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10-06-2010

OCR increase good for property market

Landlords.co.nz

The Real Estate Institute is saying that the increase in the official cash rate, which will lead to higher mortgage rates, is good for the property market.

Real Estate Institute president Peter McDonald claims the rising OCR will not adversely effect house prices.

"In fact home buyers are being promised a market environment in which they can safely plan long term," he says. His reasoning in that the Reserve Bank has indicated any further increases in the OCR will be "only gradual if needed at all."

He says because more than 30% of mortgage debt is now on floating rate and long-term interest rates are higher than short-term interest rates, the OCR will not need to be increased at the same speed as in previous recoveries.

"Interest rates are only one of many factors which influence the property market," McDonald says. "While (Reserve Bank governor Alan) Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession."

"It must also be reassuring for home buyers and investors that the Reserve Bank has found clear signs we are well into a recovery with businesses planning increased investment and unemployment still trending downwards," McDonald says.

"So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead."

Source: Landlords.co.nz

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