest rates may increase, as higher prices will push up inflation. Hopefully we’ll be a bit insulated from this here in NZ…
If tariffs don’t eventuate, or are short term, then we’ll likely see a continuation of the current picture, with the next two OCR cuts of 0.25% each taking us to the neutral level, and the economy continuing on its gradual recovery.
This is my assumption, however no one is keen to predict out too far with the current state of play, as the variables here are infinite.
So in summary, offshore volatility isn’t having a major impact here currently, and the Reserve Bank forecast remains intact.
The upcoming OCR reductions possibly won’t have a material impact on interest rates. Best in class would likely be a return of Westpac’s three-year fixed rate for 4.99%.
Hopefully the shorter term interest rates do see a reduction, if only slight.
The stability we’re currently enjoying will hopefully last, and actually improve, with government cut-backs slowly coming to an end.
Property prices have largely stabilised, so if you’re looking to take the leap, reach out and we can run the numbers and give you a gauge on what could be possible.