The housing market has undergone a number of changes in the past couple of months. From the Reserve Bank announcing changes to LVRs and changing interest rates, it can be difficult to keep up with the updates and understand what it means to you. In this article, we'll aim to explain some of these changes and indicate some of the changing trends, and in particular how this has impacted the cost of getting into a house in the South Island of New Zealand.
In the past 12 months, house prices have increased significantly in some areas of the South Island. Invercargill City has seen a 13.1% increase in house prices (from an average of $247,823 up to $280,275). Dunedin has seen a 10.5% increase in prices and Central Otago has seen a 9.5% increase.
Places like Queenstown have been in the news as being one of the most expensive places to buy a home in New Zealand. In 2017 the average house prices were $1,092,736 but an 8% increase in the past 12 months has increased that to $1,180,082 - that increase alone represents 50% of the average house price in Gore.
The land hasn't escaped the price increase either. A 2524 sqm section at Jacks Point in Queenstown retails at $695,000. In 2014 the average median price per hectare was $26,000 according to JustLanded, Although the Bay of Plenty commanded $456,326 per hectare around the same time.
This combined could create a pretty bleak outlook for buying a house in the South Island. But a few new initiatives are designed to combat that.
Interest rates (as of December 2018)
INTEREST RATES (AS OF DECEMBER 2018)
These have seen a tumble in recent weeks, and as a result, there is a lot of competition from the banks to use these lower interest rates to get new mortgages. ASB is offering a 3.95% p.a. interest rate fixed for 1 year. BNZ is offering 3.99% fixed for 2 years and ANZ are offering 3.95% for one year. For more than a year now interest rates have been sitting in the mid 4% or 5% so this represents a significant drop.
This does make it slightly easier to get an affordable mortgage, and with BNZ's two years fixed rate meaning you'll know what you're paying for 2 years this can be a bonus to people looking to get on the property ladder despite these rising prices.
But interest rates don't help people that are struggling to find the 20% deposit required. After all, with the average house price in Queenstown being close to $1.1m that means a deposit of $200,000.
Loan to Value Ratio (LVR)
The Loan to Value Ration, or LVR as it's known in the industry, is a figure set by the nation's Reserve Bank. This figure tells banks how many loans they can issue to borrowers that can't afford a 20% deposit.
The LVR has changed recently to increase from 15% to 20%. This means that 20% of all the mortgages a bank issues are allowed to be people that have less than 20% deposit. This can be great news for first home buyers, but it's always worth talking to a specialist to see whether having a lower deposit will affect things like interest rates and repayment terms.
These announcements come at a great time for several developments in the South Island. From Bullendale to Hanley's Farm there are several ways to find a brand new home in Queenstown. And if you already have a section and are looking for the ideal sustainable designer home to add to it then look no further than the Flex 90.