Propertyscouts New Plymouth

Property market update - 30th Mar 2018

Property market update

By Tony Alexander.

Data from Corelogic tell us that in the regions there are still some rapid average house price rises being recorded here and there, but that in Auckland, even though turnover has started the year by rising, prices are still fairly flat. The flatness we see in Auckland will spread to the rest of the country in fits and starts over 2018.


Contributing to Auckland’s easing has been the tightening up by banks of criteria for lending to offshore buyers and investors, the lagged effect of the Reserve Bank’s 40% deposit requirement for investors introduced in mid-2016, the 0.5% rise in fixed lending rates a year or so back, and more recently some selling by landlords.


This selling is being partly driven by the clear desire of the new government to rebalance the power relationship between landlords and tenants more in favour of tenants than has been the case. This change, coming in the form of warrants of fitness, longer notice periods, tax changes etc. simply reflects the change in our society toward more people renting and renting for longer than before.


In that regard there is not necessarily anything special about New Zealand. The same thing is happening in many other countries for a variety of reasons. One key reason is that housing markets have become internationalised over the past couple of decades.


Before the 2000s we did not usually see all that many foreign buyers of property in New Zealand. But with more people travelling the world and seeing places they like, more people building up family wealth and looking to diversify away from their home countries, assets like housing have been sought in other countries.


The data are sketchy but suggest that foreign buyers are not a big presence here. Nonetheless, some people who might have been going to buy will soon not be able to as the government plans banning foreign buyers of existing properties apart from Australians. Will this have much impact? Is the ban, in conjunction with KiwiBuild targets of 10,000 affordable houses being built a year and tax etc. changes enough to cause me to say that buyers should hold off for prices to fall by perhaps 5% - 10%? No.

 

The outlook for our economy is quite strong. Employment growth and jobs security are high. People are likely to want to continue to buy or upgrade their home. Net immigration numbers are easing off but only at a very slow pace. Construction growth is becoming more and more constrained by a shortage of staff and a strong thrust by the government to weed out visa abuses is having a big impact on staff availability in sectors like construction and hospitality.


Mortgage rates don’t look like rising all that much in the next three years, and the Reserve Bank could very well follow the recent small easing of loan to value (LVR) rules with another slight easing before the end of the year.


While the risk of a disturbance to world growth and confidence is rising as President Trump risks initiating a trade war, the chances are strong that NZ’s various housing markets will remain well supported heading into potentially a new upward leg leading into the 2021 Americas Cup and large scale APEC meeting in Auckland. However, as we have warned for the past year or so, keep an eye on some parts of the country where construction has boomed but population growth is minimal. Once the catch-up pricing phase ends in those locations turnover may remain very low for many years, effectively locking recent buyers in for perhaps much longer than they might be thinking.

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