Last week the reserve bank raised interest rates by another half a percent and signalled more increases to come.

You may be wondering what impact the higher interest rates, coupled with inflation and rising living costs, will have on the local property market.

It will definitely be harder for the average person looking to enter the property market. Higher mortgage rates won’t stop people from borrowing, but they will cut a

certain percentage of buyers out of the market.

As rates bite, the overcommitted are likely to avoid new builds and perhaps sell off sections.

Tightly stretched mortgage holders may need to reduce spending, cutting luxuries like dining out.

Here in Central Otago, though, the impact is not likely to be as bad in other parts of NZ.

Here’s why:

• Compared to other centres, we are affordable, and we are certainly the most affordable in the Central Lakes region.
• Young people are prepared to move out of expensive places to buy their first house. Alternatively, they may invest for the future here while renting near their workplace.
• The government raised the cap for the First Home Grant in May’s budget and removed it for First Home Loans.
• As our borders open up, more Kiwis and overseas buyers will return, as NZ is seen as being a safe distance from global trouble spots.
• There’s a trend towards people choosing lifestyle over the convenience of city amenities. With increased opportunity to work from home, more people can
• escape urban areas.
• The increasing cost of building, coupled with the shortage of materials, will drive people to choose existing housing.

You may need to tighten your belt as we face economic headwinds, but economist Tony Alexander advises borrowers to fix mortgages for two years at the longest,

predicting rates are likely to fall by the first half of 2024.

High interest rates are never good news for mortgage holders, but locally we should have a softer landing than other regions.

I’m confident Central’s property market will remain relatively buoyant.