Westpac has launched into 2021 with a sharp cut in a key mortgage rate, cutting -20 bps from their one year ‘special’, taking it down to 2.29%.
Taking effect from the start of this week, this is the first cut in a fixed rate from any bank since November 6, 2020, nine weeks ago. But most expect that it will not be the last. With the RBNZ’s Funding for Lending program is in place, allowing banks to access money at the OCR’s 0.25%. If banks use that funding line, they can still keep their margins intact with rates down to about 2%.
Westpac quite clearly stated that it is aiming to capitalise on the housing frenzy underway, “We know property ownership has probably been a hot topic for many Kiwi families over the holiday period, so whether you’re looking to buy your dream home in 2021 or just pay off your mortgage a bit faster, this special rate could help you get there,” a spokesperson stated.
Looking back at the statistics of that last month of 2020, it looks like this “housing frenzy” is showing no signs of letting up, with near-record growth registered across the country, according to the CoreLogic House Price Index (HPI).
The HPI for December shows nationwide property values continued to accelerate over the month, increasing by 2.6%. This takes growth in the final quarter of the year to 6.1% – a rate not bettered since the three months ending February 2004 (6.6%). Property in Auckland, even at an average value of $1.14m, is also firmly on the rise, with 6.0% growth over the final quarter of the year. This equates to an average increase of more than $60,000 in three months.
Auckland’s largest realtor Barfoot & Thompson echoed these incredible tends, finishing 2020 strongly with sales volumes up +28% over 2019 and their median price exceeding $1 mil for the first time.
They sold 11,944 properties in the year, enough to give them about 40% market share in the large Auckland market. In December, the finish was very strong, selling 1479 properties, almost double the 779 sold in December 2019. What is even more impressive, that 1479 sales level was a record high for any December for the company.
Looking forward, Quotable Value (QV) general manager David Nagel stated that the economic outlook remains murky due to Covid-19, he’s predicting property prices will continue to rise in 2021, though at a considerably slower rate than we are currently seeing.
“A shortage of listings, record-low interest rates, and the looming re-introduction of loan-to-value (LVR) ratios means that the property market is in for a hectic summer yet. But when the LVRs do eventually kick back in just as the weather begins to cool in March, I expect the property market will start to cool as well.
“I’m predicting we’ll see something more akin to 2019 levels of growth again, when prices increased by an average of 4-5% nationally, as opposed to the rampant double-figure growth that we’ve witnessed during the back half of this year.”
Property listings are showing a small but steady increase after the Christmas hiatus, with Realestate.co.nz spokesperson Vanessa Taylor stating that between January 1 and January 14, they recorded 2624 new listings – an increase on the 2191 new listings they recorded over the same period last year.
In the Auckland region, there had been new 1019 listings so far this year, which was a big increase from the 621 seen in the first weeks of 2020.
How the year will shape will remain to be seen, but for now, it seems that there is no dousing the summer flames that have set the market alight.
-by Ravi Mehta from Professional Financial Solutions