I usually avoid politics and very much stick to economics, but the last six months have seen quite a few changes to government policy that impact the residential property market. Recently first home buyers got a nasty surprise when the First Home Buyers Grant was axed without warning. While very disappointing for those about to buy, it is in line with current government cost saving policies. The all important access to their KiwiSaver funds remains for first home buyers.
Meanwhile, it has been only good news for property investors, with the return of the tax deductibility of interest and the bright-line test going back to just 2 years. With many investors staying out of the market currently due to high interest rates, these changes are unlikely to have any immediate impact on house prices. But in the longer term these changes will help increase the supply of housing throughout NZ. Rising rents strongly suggest there remains a shortage of housing.
Because of the high rates, it remains a buyer’s market, and a good time to buy for first home buyers, if they can afford it. The Reserve Bank continues to say it will be next year before interest rate cuts begin, however just about everybody else, including Treasury, expect them to begin later this year. The constant stream of bad economic news that we are currently getting has a silver lining for mortgage borrowers. It suggests the coming rate cuts will be significant rather than only minor.
And, so for borrowers (as for many NZ businesses), it's a case of "survive until '25" while we wait for the interest rate cuts to begin and for better economic times. If you, or anyone you know, would like to have a chat about a new or existing mortgage, then please do not hesitate to get in touch.
