Economist warns property market about to turn

By NZPA

Friday 14th May 2004

Home buyers and investors are being warned not to over capitalise on property as indicators show the market is about to turn.

PSIS chief executive Dr Girol Karacaoglu said all indications pointed to a property market which had reached its peak across the country.

He warned about buying a property now for investment or over-capitalising on home mortgages.

Dr Karacaoglu looked to three key indicators to predict the turn. The number of days or weeks a property was on the market had risen; prices had stabilised; and rising interest rates.

"In the next year or two I think the property market will slow. The driver is the rising interest rates. . .

"The only debate is whether the market will come down or stabilise."

Dr Karacaoglu said people with mortgages on houses around the $400,000 mark would feel the pinch of interest rates more than those homes valued between $100,000-$300,000.

Dr Karacaoglu said first home buyers should still try and get on the property ladder. But those looking at a second rental property or investing should be more cautious.

"Investors are getting in at the wrong time."

Dr Karacaoglu was concerned at the amount people were borrowing.

Kiwis traditionally put down between 20-40 percent deposit on their homes, but there was a growing trend to deposit as little as 5%.

Those who have mortgaged themselves to the eyeballs would be stung by rising interest rates he said.

"When interest rates start rising people's disposable income is affected. The test for people is to ask themselves if they could still service the debt if interest rates rose by 1.5%. If the answer is `yes' you will be okay."

Comments from our readers

No comments yet