The economy is stabilising, and this should see an end to the easing of interest rates much further, provided we do not see any more turmoil in overseas markets.
We are seeing a continuing strengthening of net migration into NZ with in excess of 9,000 more people into our beautiful country, on an annual basis, more than double a year ago, this is predominantly being driven by a sharp decline in the number of Kiwi’s jumping the ‘ditch’ which is now down to record lows not seen since 2006.
The strong net migration together with strong housing data supports the theory that the easing of interest rates has almost finished Much improved household affordability is being driven by the lower interest rates we now enjoy and the average number of days to sell a house is now down to 41 which is juts a touch over the historical average of 39 days and seasonally adjusted sales last month were over 5,700 more than 50% above the trough in November 2008.
There is clearly a stock shortage in Real Estate with a lot of people preferring to sit tight in the current climate due to concerns around employment prospects and the continuing conservative approach to lending from banks who all have liquidity concerns and are in a massive arm wrestle for term deposits.
The Reserve Bank has reiterated that it expects to keep the Official Cash Rate low right through to late 2010 and while business confidence has been restored the economy is still hampered by the strengthening of the kiwi dollar due to a continuing depressed global environment, which is undermining the rural and export sectors.
Mortgage rates continue to be influenced by contrasting forces, at one end of the scale you have continued upward pressure on long term rates (3-5 year) due to upward pressure on term deposit rates as banks scramble for term deposits. At the other end of the scale we see the message being reinforced that short term rates will be held low for at least the next 18 months.
Our current strategy still remains unchanged though, be patient and take advantage of the low 6 month or 1 year fixed rates with over 2% difference to 5 year rates.
