Indian Weekender spoke with Christchurch-based top mortgage broker Nathan Miglani about the current state of the property market and his outlook for 2023. Miglani discussed challenges such as affordability and the impact of government policies on the market. Despite this, he remains optimistic about the market's future, pointing to initiatives to assist first-home buyers.
According to Miglani, interest rates are expected to increase over the next 3-9 months due to a potential rise in the OCR (Official Cash Rate) in February. The current OCR stands at 4.25 per cent, but many bank economists predict it could reach 4.75% or even 5%. This could result in a 1-year rate of around 7 per cent.
Highlighting the impacts of the interest rates, Miglani says, "Sales and mortgage lending have declined by 30 per cent in most areas, with some parts experiencing a 40 per cent drop. A year ago, a $500k mortgage would have had weekly repayments of $520, but with the new interest rates, it's now estimated to be around $730 per week. The property market is expected to remain sluggish and slow for the next half of 2023."
Talking about government policies that might affect the market, Miglani mentions, "There are some good initiatives from the govt especially around assisting first home buyers with deposit under the shared equity scheme and 5 per cent deposit first home loans with Kianga Ora however, it all comes down to affordability at the end of the day, and when rates are that high, it is not hugely attractive and affordable for people to pay double than what they are paying in rent.
Talking about the specific property types that might be in demand, Miglani says, "Properties that are three bedroom, two bathroom, brand new standalone, freehold with a garage, might be a smaller dwelling that suits a young family or a professional couple will be in a good demand as the prices have come down $50k to $80k, before the shift in the market, buying a townhouse/apartment was the only option if you are tight on the budget however with similar budget(example $700k to $750k) now you can buy these homes."
"I see Canterbury/Christchurch market to be the most resilient and in-demand market across NZ where prices have only dropped less than 4 per cent according to the latest REINZ data as compared to 15 per cent or 20 per cent in Auckland and Wellington from last year's peak. There is a huge demand in Christchurch from people moving from the north and I see this continue for at least a few years as house prices are affordable, and incomes are more or less the same."
When discussing the challenges faced by the property market in the coming year, Miglani states that affordability is the biggest issue. The bank stress test rate is close to 8.60%, making it difficult for people to secure loans from the bank. Despite stable jobs and income, many individuals are unable to borrow due to stricter lending criteria.
"If the reserve bank can let go of the tight lending restrictions they put in place in 2021 for genuine first home buyers, it will make things a lot simpler and easier for first home buyers to borrow money and purchase their first home. For someone who wants to sell and upgrade, they are exchanging in the same market.
"I see the rates start to stabilise mid this year, and if OCR starts to level off or go down, then likely rates will start to come down by the end of this year or early 2024," Miglani predicts.