Outlook uncertain for housing

Uncertainty is growing, but people’s positivity could keep the housing market strong for at least one more year, CoreLogic says.

In a review of the year just gone, the property data firm said earthquakes, Brexit, and Donald Trump’s victory in the United States presidential election have all made the New Zealand property market much more uncertain.

An election at home this year, questions about the Auckland market being overvalued, and the threat of further borrowing restrictions were adding to concerns.

The market had already shown signs of this unease, with tighter lending restrictions and holidays putting growth on hold. ‘‘The slowdown is real,’’ CoreLogic senior research analyst Nick Goodall said.

Auckland’s stellar annual growth had slowed to 12.8 per cent in December, a far cry from its peak a year ago at 24.4 per cent. ‘‘But with an average property value of $1.05 million, any growth from this point on could be seen as excessive, especially with wage growth not keeping pace,’’ Goodall said.

Outside Auckland, 2016 had been a year of playing catch-up. Most centres had experienced single-digit growth up until mid to late 2015.

But when lending policies were tightened in Auckland and loosened elsewhere, investors started looking to those regions, aided by falling mortgage rates.

‘‘All of a sudden it was game on,’’ Goodall said.

Annual growth in Hamilton peaked at 31.5 per cent in July, and Tauranga’s peaked a month later at 28.5 per cent.

However, the pace of growth in both cities has since slowed, with Hamilton now coasting at 23.1 per cent annual growth and Tauranga at 26.5 per cent.

Wellington took a bit longer to get going, but the growth in its house prices rocketed from an annual 10.2 per cent to 21.2 per cent between May and September.

First-home buyers were a bigger slice of the buyership in Wellington than nationally. However, by November, price growth in the capital had also stalled, albeit at 20.6 per cent.

In the South Island, Christchurch’s growth was a modest 4.3 per cent, while Dunedin’s growth was slow but steady, a respectable 11.4 per cent increase after peaking at 13 per cent in October.

Figures from Statistics New Zealand show that of the 1.82 million homes in New Zealand, 1.15 million (63.1 per cent) were owner-occupied in December 2016.

Property Institute chief executive Ashley Church said news of a continuing slide in home ownership was a ‘‘disaster in the making and threatens the fundamentals of what it means to be a Kiwi’’.

‘‘It isn’t just about the value of the house as an asset – it’s also about what you can do with that house,’’ Church said. ‘‘Mums and dads use the equity in their homes to buy businesses, fund further education, fund their retirement and help out their kids.’’

ASB senior economist Jane Turner said that while 2016 was marred by economic disappointment, 2017 was shaping up to be full of promise for the economy.

‘‘Strong population growth and low interest rates have fuelled construction demand, a tourism boom has the retail sector humming, the labour market has tightened and New Zealand households feel more confident, and dairy prices have finally turned around.’’

Looking ahead for the housing market, Goodall said there was a feeling of ‘‘Surely this can’t go on forever?’’ But some of the same driving forces remained such as record net migration, low interest rates and lack of supply.

‘‘There are signs of all these factors turning around but none are fast moving. The pressure they’re creating will therefore continue in our short-term future.’’

The potential for rising mortgage interest rates would have an impact on some would-be buyers. However, business and consumer confidence was strong, as was employment.

‘‘Beyond 2017 is anyone’s guess. We could have a new government, Australia could be more appealing off the back of an improving economy there, mortgage interest rates will likely have increased further and we may well have a debt-toincome restriction implemented,’’ Goodall said.