Young buyers are coming back

From Independent Economist Tony Alexander

In my monthly survey of mortgage advisers all around the country we can see that first home buyers are moving back into buying mode. Before the shock inflation number of October 18 then the record monetary policy tightening of November 23, a net 48% of mortgage brokers in my survey said that they were seeing more first home buyers looking for advice.

That fell away to eventually reach -13% in January. But now a net 30% of advisers once more say that the young people are out hunting property once more. Why might they be doing this when there is further monetary policy tightening to come and talk remains strong about recession this year?

One reason is banks recently cutting fixed mortgage rates for terms of two years and beyond. These cuts reflect wholesale funding costs falling as some signs have emerged of inflation easing off. The path to achieving inflation less than 3% is going to be very rocky still this year and next. But worst case scenarios of fixed rates going to 8% are being ditched.

Young buyers are also watching prices falling now on average 16% from their peaks. That still leaves then 20% above pre-pandemic levels. But wages have risen by almost the same amount. This means affordability looked at from an interest rates point of view is still bad. But from a price versus income angle the pandemic impact has essentially been eroded away.

Young buyers are also seeing continuing rental shortages and rising rents. Falling house prices are not translating through into falling rents and the incentive to switch from renting to owning grows every month.

First home seekers face very little competition from investors and stocks of houses for sale are at their highest levels since 2015. Finally, banks are easing their lending criteria to try and meet sales targets.

These are early days and considerable uncertainty remains along with pain for many people. But at the margin the housing market is showing signs of being back on track towards a general bottoming out by perhaps the middle of the year.

For additional information on the economy, housing market, and interest rates, you can subscribe to Tony’s free weekly Tony’s View publication at www.tonyalexander.nz

Blog 16th February

The impacts of cyclone Gabrielle are a physical reminder of how life can change in an instant.  Our blog topic for this week is not one that fills people with great excitement yet is critical for surviving tough times.  Last week, a middle-aged client of ours passed away   without insurance, a Will or power of attorney in place. The stress that this placed on her surviving husband was huge.  He was struggling to pay for the funeral and couldn’t access funds due to the lack of estate planning.  Despite advice given, appropriate insurance was never taken up.  Whether it was cost, or the time involved, it’s hard to know why.  However, some is better than none.

We contacted our solicitor after our client’s situation, to update our own wills and check on our power of attorney, only to discover that we hadn’t ever completed them.  We have since remedied this and as a result, thought it prudent to make sure you took some time to check on your estate planning.

A will covers more than just what should be done with your assets and who you want to provide for.  We were asked by our lawyer to outline our funeral instructions, who would look after the kids, and any special gifts to be donated.  This has caused much discussion in our household!

An enduring power of attorney (EPA) is a legal document giving someone the power to act for you if you lose the ability to make decisions for yourself.

There are two types: one for money and property, the other for personal care and welfare.  The enduring power of attorney needs to be done when you are mentally capable, so it makes sense to do it as soon as possible.  (https://sorted.org.nz/guides/protecting-wealth/willsSorted.co.nz.) People tend to think that only the elderly require assistance with their affairs, however, as for our clients, they required it while in their early 50’s.  For more information, you can contact your lawyer or Citizens advice bureau.  I found a range of really useful and easy to follow information on sorted.co.nz.

It’s worth taking a little bit of time to make sure you are well set up for managing whatever comes your way.

Disclaimer:  This newsletter is meant to be informative and engaging, hopefully not a cure for insomnia.  Please don’t take this as personalised financial advice.  Discuss your situation with an Advisor.  This is where I need to say past returns are no guarantee of future returns.