Property Institute of New Zealand Chief Executive Ashley Church says the impact of the election on the New Zealand property market can already be largely predicted – even though the final make-up of the next Government could be weeks away.
Church says that the role of NZ First as ‘King or Queen maker’ in coalition negotiations means that much of what is likely to happen is predictable because New Zealand First policy positions will feature whether National or Labour is ultimately chosen as a coalition partner.
“While the coalition talks are all about negotiating positions – Peters will have considerable leverage over both parties – so there are some bottom lines that we can reasonably expect to find their way into any final agreement”.
Church says that these will probably include:
• A ban or partial ban on the sale of New Zealand residential property to foreign buyers
• A reduction in immigration numbers
• Amendments to the Reserve Bank Act – particularly around housing targets and job creation
• A moratorium on any consideration of Capital Gains taxes
• A greater focus on State involvement in increasing housing supply
• The creation of one or more Urban Development Authorities
Church says that all of these policies would have an impact on the housing market – but the effect of some would be much more significant than others.
“Reducing immigration inflows and amending the Reserve Bank’s target’s, in particular, are likely to have a sustained impact on the market. What’s less clear is whether that impact will flow through into the broader economy and slow down economic growth”.
Church says that while New Zealand First doesn’t have a formal policy on the Reserve Bank’s Loan-to-Value restrictions he would also expect these to be relaxed over the next 12 months.
“New Zealand First policy puts a big emphasis on getting young people into their first home – so I’d expect to see the LVRs gone or heavily reduced as part of a suite of policies to achieve that”.
Property Institute Valocity Regional Insights Report
According to the latest results from the Property Institute / Valocity Regional Insight Report; the New Zealand housing market has continued to maintain a holding pattern.
The report indicates that the median sales price across New Zealand has remained stable at $480k over the past 12 months – even though sales volumes, nationwide, have dropped by 29.3% from August 2016 levels.
“As predicted, there’s no ‘correction’. Kiwis have just made an orderly retreat from the market while they wait to see what happens next”.
“Based on the experience of 2011 and 2014 this slowdown is probably due to uncertainty around the election outcome – but there’s no doubt that LVR restrictions and credit rationing by the banks, have also played a part”.
Church noted that, according to Valocity data, first home buyers are still accounting for around 27% of all new mortgages across the country – a 3% reduction on the July 2017 figure but still well ahead of other borrowers. He also notes that mortgages to investors have remained steady at about 17 – 18% of all new mortgages.
“This figure has been consistent for several months – but it represents a 39% drop over the number of investors borrowing a year ago – which has probably been a big factor in the tapering off of house price pressure in the short term”.
“That’s obviously good for prices – but I worry that the exodus of investors from the market will end up having a negative impact on housing supply, which is a longer term driver of house price inflation”.
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