The Reserve Bank’s OCR cuts have yielded a “period of opportunity” according to property experts, but the low interest rates are also fuelling a market where the demographic of people approaching retirement may increasingly look to downsize.
Real estate firm Tall Poppy reported a 52% year-on-year growth in September, driven largely by regional buyers taking advantage of the low interest rate environment – however, property expert and adviser Joe Wilkes says that that the record low interest rates will also put pressure on the savings of those leaving the workforce. As the cash rate is only expected to shrink, there’s no sign that that pressure will ease anytime soon.
“We’ve had some surprising moves from the Reserve Bank, and our expectations are that we’ll see a further cut in November and likely a further cut next year,” Wilkes told NZ Adviser.
“We’re at 1% now, and I wouldn’t be at all surprised if it was at 0.50% by May next year.”
“Low interest rates are going to be around for a while, that that could create a pressure on a certain demographic,” he explained. “Those born between 1955-65 will be retiring soon, and every year we see more people exiting the workforce than entering it. As these people hit retirement, they’re getting lower interest rates on their savings, and that may create a need for them to consider downsizing.
“There is a possibility that that pressure on fixed incomes could stimulate more growth in the numbers of people wanting to sell, so in that respect, we could actually see more choice and more opportunity in the market.”
“The rate cuts are also helping first-home buyers get into the market, and that’s a large bulk of buyers at the moment,” Tall Poppy co-owner Sam McIntyre added.
“It’s also seeing people trade up a lot – upgrading their home to something larger and better, because money is cheaper at the moment. Spring is usually our busiest time of year, and there are signs more properties will be on the market.”