NZ Mortgages Managing Director Nathan Miglani offers an insight into where the property market is heading and why stability is a reason for confidence.

There was some relief at the end of February when the Reserve Bank announced the OCR would remain at 5.5 per cent. While of course we would welcome a drop, having it hold provides a level of certainty for the next few months, which allows for confidence to start creeping back into the property market. 

For the last four to five months, interest rates have sat around six to seven per cent. People have accepted this. They are what they are, and for first home buyers and those looking under $750k, there is significant activity. Open homes are bursting and there is plenty of inventory for people to explore. 

The biggest shift we have seen in the property market in the first quarter of 2024 is in the next bracket, $750k – $1 million. We often see a post-election optimism in property and coupled with long-term interest rates starting to lower, we have seen growing activity and interest in this segment of the market. Buyers and sellers were waiting for the stability that comes post-election to upgrade or move, and with the OCR holding, this will give them the green light. 

Looking ahead at the months to come, we expect property investors to start to return to the market in July, given the number of soft changes expected to come into play. Such as the reduction of the bright-line test down to two years from 10, and the introduction of an official debt-to-income (DTI) measure. 

A DTI effectively limits the amount you can borrow based on your income. As a simple example, if your annual salary was $100k and the DTI measure is five times, you could borrow up to $500k to purchase a property. The intention is to protect home buyers from borrowing large sums they can’t afford should the market shift. While not in place in New Zealand yet, DTIs are in place in a number of countries around the world and would be another tool in the Reserve Bank toolbox, to create stability within the property market should it take off again. 

For those looking to refix your mortgage, change is on the horizon and we still expect interest rates to be coming down by the end of 2024, so a one-year fixed rate term is encouraged.