Auckland house prices to stagnate in 2016 but rest of NZ will take off, pundits say

2016 may be the year soaring house prices become no longer just an Auckland problem.
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2016 may be the year soaring house prices become no longer just an Auckland problem.

New Zealanders who live outside Auckland are being warned: 2016 could be the year your property prices boom.

Auckland's house prices have been the standout performer over the past few years.

Real Estate Institute figures show Auckland's median house price was up 19 per cent over the year.

Excluding Auckland, the national median rose just 4 per cent.

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But commentators say Auckland house prices will significantly soften over 2016, as the rest of the country ramps up.

Bank of New Zealand chief economist Tony Alexander said outside Auckland, the rest of New Zealand could be in for house price rises of 15 per cent to 20 per cent over 2016 due to low interest rates, population growth and the effect of Aucklanders moving out of the city.

That would probably be enough to worry the Reserve Bank, he said.

The central bank introduced a 30 per cent deposit requirement for investors buying in Auckland in November. Alexander said it was possible it would extend that requirement to other parts of the country as price inflation picked up.

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ANZ chief economist Cameron Bagrie said he expected Christchurch's property market to flatline. Auckland prices would drop during the first half of 2016 and stabilise for the second, he said. 

In other parts of the country there would be a mix of low single-digit growth and some areas where prices would rise by as much as 15 per cent. 

Property investor and commentator Olly Newland said Auckland's prices had already started to level off. But he said in other parts of the country, prices would start to climb steadily over 2016.

"Prices are so much cheaper, there is good buying."

He said commercial property would also have a strong year.

"Returns are still two or three times that of residential and people are waking up to the fact that a block of shops or a small factory will produce twice or four times as much as a house."

ASB chief economist Nick Tuffley agreed Auckland's price growth would slow over the year but there were still factors such as migration and low interest rates to drive demand.

He said as Australia's jobs market picked up and more construction happened in Auckland, that could have an effect on prices. "There is also an issue over price resistance and people are reluctant to pay the higher house prices."

He said growth should be stronger outside Auckland.

Most markets outside Auckland were in balance, he said, and the impact of falls in interest rates and the slight relaxing of loan-to-value ratios would make it easier to buy.

He was expecting price growth of 4 per cent to 5 per cent nationally, flat Auckland prices, Wellington to report 3 per cent to 4 per cent increases and other regional centres to hit about 8 per cent growth.

Tuffley said the impact of the Reserve Bank's new restrictions, such as requiring foreign investors to have an Inland Revenue number, would have been overstated in recent statistics.

Some buyers would only have been temporarily delayed and would return, he said.

Analyst Rodney Dickens said the situation was very similar to what had happened in the mid-2000s, when interest rates were last cut substantially.

He said the effect of Auckland's prices had already been felt keenly around the lower parts of Northland and Waikato but the momentum was starting to shift into other parts of the North Island and should filter through to the South Island by 2016.

Dickens expected the Auckland market to rebound and said supply pressures would continue to support 10 per cent year-on-year price growth.

The Reserve Bank expected national house price inflation to peak at the start of 2016.

STANDOUTS FOR 2016

Hamilton

Tauranga

Parts of Northland

Parts of Hawke's Bay

Queenstown

 - Stuff

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