Pressure on both sides: ANZ

There’s a mixed outlook for the property market, if ANZ’s latest Property Focus is anything to go by.

Friday, January 31st 2014, 12:00AM

by The Landlord

The bank’s economists have issued their monthly Property Focus, reporting pressure from both directions on house prices.

They noted declining turnover but said prices were still rising.

Residential consent figures lifted 10.7% in December but that followed a concerted period of under-building. The three-month average volume of house sales has eased to a 13-month low.

Annual net migration is at its highest 12-monthly net inflow since January 2010. But mortgage approval numbers and values are about 9% below their level a year ago.

Of the gauges ANZ uses to determine the direction of the market, only migration is exerting purely upward pressure on prices.

Affordability is tougher, serviceability is stretched because mortgage repayments are rising faster than incomes, LVR restrictions are gaining traction on credit growth and listings have hit a 13-month high.

The report said LVR restrictions were having an impact and that fixed rates were increasing, particularly in the two-year band. Floating would follow.

On balance, the pressures were stable, the economists said.

But they said despite the expectation of rising interest rates this year, borrowers should not necessarily rush to fix a home loan for more than two years. "An expectation of higher interset rates is now 'priced in' to mortgage rates. Consequently, we still believe it makes sense to stick to short-dated fixed rates, which offer the lowest rates on the curve."

The one-year rate would have to rise from 5.49% to 7.09% in a year’s time for it to be worth fixing for two years now.

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