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No Surprise As The OCR Remains At 2.50% - But! How Will That Affect The Housing Market?

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Brian Dalley
Brian Dalley

For the first time all economists/commentators seem to be on the same page, all but one.

Yes you guessed it, I have differing views.

Sure I was with the rest when it came to this announcement as the writing was on the wall just as it was for an increase in the GST to 15%. What I disagree with is when the Reserve Bank Governor Alan Bollard will increase the rate – and he will.

Personally I think April 29 is a given [not June or later as others are predicting] yet it may only be a small increase but even a small increase can have a snow ball effect as those on a fix or floating rate rush to fix which then drives the rates even higher.

In saying that, I wouldn’t rule out a small increase as early as March 11, but it’s a little early to say with any certainty.

The longer Bollard puts off increases to the OCR, yes plural, there will likely be at least 3 increases this year, the more carnage there could be.

We must remember most people base their discussions on emotion rather than what is practical.

This is the first thing sales people are taught and what I am hearing on the street is confirming that theory.

Daily I am questioned as to how much a certain amount will cost and as I tend to use an average rate, not the highest or lowest 99% of the time I am challenged.

“What rate was that based on”.

When I tell them their response is, “ But the floating rate is much lower than that and the 6 month rate is even lower, what would the payments be based on the lower rates”.

Sure we all want the best deal and I would like to emphasise what I am about to say next,“THE LOWEST RATE IS NOT ALWAYS THE BEST RATE”.

How do I think the residential housing market will track throughout twenty 10 based on the above assumptions.

There will be a few burnt trying to keep up with the Joneses, as did the company with the same name. There will always be winners, losers and those that sit on the fence. So remember what we were taught at school.
Stop, look, listen, before you move your feet – don’t forget the basics.

People will hold onto their homes longer which will result in a resurge of activity in the building industry.

Lenders will [be forced to] change their view on apartment lending as this is going to be the way forward for many. Although this has been evident for some time the wheels within corporate organisations can at times turn very slowly.

As to an increase in value across the board, I feel a substantial increase is unlikely however; there are still many unanswered questions before anyone could reliably say whether there will be a swing either way. All I am prepared to say at this stage is to look at your budget. If you can afford to do what you want to after [looking at the big picture] go for it.

Brian Dalley is a leading Property Consultant | former NZMBA Mortgage Broker, and Real Estate Agent. You can read more of his views and opinions on his website

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