The first three months of 2019 delivered an almost identical property market performance to that of 2018: sluggish sales activity and consistent (yet controlled) value growth – with the notable exception of Auckland. According to CoreLogic, this could continue throughout 2019
CoreLogic has just released its Quarterly Property Market and Economic Update Report. Senior Property Economist Kelvin Davidson explains, this prediction is based on multiple market factors: “NZ’s macroeconomic environment remains supportive. Yes: GDP growth has slowed down and will probably ease further still. But at 2-2.5% both this year and next, that growth would still be respectable (and probably higher than Australia’s figures of perhaps 1.5-2%).”
The report notes that the labour market is another strong foundation for property sales and prices in NZ, with unemployment low. “Admittedly, limited wage growth isn’t doing much to help improve that all important topic of housing affordability however, we are seeing a favourable lending environment for borrowers, provided of course that they can meet the deposit, income/expense, and debt serviceability tests.” Davidson says.
The report reveals that the recent rise in lending volumes (by value) is largely being driven by first home buyers (FHBs) with greater than 80% LVRs drawing down bigger average loans – as opposed to more loans. FHB’s also enjoyed a 24% market share of all Q1 property purchases (well above their normal levels) and equal to mortgaged investors who are showing a return to form, even if still below their past levels.
“Like us, investors will be watching policy intervention in the housing market from both the Government and Reserve Bank very closely. The prospect of a broad-based capital gains tax in 2021 has been ruled out, however the effects of last October’s Foreign Buyer Ban seem to be playing out in softer sales activity, while the tax ring-fence for rental property losses is currently going through the parliamentary process. It’s not yet law, but when it does pass, it will apply to the current tax year (starting from April 1st). Investors will therefore be factoring this into their sums right now.”
Auckland’s property values have dipped by 1.5% over the past year with the report stating more modest falls could occur: “Auckland’s affordability is still low (FHBs are still managing to buy but only thanks to KiwiSaver funds and/or a willingness to compromise on location/property type), listings are high, and buyers aren’t in any rush”.
Davidson summarises the NZ property market as being on a relatively solid footing despite sales volumes likely to remain subdued in 2019. “National average prices may edge up by about 3% from their current level of $686,523, however for Auckland, the scene is set for further weakness.”