Housing squeeze defies NZ trend

00:06, May 10 2014
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Canterbury's housing shortage means it has bucked a nationwide trend of falling house sales, despite mortgage restrictions.

House prices are starting to level but ongoing demand is buoying sales in the region.

Reserve Bank deputy governor Grant Spencer said the bank's low-deposit loan restrictions, introduced in October, would last until at least the end of the year.

The housing shortage remained large and "significant increases in building" were needed for three years in Auckland and Canterbury, he said.

Only Canterbury had not seen a slow-down in sales, Spencer said, noting replacement of lost homes was under way after a slow start.

Almost 1000 houses a week are selling in Canterbury-Westland, Real Estate Institute data reveals. From September to March, sales fell by 11 per cent nationally but by only 1 per cent in Canterbury.


Figures from Quotable Value this week put Christchurch's average house value at $451,794, 1 per cent lower than three months ago but 8 per cent up from a year ago. The figure is almost 20 per cent higher than at the previous market peak in 2007.

Quotable Value reported steady demand in Christchurch but without last year's hype, and said more house-price growth was likely.

Yesterday, Spencer described immigration as the biggest risk to New Zealand's housing market, especially with fewer Kiwis leaving. He forecast floating mortgage interest rates could be 7 per cent to 8 per cent in two years. How far and fast rates rose would depend on the exchange rate and the housing market.

The loan-to-value (LVR) restrictions limiting low-deposit loans were "achieving their purpose", Spencer said..

He said the bank needed to ensure immigration would not reheat the nation's housing market.

Canterbury had more than 11,000 permanent and long-term arrivals in the past year, according to Statistics New Zealand, the highest number for decades. About half that number departed long term.

A Government plan to attract beneficiaries into Christchurch for work drew criticism that it would further stress the housing supply.

Christchurch economist Robin Clements said that, while the mortgage deposit rules had affected Canterbury's house market, their impact was "swamped" by all the other post-earthquake factors.

"Maybe it did have an impact, but now that's wearing off. It probably has taken the top end off inflation, but the question is how long will it last?"

After cutting back hard on low-deposit mortgages to meet the new rules, the banks had room to move and were now writing more of them, Clements said.

Lending data suggested that, despite far fewer low-deposit loans being issued, total borrowing remained high and interest-rate discounts for higher deposits were attracting borrowers.

Hayden Duncan, head of real estate group Harcourts, welcomed the Reserve Bank's news that the loan restrictions would come off.

After an initial "cooling off" in first-home buyer numbers, they were returning to the market and prices were continuing to rise, he said.

The Press