Now lockdown is behind us it's time to start moving forward, and opportunities are looking bright for those wanting to expand their portfolio.
Housing Prices Forecast to Drop
Historically house prices are known to fall after economic downturns and it seems it will be no different this year. In their economic update released this week ANZ said "our forecasts have not changed since our last ANZ Property Focus [a month ago]. We continue to expect house prices will fall 10-15% over the year, compared with a fall of 8-10% in GDP." You can read more on this in our latest article What Will Happen to House Prices in Wellington?
LVR Restrictions Removed
The Reserve Bank has remove LVR restrictions for 12 months until April 2021, meaning investors will need less down payment for new properties. This is only guaranteed for 12 months though, and so in April the Reserve Bank will then review the most appropriate setting for LVRs going forwards.
Interest Rates at Record-Low
Mortgage rates continue to fall with most fixed rates now lower than the last month’s already-record lows, and some even below 3%. Low interest rates and the removed LVRs is great news for those wanting to expand their portfolio this year.
In their monthly update, ANZ explained this fall has "been driven by a further lowering and flattening of the term structure of the government bond yield curve, which has in turn been driven by the Reserve Bank’s decision to employ quantitative easing (QE) now that the OCR is at its current practical lower bound of 0.25%. Although the OCR isn’t likely to go lower (or negative) any time soon, it might next year, and in the meantime we expect longer-term rates to fall as the Reserve Bank’s QE programme gets expanded. As such we favour the 1-year rate with a view to making a fresh decision then, when all rates are likely to be lower."
Lower Risk of Tenant Unemployment in Wellington
Even with government doing all it can to support businesses across New Zealand, many will be hard hit, causing job losses and business closure. Fortunately Wellington has multiple "safe" sectors, the biggest being the government and hospital sectors, who are unlikely to suffer job losses. Wellington also has a high percentage of office workers, many of whom were able to continue working from home during lock down, helping keep their businesses afloat.
Government Weakened Need for Building Consents
Excellent news for investors wanting to make improvements to new or current investments. Minister for Building and Construction, Jenny Salesa announced this week that single-storey detached buildings up to 30 square metres (including sleep-outs, sheds, greenhouses and carports) will be affected by the new exemptions to the Building Act which is expected to come into affect August 2020, saving investors time and money. So if you're eyeing up a potential investment property that needs a few improvements within these specifications, don't let the idea of building consents deter you.
It's expected to save property owners $18 million in consenting costs per year, and result in 9000 fewer consents processed annually. This improvement is a double-win, as it will reduce waiting times for building consents on larger projects, helping push new-builds and such forward.
If you're interested in a free, no-obligation rental appraisal on an investment you're considering buying, get in touch with us today.
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