Nowadays, when you check out the news, it seems like doom and gloom everywhere you look. Rising interest rates here, OCR hikes there, and let’s not forget all the global tensions elsewhere! All news we seem to read has an effect on the economy. As a result, you have to ask: What’s happening to housing?
Interest is Interesting
Interest rates determine the cost of borrowing money. The higher the interest rate, the more expensive it is to borrow. Since 2021, interest rates in New Zealand have gone in only one direction – up. There is a general sense of despair among people as they continue to rise amidst cost of living concerns. But, it’s not all bad news if you look at the historic data. Between 2005 and 2009, the floating interest rate did not drop below 7% and even went as high as 10.72%. Even during the 2008 GFC when interest rates crashed, they only went as low as 7.17%. To put that into perspective, floating interest rates are currently sitting between 7% – 7.35%. A big reason for concern over rising interest rates is that in May 2021, the floating interest rate was 4.47%, the lowest they have been in the past twenty-two years. Naturally, as we move on and recover from the economic effects of COVID-19, interest rates are quickly adjusting back to rates that we have typically been seeing throughout history.
The current OCR is 4.25%, the highest it has been since the end of the 2008 GFC. Considering it was at a historical low point for most of 2020-2021 you can see why it is a tense topic of discussion. Again, looking at past data can put current trends into perspective and help you realise that while things could always be better, they have certainly been worse. Between the conception of the OCR in March 1999 and December 2008, the OCR did not go lower than 5.00%. So, while it may be creeping up lately, like all things in life it will move in a cycle and correct itself.
What about the Housing Market?
With all being said, it can be difficult to know what to do if you have been thinking about getting onto the property ladder or expanding your portfolio. We’ve said it before and we will say it again: the best time to buy property has always been yesterday. Real estate is a long-term investment that will rise in value over time as the population rises and land becomes more scarce. So while economic factors will always fluctuate, it is cyclical as historical data shows. We believe in property and its value. If you would like to discuss the current state of the market and why we will always support property, click here.