Housing market predictions continue to run rampant in the news, with property experts once again peering into their crystal balls.
In the past few weeks, most economists have been revising their forecasts for 2020, saying that current market conditions may cause house prices to rise faster than expected. Low interest rates, unresolved supply constraints, a strong economy, low employment and continued migration – these are all key factors at play.
“The housing market has indeed turned,” said Dominick Stephens, Westpac chief economist. And Auckland’s recent data, alongside the continued positive performance of regional markets, seems to corroborate this claim.
However, Stephens tipped mortgage rates would start rising by the second half of the year, cooling the pace of price growth by 2021. Other potential price dampeners, according to CoreLogic analyst Nick Goodall, could be the new bank capital requirements putting pressure on mortgage rates from 1 July 2020, and the increasing use of “risk-based pricing” on property insurance policies. Plus, investors and vendors are likely to adopt a “wait and see” approach in the lead-up to the General Election.
On the other hand, according to OneRoof editor Owen Vaughan and CoreLogic’s Goodall, investor activity may return in higher-price markets like Auckland and Tauranga, especially given the potential for long-term growth in Auckland suburbs that are clustered around transport hubs.
“It looks pretty clear that the drop in returns on other assets, such as term deposits, and also the scrapping of the capital gains tax proposals back in April, have given [mum and dad investors] a bigger shot of confidence than other investors,” said Goodall.
When done properly, buying an investment property can be a great way to create wealth. Our Mortgage Link advisers can help landlords calculate how much they can borrow and find the right investment loan options to maximise their rental income.
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