CoreLogic: uncertainty creeps into property forecasts video

Uncertainty is growing, but people's positivity could keep the housing market strong for at least one more year.

In a review of the year just gone, property data firm CoreLogic says earthquakes, Brexit, and Donald Trump's US Presidential election have all made the New Zealand property market much more uncertain.

An election at home this year, question marks about the Auckland market being overvalued, and the threat of further borrowing restrictions were also adding to concerns.

Wellington played catch-up last year, with prices rising more than 20 per cent.
JOHN NICHOLSON/FAIRFAX NZ

Wellington played catch-up last year, with prices rising more than 20 per cent.

The market had already shown signs of this unease, with tighter lending restrictions and holidays putting growth on hold.

READ MORE:
* Cheap houses lure investors to Dunedin, Wellington heats up, Auckland cools
* Sharp rise in December Auckland property listings, but prices remain steady 
Wellington leaps up world house price rankings: Knight Frank

"The slowdown is real," CoreLogic senior research analyst Nick Goodall said.

Auckland's stellar annual growth had slowed to 12.8 per cent in December, a far cry from its peak a year ago at 24.4 per cent.

"But with an average property value of $1.05 million, any growth from this point on could be seen as excessive, especially with wage growth not keeping pace," he said.

Outside Auckland, 2016 had been a year of playing catch-up. Most centres had experienced single-digit growth up until mid-late 2015.

But when lending policies were tightened in Auckland and loosened elsewhere, investors started looking to those regions, aided by falling mortgage rates.

Ad Feedback

"All of a sudden it was game on," Goodall said.

Annual growth in Hamilton peaked at 31.5 per cent in July, Tauranga's peaked a month later at 28.5 per cent.

Locals climbed in because Aucklanders were doing so, and competition grew for lower numbers of stock, pushing up houses. 

However, the pace of growth in both cities has since slowed, with Hamilton now coasting at 23.1 per cent annual growth and Tauranga at 26.5 per cent.

Wellington took a bit longer to get going, but the growth in its house prices rocketed from an annual 10.2 per cent to 21.2 per cent between May and September - "an exceptionally steep curve, especially for the winter months", Goodall said.

First home buyers were a bigger slice of the buyership in Wellington than nationally. However, by November, price growth in the capital had also stalled, albeit at 20.6 per cent. 

In the South Island, Christchurch's growth was a modest 4.3 per cent, while Dunedin's growth was slow but steady, a respectable 11.4 per cent increase after peaking at 13 per cent in October.

This is echoed by new figures from Statistics New Zealand which show - of the 1.82 million homes in New Zealand - 1.15 million (63.1 per cent) were owner-occupied in December 2016.

Property Institute chief executive Ashley Church said news of a continuing slide in home ownership was a "disaster in the making and threatens the fundamentals of what it means to be a Kiwi".

The generational impact of closing Kiwis out of the housing market had "huge knock-on effects", he said.

"It isn't just about the value of the house as an asset - it's also about what you can do with that house.

"Mums and Dads use the equity in their homes to buy businesses, fund further education, fund their retirement and help out their kids," Church said.

PROMISE

ASB senior economist Jane Turner said while 2016 was marred by economic disappointment, 2017 was shaping up to be a year full of promise for New Zealand's economy.

"Strong population growth and low interest rates have fuelled construction demand, a tourism boom has the retail sector humming, the labour market has tightened and New Zealand households feel more confident, and dairy prices have finally turned around."

Looking ahead for the housing market, Goodall said there remained a feeling of "surely this can't go on forever?".

But some of the same driving forces remained such as record  net migration, low interest rates and continued lack of supply. 

"There are signs of all these factors turning around but none are fast moving. The  pressure they're creating will therefore continue in our short term future."

The potential for rising mortgage interest rates would have an impact on some would-be buyers, but not so much for those already in the market.

Debt-to-income restrictions would also remain a very possible alternative for the Reserve Bank.

However, business and consumer confidence was strong, as was employment.

"Beyond 2017 is anyone's guess. We could have a new government, Australia could be more appealing off the back of an improving economy there, mortgage interest rates will likely have increased further and we may well have a debt-to-income restriction implemented," Goodall said. 

"These are all important factors when it comes to the property market and we will continue to pay close attention to them all. "

 - Stuff

Comments

Ad Feedback
special offers
Ad Feedback