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Why First-Time Buyers Shouldn't Wait: Economic Insights from ANZ
•Zebunisso Alimova
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Looking to buy a home but feeling unsure about the current market? This candid conversation between Zebenisa and James Buchanan unpacks fresh insights from ANZ Bank's latest economic forecast that might just change your perspective on property investment during economic uncertainty.
James shares valuable insights from an ANZ economist webinar, revealing that we can expect three more OCR cuts by February, potentially bringing rates down to 2.5%. This is excellent news for mortgage holders and prospective buyers alike. While inflation remains a concern, particularly in areas like council rates and utility bills that aren't affected by OCR changes, the overall economic outlook suggests now might be an ideal time to enter the property market.
What's particularly fascinating is the current bottleneck in the market – numerous potential buyers with pre-approvals and healthy KiwiSaver deposits are hesitating due to economic jitters. Those moving forward tend to be people tired of renting uncertainties. For first-home buyers, this presents a unique opportunity with lower competition and stable prices predicted for the remainder of the year. The conversation takes an interesting turn when discussing long-term property investment strategies, including buying before moving overseas and renting your property while earning in stronger currencies. Several real-world examples highlight how this approach has benefited Kiwis working in places like Hong Kong, while cautioning against the opportunity cost of waiting decades to enter the market.
Ready to explore your options in this buyer's market? Connect with a mortgage broker sooner rather than later to understand your position, even if you're not quite ready to buy. Remember – property investment is a long-term game, and current conditions offer an opportunity that may not last indefinitely. Share your thoughts on today's market conditions or reach out with your property questions!
Hello and welcome back to that Home Loan Hub . I am joined back by James Buchanan . Hello , James .
Speaker 2
Morning Zebenisa .
Speaker 1
We are in episode of James Shares , and you had some fun this week , you , our resident nerd . You attended a webinar .
Speaker 2
I did and I really enjoyed it .
Speaker 1
What was that ?
Speaker 2
about Very , very sad . It was an economist webinar from the ANZ Bank but , look , he did a really good job and they just did a very thorough gave us some very thorough insights on how the property market is going and how the New Zealand economy is going . So what I did for the team is I well , I took one for the team but I actually enjoyed it . So I went along and I just took a few notes and sent it out to the team and I think it's worth sharing with our listeners .
Speaker 1
Yeah .
Speaker 2
Because some really interesting things come out of it .
Speaker 1
Okay , let's hit it .
Speaker 2
Okay , well , the main thing and just remember , this is ANZ's perspective , so the other banks have slightly different perspectives . But it sort of resonated with me what they were saying quite a bit and basically things are really slow and most of us probably already know that , but sort of mid-year or sorry , early part of the year , it looked like things were going to be ticking up with some .
Speaker 2
GDP growth quarter to quarter . But actually it's really buttoned off a wee bit and we might still be contracting , getting lower growth over in the next
couple of quarters . So he thinks that there will be at least three more OCR cuts by the Reserve Bank , three more interest rate cuts in August , November and February , which would bring the OCR down to 2.5 . That's really cool for us in the property market or buyers , because it should have an impact on fixed-term interest rates if you're looking to lock in those interest rates . So that's quite interesting .
Speaker 1
Interesting because a lot of people were expecting that something will happen in the July OCR but then there were mixed reviews of it may happen , it might not happen , because the inflation was still going hard . So they didn't cut the OCR in July .
Speaker 2
Yeah well , so the reason that these guys understood behind that was to do with council fees . There's certain things in the economy that are not having inflation anymore , but there are things that are , such as council fees , like your rates and your power bill and stuff like that and what ANZ is saying . No matter how much they increase the OCR , it's not going to change council rates . So you know , changing the OCR can't have any impact on on what the council rates or the power bills are going to be and all that sort of stuff , it's not going to curb spending .
Speaker 2
So they're saying you know , why don't you just carry on and forget about that side of inflation ? Because we can't do anything about it . Let's worry about the other side . And the economy is not doing very well , so let's
Yeah , help them out a little bit , absolutely . I think this is what we're seeing , isn't it ? The living cost is going up yeah . And if people can't afford to pay for their mortgage and they can't afford to pay for the bills and stuff , then that's going to depress the first-home buyers , for instance going oh you know , my friends are struggling and they've got a home . Do I really want to buy a house ?
Speaker 2
Yeah , for instance , going oh , you know , my friends are struggling and they've got a home . Do I really want to buy a house ? Yeah , yeah . Well , I think what , what we are , well , what I'd like to encourage people to do , because there's a lot of people with the money . You know , we're seeing these clients come in and they've got the money . They've got , um , pretty good deposit from kiwi saver , but they're holding back just because of what's going on , of the uncertainty in the economy .
Speaker 2
But in reality , if you're , in a good spot it's a great time to be at least talking to us about getting a mortgage so we can get your affairs in order , so that when you are ready , you're good to go .
Speaker 1
Yeah , and what we've seen recently , right , we've got a bottleneck at the moment where we've got so many clients sitting there , pre-approved , ready to go , but only a small amount of clients are dribbling through . Yeah , and the ones that are going ahead are the ones that are sick of paying rent yeah , really , and they're sick of uncertainty , they're sick of being told by the landlord things that they can do and they can't do , and all the inspections and they're sick of moving because , you know , a lot of landlords are struggling , for instance , to pay the mortgages and they are selling the properties .
Speaker 1
So every time they sell a property then those people have to move and I think , as you say , you know , if you are in that good position , at least talk to us .
Speaker 2
Get on the ladder . Yeah , and even we're seeing people with credit issues come and talk to us , but they really need to be talking to us sooner rather than later so that we can advise them on what they need to do to sort out their credit problems . There's no point coming to us and say six months' time , when the market's going gangbusters and it's going to take you six months to a year to get your finances sorted out . We need to . You know you need to talk to somebody earlier so we can help you , so we can get you on the right track . That's what I would like to see , and we're seeing a lot of people get in touch with us , but we're not what
I am , but not necessarily following through . Maybe it looks too hard .
Speaker 1
Cold feet .
Speaker 2
Yeah , and we're not scary people , are we ? I'm a little bit worried . It's my answering machine message so I've changed that in case I sounded like a bit of a weirdo or something .
Speaker 1
I love you , James . This is so funny , James . Back to the ANZ review of the economy . What else did they say that's of value ?
Speaker 2
Basically , I think what came out is that the property market is going to be weak for the rest of the year . We're not going to be seeing any significant changes to property prices this year , perhaps early part of next year . We're not going to be seeing any significant changes to property prices this year . Perhaps early part of next year you might see things move a little . The other thing that sort of came out so the market's not going to change much . That's from their perspective .
Speaker 2
The other thing that came out about it and I think this is useful for everybody to know , for us to understand is that even though inflation is is reducing uh , it's not it still doesn't mean that prices aren't rising . It still does . It still means that prices are what ? 30 percent more than what they were five percent five years ago , if that makes sense . So they , what you could say is that , um , and they , what you could say is that inflation today is high but it is reducing at a slower rate , if you know what I mean . So we still got to pay . I've still got to pay $400 a week . Okay , groceries , even though inflation has come down , I'm still paying $400 a week groceries .
Speaker 2
It's never going back to $200 a week groceries that it was four or five years ago . So even though inflation is coming down , we've still got those high prices that we have to and maybe incomes are not matching that , yeah , interesting .
Speaker 1
I saw , step aside from the ANZ one , I saw an interesting post from National . They put it on their page about how the rent is down in Wellington and how they were very happy about how their policy changes made this great change and the rents are lowest that they've been since , and they put a really interesting year on it . I think it was like I don't want to lie about it , but it was 2012 or 2020 , something like that , so the rents were historically low , you know . But it's interesting because the comments underneath that post were about people that they're losing their jobs , they're moving out of Wellington and this is why we are seeing the drop in rents , because people don't have , you know , tenants and therefore the landlords are dropping the prices , because that was another thing that you mentioned from that ANZ economy update that a lot of net migration and people are leaving .
Speaker 1
People are leaving New . Zealand .
Speaker 2
Yeah , so that's really that's a big drawback is that we're losing a lot of skilled workers in terms of our whole economy . But you know , in terms of the property market , immigration numbers are nowhere near as high as what they used to be . You know , we used to have a pre-COVID . I think we were doing really well .
So that's not quite the same as what it was . And the other thing is , I think we've got to be a little bit thankful of what's going on in the agricultural industry , because that's sort of supporting the economy a lot at the moment with very high commodity prices . So , um , we're lucky that that's doing well um , if that was , you know , because that's a significant part of our economy .
Speaker 2
if that wasn't doing very well , we'd probably be in a bit of trouble , because we don't have the tourism that we used to have either . So we're losing out on quite a bit of stuff and low immigration , yeah .
Speaker 1
On the other side , though . It's interesting because I know New Zealanders . You know they think that the grass is always greener in Australia , for instance , and go to Australia . On the other side I am getting a lot of messages from people in America saying wanting to leave America , to come to New .
Speaker 1
Zealand because they see New Zealand as a bit of a green heaven for them , where you know , we've got relatively low crime rates , especially compared to America . We've got good education , we speak English , so I'm getting contacted by a lot of expats in America wanting to come to New Zealand .
Speaker 2
Yeah , and I think that's what we've got to remember as well we're always comparing ourselves to Australia . Australia is actually a really wealthy country , you know , if you compare it to other countries around the world . So to be comparing ourselves with Australia all the time it's not so useful . But yeah , we attract a lot of people . New Zealand is still a cool place to live . It's very stable . You can still pretty much do a lot of things .
Speaker 1
Yeah , and what I'm seeing as well . It's an interesting situation , right , because we've got this first-time buyers that I think it's a fantastic opportunity for them to buy now , and what I try to show them is the vision ahead . So , for instance , if they buy now and even if they want to go away and work in Australia , work in Singapore , whatever buy a house , live in it for six months to 12 months , you know , if you can't , if you're still struggling with the jobs in New Zealand , go away , go work somewhere else . Leave your house as a rental . You can still get the rent because more people are still coming back to New Zealand . Leave your house as a rental and even if you come back in five to 10 years to even to 20 years , you've got this asset that will continue to go up in value versus if you leave it . And again , this is something I've seen happen .
Speaker 1
I am dealing with some New Zealanders that are in their fifties and sixties that have left New Zealand . 40 years ago , for instance , didn't buy a property then . Now they come back after having a great time overseas , great salaries . Now they come back , because New Zealanders always come back to New Zealand . It's amazing . They do a bit of a ticket tour across the world and then they come back . So they come back and now they go . Oh crap , you know I should have brought this property when it was like 100K versus now 1 million . So you know , if you put these things in perspective , always think of a bigger . Longer picture I think property is never a short-term solution . Longer picture I think property is never a short-term solution ?
Speaker 2
yeah , it's , it's a long-term goal . So , and if you're earning that foreign exchange money often it's it's quite easy just to top up your mortgage back here if the rent's not quite covering it , yeah um I have .
Speaker 1
I have actually a few clients . One of them is in hong kong and she's a teacher , you know , in a private school . She worked here in wellington , got a contract in Hong Kong , got a few properties here and even if she has to support those properties here in New Zealand because in Hong Kong it's so much cheaper for her , there's no tax .
Speaker 2
Yeah .
Speaker 1
You know , I think , it's zero tax in Hong Kong , so she's able to earn more money to support her properties in New Zealand while also still getting ahead in life and , you know , ticking off her box for traveling .
Speaker 1
So there , getting ahead in life and , you know , ticking off her box for traveling . So there's so much you can do and we just can't stress enough that right now , don't get fixated on the economy's all gloom and doom . No , like this is your perfect opportunity . Buy a house , get on the ladder exactly , and this is what you know .
Speaker 2
That's sort of my point , but I got carried away with the doominess . It's it's the best time to buy yeah you know , interest rates are right low , as you said so , and there's lots of supply out there cool , sounds good , awesome .
Speaker 1
Well , thank you so much , and uh , let's go on to the next one cool
