The Reserve Bank’s move on August 9 to drop the official cash rate (OCR) could prompt homeowners to trade up to a new home and buyers currently in the market to lift their price thresholds, according to a Hamilton real estate manager.
“The half a percentage point drop in OCR is quite significant for people who are carrying a mortgage,” Lodge Real Estate managing director Jeremy O’Rourke said.
“Suddenly, you can carry a slightly bigger mortgage for the same interest cost.
“For instance, if you are carrying a $200,000 mortgage at four percent, you can now carry a $235,000 mortgage at 3.5 percent. Both scenarios cost you around $8000 per year in interest.
“Being able to carry a slightly higher mortgage creates a tipping point where buyers can stretch up to a new price bracket. We certainly saw this phenomenon happen years ago when interest rates fell from eight to four percent, for instance,” he said.
Buyers in the market for a new home in Hamilton would welcome additional homes coming onto the market, as there is a shortage of houses available for sale in the city with only 624 currently listed. This compares with 648 homes available for sale at the same time last year.
O’Rourke said the number of current sales in the city does not accurately reflect demand.
“During July, 280 homes were sold in Hamilton, which compares with 252 the previous month and 259 in July 2018.
“The number of sales, however, does not reflect the intense demand in the market right now. For every home sold, most often there are a handful of buyers vying for that property, particularly when it’s a quality home.
“This intense demand is coupled with incredibly short supply. That means we are likely to see prices rise over the next few months as we head into spring.”
According to the Real Estate Institute of New Zealand (REINZ) statistics for July, Hamilton’s median house price hit a record high and is pushing the $600,000 mark.
The median was $590,000 for July 2019, which compares to $555,000 in June 2019 and $527,760 in July 2018.
