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A strong and stable housing market

Tags: Residential Residential Views

For the past few years, New Zealand’s housing market has been a white-knuckle ride. Since 2012 house prices have risen 70 percent and we’ve witnessed a buying spree that has attracted government intervention.


As a result, housing unaffordability in many areas is high and the government is proposing even more measures to curtail speculation, both at home and from overseas.

Why then, in its New Zealand Property Focus, does ANZ describe the current housing market as “about as stable as it gets”? Surely after all the ups, we must be in for some crashing downs, right? Wrong!

Luckily, New Zealand’s housing market is reinforced by a simple equation of supply and demand. Our growing population needs somewhere to live and, presently, there aren’t enough houses being built.

Alongside this underlying demand for bricks-and-mortar our banks and government have underpinned the market with a solid economic foundation. In its report, the ANZ highlights lending prudence from the banks and government policy as two of the main forces behind the market’s stability.

The global low-interest rate environment, the strength of our primary industries, the strong job market and record immigration levels – these are all economic factors that have nourished our housing market. Add to this years of careful financial management by the Government and Reserve Bank, and it means that our economy is ticking along nicely.

Given the stable outlook and cooler market, now could be an ideal time to consider buying property, whatever your motivation.

As tighter lending restrictions have taken many speculators out of the market and prices have softened, we’ve already seen first-home buyers return to the market in strength. Over the past few years, rents have risen and mortgage rates have dipped, which means for more young people it makes economic sense to buy.

Banks are looking favourably on young couples, too, with lending to first home buyers of $1.116 billion in May, up by nearly a third on a year earlier. For those looking to take a first step on the property ladder, now could be a great time to dip into KiwiSaver, give your deposit a boost and make your dream of home ownership a reality.

If you’re trading up, or trading down, a calmer marketplace means you have more time for due diligence and less stress about missing out on an ideal family home. ANZ predicts that the Reserve Bank will remain cautious and keep interest rates on hold “for some time yet”. Against this backdrop, it recommends fixing mortgages for shorter durations, one or two years, to take advantage of the low rates.

For investors, the LVR (loan-to-value ratio) restrictions have reduced speculation and risky lending. As a result, investor lending now comprises 24 percent of new lending, down from 35 percent in 2016. But the ANZ is still optimistic about the long-term forecast for investors. Despite looming law changes that could make the tax treatment of investment property less favourable, and the slowing (and possible taxation) of capital gains, ANZ says any possible impacts are likely to be short-lived and not impact the market drastically. And with rental yields ticking back up, it’s little wonder that the bank’s report concludes that investment in residential property is “likely to stack up favourably relative to other assets”.

Of course, as we saw with the GFC, financial shocks can come out of nowhere, but barring some global economic catastrophe, our housing market seems set to continue on its stable trajectory for the foreseeable future, providing solid growth and ample investment opportunities for those looking to make a home, or invest, in New Zealand property.

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