What property market holds in store for 2019
Get in quick: Economist says Auckland house prices could reach record highs next year
Auckland home buyers need to get in quick — city house prices could leap to record highs by this time next year, one property pundit predicts.
Infometrics economist Paul Barkle says that while Auckland house prices have stagnated for close to two years they are set for an almost 10 per cent jump next year followed by sustained increases through to mid-2022.
Behind the forecast price rise is an acute shortage of houses. By Barkle’s estimate the city needs at least 45,000 more homes.
But the news is not so rosy for homeowners outside the Super City, with national prices poised to ease next year from current record highs.
“By the end of next year we expect house prices in Auckland to be 9 per cent higher than in December 2018 compared to a slight decline in national prices of roughly 1 per cent over the same period,” Barkle said.
Should Barkle’s forecast play out, it would push Auckland property values to new highs.
Last month, the city’s median price reached $867,000 — or 3.7 per cent below the record price of $900,000 set in March 2017, according to the Real Estate Institute of NZ.
National house prices, meanwhile, are already at record highs with a November median price of $575,000.
Not all pundits agree with Barkle’s upbeat forecast.
Devon Funds managing director Slade Robertson said New Zealand’s housing market was due for a fall, with the real question being: Will it be a crash or a correction?
He said strong economic growth since the Global Financial Crisis had been driven by central banks cutting interest rates and printing money.
This access to cheaper loans helped send house prices skyrocketing in many Western countries, including New Zealand where Kiwis have become so heavily mortgaged that they labour under a household debt to income ratio of 166 per cent.
Robertson noted that the growth cycle had turned in Sydney, Melbourne, London, New York and Vancouver where property prices were falling.
If this sag in investor confidence hit New Zealand and combined with rising interest rates, then the housing market could take a slump as Kiwi families falter under their high debt loads, he said.
Dominick Stephens, chief economist with major bank Westpac, also believes a fall could be coming.
He said while there had recently been a small uptick in Auckland prices due to buyers having access to record low interest rates, his team “unambiguously” anticipated this would be temporary.
“Later next year, changing tax policies will impact the market, and we firmly anticipate that house prices will fall when mortgage rates [eventually] rise,” Stephens said.
OneRoof editor Owen Vaughan also believed the greatest risk to prices could come from the introduction of new taxes.
“The big unknown for Auckland, and the rest of New Zealand, is whether the Government will apply a capital gains tax across the board and remove the current tax breaks property investors enjoy,” he said.
“Both moves could suck the oxygen out of the market.”
Nick Goodall, head of research for analysts CoreLogic, on the other hand, expected prices to gently rise across New Zealand by between 3 to 5 per cent next year.
He said Government moves to ban foreign buyers, impose new taxes on home owners and ensure landlords spent money on their properties so they were healthy and warm all acted as brakes on house prices.
However, he tipped these would be offset by continued low interest rates in 2019, a slight loosening on lending criteria allowing banks to more easily approve home loans and Auckland’s undersupply of housing.
The key thing to watch would be whether new Government taxes and regulations drove property investors out of the housing market or not.
James Wilson, valuation director for analysts Valocity, echoed this sentiment, saying he expected Auckland property values to remain subdued in 2019.
“Overall value growth will be in line with what we saw in 2018 — between 1 per cent and 2 per cent,.
“However, we may see more growth in fringe suburbs and in certain sub-markets, such as flats and apartments, which are comparatively more affordable than other property types.”