Last on the 15th of November, TSB cut it’s one year mortgage rate to 3.95%. Meaning for the first time in history the weighted average one year fixed mortgage rate is lower than 4%. Something that is in sharp contrast to the average weighted 18 month rate of 4.31% and the weighted two year rate of 4.24%. Rental yields have also remained constant over the last year. Keeping up with the increases in the costs of owning property. As a result, now is the time to start expanding your property portfolio and take advantage of market conditions!
The reason that interest rates have fallen so much is that wholesale swap rates are rising for durations to five years. The rises are small for the one year duration, up a mere +10 bps in the past month. Especially considering that they have been up +25 bps for the last two and three year terms. The increase in wholesale swap rates will limit how much and for how long banks will tolerate ‘specials’ in the mortgage market. However these rates may still last for a few more weeks as the bulge in resets and rollovers runs until mid-December. In addition to this Westpac’s chief economist has said that he expects house prices to continue to rise over the next year. As a result, now is the time to take advantage of this historically low mortgage rate and expand your property portfolio.
Rental yields also remain constant on last years level with some areas in New Zealand delivering a gross rental yield of 8.5%! The Wellington average remains around the 5.0% benchmark ensuring that you can get a healthy return on your property portfolio. To put this in perspective, take a 3 bedroom house in Johnsonville for sale today. Assume it is sold for $610000, using the average gross rental yield rate of 5% in Johnsonville you can then expect to collect $30500 in rent per annum or $587 per week. This less rates and property management fees will deliver you a weekly income of $490.00 per week or $25453.53 per year! Considering the great work that property managers do to manage your property for you, you are essentially earning $25453.53 a year for putting down a deposit. A deposit you will earn back in 5 years regardless, resulting in an overwhelmingly profitable long term portfolio.
In short with constant rental yields and falling mortgage rates a house purchased and put on the market today will deliver higher returns than a property purchased a year ago. As such there has never been a better time to start or expand your property portfolio! Get in touch to find out about how the current market conditions could help you by taking advantage off all the benefits the Wellington rental market has to offer. At Quinovic Te Aro we are a team of property owners, developers and tenants. As such we are perfectly placed to advice you on current market conditions and how to make the best return on your property portfolio. Click here to arrange a meeting and make the market work for you!
Mortgage rates retrieved from: https://www.interest.co.nz/news/96899/history-made-weighted-average-one-year-fixed-mortgage-rate-falling-below-4-first-time
Rental yield data retrieved from: https://www.interest.co.nz/property/96737/little-overall-movement-rental-yields-residential-property-investors-particularly-low