2017 has been an interesting year in terms of residential property in New Zealand. Recent statistics suggest that there has been a definite easing in property values, particularly in Auckland but also throughout most of the country. There are a number of factors which are influencing the current trend – most of which are driving down demand. Lets take a look at some of these factors and then identify how this may play out over the next couple of years.
- RBNZ has kept interest rates at historic lows throughout this year and, in recent announcements has suggested this is likely to be the case for the foreseeable future – perhaps well into 2019.
- Despite the low RBNZ rates, international market influences (which is where most of our banks source their funds for lending purposes) are putting upward pressure on interest rates leading most of the banks to raise interest rates both fixed and floating. These rises in interest rates have had a dampening effect on demand for property as net returns for developers and investors are negatively impacted.
- The LVR restrictions and bright-line IRD test has also affected investor demand and created challenges for first-home buyers in particular who are trying to getting onto the housing ladder. Despite political comment that, with an easing in property inflation pressures, there is a possibility that LVR restrictions could be eased, there is no indication when this could happen.
- One of the more important counter-balances to price softening is the continued net migration inflows. There is no sign that this will change any time soon.
- Political uncertainty with the upcoming election, is also a dampening factor on demand with buyers (and sellers) taking a wait and see approach before moving.
So what is the outlook for property. As always, this requires some form of crystal ball-gazing and no-one really has the answer. However, it would seem likely that over the short to medium term at least, the double-digit growth we have seen in recent times is a thing of the past. It’s worth remembering that investing in property should be a long term decision – over the short to medium-term buying a property becomes more speculative; not something we would recommend to any of our clients.
If you’d like to understand what all this means for you – get in touch and we can discuss your situation and needs.
Information and Disclaimer:
This article is for information purposes only. It does not take into account your individual needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should contact Miles Flower on 021 645 000.