Property Focus

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Property Focus

Category : Housing Market

Please find the property focus update from ANZ



Our monthly Property Focus publication provides an independent appraisal of recent developments in the property market.


Governor Wheeler has effectively ruled out OCR hikes to counter housing market strength, but the RBNZ has acknowledged they are very mindful of housing excesses and are now also watching some regional housing markets more closely. October sales figures, however, showed that regulatory changes intended to slow investor demand are impacting, with a regionally broad-based fall in sales activity and lower annual house price inflation. The hope is that such measures will provide more time for the lift in dwelling supply to deliver greater balance to the Auckland market in particular, but with net immigration inflows still booming, this is a moving target. Credit growth has followed the housing market and households are re-leveraging off already high debt levels.


House prices and sales fell in October, coinciding with the October introduction of government measures to slow investor demand. House prices in Auckland look stretched relative to both incomes and rents, with support to prices provided by lower fixed mortgage interest rates, tight dwelling supply, and booming net immigration. Other regions look well placed to outperform our largest city in terms of price growth from here.


Momentum across the economy slowed over the first half of the year, but the economy is far from weak. Challenges posed by low dairy export prices, peaking earthquake rebuild activity, capacity bottlenecks in some sectors and some deterioration in structural metrics are being offset by supportive financial conditions and strength in construction, non-dairy agriculture, tourism, and housing outside of Auckland. The risk profile still has a modestly negative skew (courtesy of risks around the global scene and commodity prices), but we can now see some upside domestic growth risks too. The timelier indicators suggest the economy performed better in the second half of this year than the first. We expect 2.5% growth in 2015; that’s respectable.


This month saw a period of stability in rates, with only modest moves in some special fixed mortgage interest rates. Special rates for one and two-year tenors are at (or close to) multi-decade lows. Borrowers could choose to spread fixed terms across both tenors to stagger roll-overs, although if we had to choose one, we have a mild preference for the two-year rate which offers greater certainty. With no OCR rises on the horizon, longer-term rates – while historically low – don’t offer the same value, although they do provide certainty.


Our analysis suggests that demographic changes will result in a slowing in labour force growth, even allowing for a continued shift higher in workforce participation. All else equal this is likely to knock about half a percentage point off annual labour force growth from next decade onwards. Differences in regional growth rates are likely to persist, and some regions will be looking at population falls within a few decades. This will have implications for planning future infrastructure provision. Population ageing is not a phenomenon that’s specific to New Zealand. Technological and population trends are hard to predict and migration flows between New Zealand and the rest of the world are large and variable.


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