Low mortgage rates fuel sales

Low mortgage rates are playing a major part in fuelling the recent increase in the number of residential house sales in Auckland.

Monday, April 26th 1999, 12:00AM

by Paul McBeth

Low mortgage rates are playing a major part in fuelling the recent increase in the number of residential house sales in Auckland.
Gerald Rundle, of Bayleys Research, says sales volumes began increasing in the October 1998 quarter following a significant reduction in mortgage rates in the previous quarter.
He says the Auckland market has experienced its third consecutive quarter of increased sales volumes.
"The increased market activity has pushed up the number of transactions to levels that for the first time in four quarters are in excess of those achieved over the same quarter last year."

However, volumes are still below the record levels achieved two years ago.
"Low interest rates have played a major part in the recent increase in the number of residential property sales," he says.

He sales while there is a strong correlation between volumes and rates, it is not consistent as there are so many other factors that have an impact.
Rundle says perception that interest rates are going to stay low for some time has taken some of the frenzy out of the Auckland property market.
While increased domestic demand is helping the recovery it could also be its downfall.
"The increased domestic spending could eventually be the downfall of the recovery as domestic demand for imported goods exceeds New Zealand's export receipts. A significant deterioration in our balance of payments would place upward pressure on domestic interest rates and any substantial rise in mortgage rates as a consequence could see a weakening in housing demand," Rundle says.

Paul is a staff writer for Good Returns based in Wellington.

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