Norfolk Mortgage Trust Returns Steady at 7.5%, While Interest Rates Drop and Housing Market Stalls.
The Reserve Bank’s been cutting interest rates, but the NZ housing market’s playing hard to get. QV’s August 2024 House Price Index shows values are basically flat for the year. It’s a tough time, no doubt, but at Norfolk Mortgage Trust, we’re still delivering steady returns.
In this blog post, we delve into the latest insights from the QV’s August 2024 House Price Index, explaining how NMT’s expertise and strategies help secure consistent returns for our clients despite fluctuating market conditions.
Key Takeaways:
National Trends: House prices declined by 2% over the August quarter, reflecting the ongoing challenges within the New Zealand property market.
Major Cities Under Pressure: Auckland (-2.8%) and Wellington (-3%) lead the decline, while regions like Queenstown and Marlborough offer pockets of resilience.
Market Outlook: The recent rate cuts by the Reserve Bank (RBNZ), bringing the Official Cash Rate (OCR) down to 5.25% from its year-long high of 5.50%, have sparked cautious optimism in the market. However, the oversupply of real estate is currently preventing any significant price increases.
National Overview
The latest QV House Price Index reveals that the national average home value decreased 2% in the three months leading up to August 2024. This figure brings the average home value to $905,357, roughly the same as it was at the start of the year. While consumer confidence is on the rise due to falling interest rates, property values have not yet rebounded, largely due to an oversupply of listings, especially in urban areas.
James Wilson, QV Operations Manager, highlighted that while buyer interest is growing, it is unlikely to translate into significant price increases until the market stabilises. “With plenty of listings and cautious buyers, we’re not expecting to see home values soar in the short term,” said Wilson.
Major Cities Experience Largest Declines
Auckland and Wellington saw the steepest declines in home values this quarter, with reductions of 2.8% and 3%, respectively. Auckland, in particular, is experiencing its seventh consecutive month of negative growth, while Wellington’s property market is also feeling the strain of rising unemployment and economic uncertainty.
Regional Performance
Elsewhere, regional centres like Queenstown and Marlborough showed modest growth, with values increasing by 0.5% and 0.1%, respectively. These pockets of resilience demonstrate that while the broader market may be struggling, there are still opportunities for growth in select areas.
Expert Analysis: Spring Brings Cautious Optimism
As we move into spring, traditionally a more active season for real estate, there is a growing sense of cautious optimism among buyers. With interest rates continuing to drop and more properties coming to market, experts expect to see increased activity, particularly among first-time buyers and investors. However, the abundance of available listings means that prices are likely to remain soft in the short term.
QV’s Hugh Robson notes, “We’ve seen a slight uptick in the number of sales and listings, especially in Auckland’s North Shore and East Auckland suburbs. This suggests the market may be bottoming out, but recovery will likely be slow.”
Our Proven Formula for Stable Returns
Since 2006 Norfolk Mortgage Trust hasn’t just been weathering market storms; we’ve been navigating them with precision. Our winning formula for delivering consistent returns, even amidst fluctuating interest rates and property market shifts, is built on three pillars:
Rigorous Evaluation: We meticulously assess each borrower’s financial standing, going beyond credit scores to understand their true capacity to repay. This selective approach allows us to cherry-pick the very best lending opportunities, maximising ongoing returns and minimising risk for our investors.
Conservative Lending Practices: we prioritise the security of your investment. That’s why we adopt conservative lending practices that shift the majority of the risk onto the borrower, not you.
- First Registered Mortgages: All our loans are secured by first registered mortgages on real estate. This means we have the primary claim on the property in case of default, providing a strong layer of protection for your investment.
- Low Loan-to-Value Ratio: We maintain a conservative loan-to-value ratio, which is regularly updated and available on our website. This built-in equity cushion acts as a safety net for your investment, providing added security even if property values decrease.
Diversified Portfolio: We spread our investments across a wide range of properties in different NZ locations and sectors. This diversification acts as a further buffer, ensuring that even if one area experiences a downturn, the overall portfolio remains resilient.
Proven Track Record: Our numbers speak for themselves. Over the past 10 years, we’ve delivered an average return of 6.46% after fees and before tax – demonstrating our ability to thrive in challenging market conditions.
As Executive Director Stu Smith puts it, “We are very conservative, and we have to be because we are dealing with other peoples’ money.” This philosophy, paired with our expertise and transparency, makes Norfolk Mortgage Trust the smart choice for investors seeking stability and growth in the real estate loan market.
Click here to see our returns over time.
Final Thoughts
As interest rates drop and the property market flatlines, remember that stability and security remain paramount. Norfolk Mortgage Trust’s unwavering commitment to rigorous borrower evaluation, conservative lending practices, and a diversified portfolio ensures your investment is protected, even as the wider market fluctuates.
If you’re seeking a reliable and trustworthy investment partner that puts your financial well-being first, consider Norfolk Mortgage Trust. Our proven track record of consistent returns, even in challenging times, speaks volumes.
Invest with confidence. Invest with Norfolk Mortgage Trust.
Watch our short video to learn more about how the Trust works and what you can expect from your investment.
For more information and the opportunity to discuss Norfolk’s approach to lending contact Norfolk Mortgage Trust today.
Data Source: QV House Price Index for Aug2024