Policy talk blamed for building blues

UNCERTAINTY ABOUT housing policy is a risk to property investment and the rebound of the building industry, according to landlords and an economist.

Talk of rental warrants of fitness, lending limits and capitalgains taxes on secondary properties were offputting to many investors, said the president of the New Zealand Property Investors Federation, Andrew King.

Investors he had spoken to in Auckland and elsewhere were feeling quite cautious about making new investments because they were unsure how they would perform if the rules changed.

‘‘This is particularly worrying in Auckland, where we are at the start of a growth cycle,’’ he said.

‘‘People are still thinking about making purchases, but the feeling is not as buoyant as you would expect given low interest rates, higher rental yields and the start of an upward cycle to the property market.’’

However, David Whitburn, president of the Auckland Property Investors Association (APIA), disagreed property investors were getting more cautious.

Some banks had already lowered their loan-to-value ratios ahead of Reserve Bank’s proposals, but most property investors could handle mortgages requiring a 20 per cent deposit, he said.

‘‘When an ANZ economist asked around 300 people at an APIA meeting how many are impacted by the macro-prudential tools, only three people put their hand up.’’

Economists are also eyeing building consents for signs of uncertainty. Figures out last week showed a seasonally adjusted 4.5 per cent fall in non-apartment building consents in June, after a surprisingly strong two months.

Infometrics economist Matthew Nolan said that, on the face of it, he would not want to read too much into one month’s results.

However, the decline did coincide with increasing signals of intervention in the mortgage market by the Reserve Bank.

At the same time, politicians had ramped up the debate on housing policy. Labour had pledged to increase the housing supply, ban many foreign house buyers, and bring in capital-gains taxes on secondary properties, while the Government was also proposing intervention in the Auckland housing market.

All this made the value of future property less certain and building less attractive, Nolan said.

‘‘Access to credit remains an issue for developers, and increased uncertainty and policy to limit credit availability risk further holding back growth in building activity.’’

However, Nolan and Whitburn acknowledged it was too early to be sure consents were in decline.

‘‘Some councils missed the deadline [they often do],’’ said Whitburn. ‘‘You cannot view the monthly building-consent data – a chore for councils – as being accurate. Auckland consents are slowly but surely picking up.’’