Thursday 22nd of January 2009

Here’s a few predictions to start the year with. Firstly, smart investors are buying and will make some great buys.

In the next issue of the NZ Property Investor we speak to many people who have bought properties in the past couple of months. The stories they tell are quite inspiring as they show that the numbers being achieved in this market are good. Property is starting to stack up as an investment option after years of being too expensive.

One of the reasons is that interest rates are low and continuing to fall.

My second prediction is that we will see home loan rates with a five in front of them within three weeks at the outside. It seems to be a race to see who gets to 5.99% first. It could even happen sooner as we have wholesale rates falling and banks working on what are fat margins (compared to the mortgage war era).

My third prediction is that while money is cheap, it won’t stay that way for very long. Later in the year we will see interest rates start to increase again (just like we have seen petrol prices rise in the past week).

A fourth prediction is that property will look very attractive. At the moment, low interest rates mean that real returns from bank term deposits are close to zero. Investors have to look at growth assets such as shares and property. Shares look ugly as the world markets go through turmoil, while property looks much better.

My fifth prediction comes from the effect of the first three. House prices won’t fall significantly in the next few months, with the exception of high-end property especially coastal retreats.

Buyers are out there looking and if there is enough of them, they will provide sufficient demand to stabilise prices. This won’t just be for properties which stack up as investments, but also for first home buyers and for families looking to take the opportunity to upgrade their home.

These people may even end up buying the property which has been put into the rental market by accidental landlords, the ones who couldn’t sell at a decent price in the second half of last year.

This is far more optimistic that what you will read in other places, but I reckon there are many positive things happening for property investors right now.