The gap is closing for investors to act

The predictions we have been making since winter about an increase in market activity in spring/summer have been bolstered by the recent OCR drop of 50 basis points, to 4.75%.

The Official Cash Rate (OCR) is a benchmark interest rate set by the country’s central bank, the Reserve Bank of New Zealand (RBNZ). It influences the cost of borrowing and the return on savings, thereby affecting economic activity. When the OCR is lowered, it typically results in lower interest rates on loans and mortgages, making borrowing cheaper. On the flip side, higher OCR rates can lend to increased costs of borrowing, dampening economic activity.

Before the announcement, the Reserve Bank cut the OCR in August for the first time since 2020, reducing it by 25 basis points to 5.25%. This latest drop reflects further confidence in the market which is heartening to see.

One of the most immediate impacts of a lower OCR is the reduction in mortgage interest rates, which means lower mortgage payments. Borrowing is more accessible, and investors looking for favourable returns become drawn to the property market given the lower cost of borrowing. 

With cash easier to access, and the overall lift in sales activity we’re seeing, there’s every indication the market is starting to function across all levels again, and with all sectors of the market active (first home buyers, investors and top-end properties), we could start to see the median house price lift in the months ahead.

Given the current environment, the window of opportunity for investors to secure a property before the prices really start to rise is narrowing. Soon, you may not even receive any more warnings from me – just don’t say I didn’t warn you.

Recently released figures from the latest Census show Hamilton city has the lowest home ownership rates in New Zealand at 53.5%.

On the face of it this data could look disappointing, but what it doesn’t show is that Hamilton’s sheer population growth in recent years has created a demand for rental property that greatly outstrips supply.

Every month we see a third of new leases going to people new to the city, and I don’t anticipate this changing any time soon. Hamilton is second only to Auckland in terms of projected population growth in the next 25 years, and we know that home ownership rates among migrants generally lag for a few years while they rent and find their feet.

This, alongside the current market upswing, presents immediate opportunities for investors. We have more tenants than ever before needing rental properties, and with favourable market conditions, we have funds that are easier to access. If you’re in the position to secure an investment property, you will have no problems ensuring tenants. 

Get in now, before it really is too late!

Set to come into play next year, Plan Change 12 will limit in-fill developments in some parts of Hamilton, due to existing infrastructure limitations – particularly waste and stormwater systems in some suburbs.

The Government has set these rules to guide growth in New Zealand’s main centres and the changes are not optional, though councils can decide to some extent how to ‘zone’ areas to factor in environmental integrity, land use, heritage area protection, etc.

For Hamilton, this will broadly mean development may become restricted in central suburbs (aka, ‘red zones’), with areas to the north and south of the city (Rotokauri, Peacocke) able to accommodate higher densities due to planned infrastructure.

What will this mean for investors? It’s all to do with availability. Popular areas to invest in, such as the ‘red zone’ central suburbs will likely present less listings over time, and with more competition, prices will be under pressure to rise. You can check out the zoning map here.

Again, it’s another situation where the best time to invest was yesterday…but today is just as good.  

Armed with all the information in this month’s newsletter, there really is no better time to invest. As always, you know how to contact me.