Mar­ket strong in Welling­ton de­spite dips else­where

The Dominion Post - - Property -

THE WELLING­TON hous­ing mar­ket is strong and steady if not get­ting stronger, BNZ chief econ­o­mist Tony Alexan­der says.

It is one of 10 re­gions he cites in his Weekly News­let­ter anal­y­sis of data.

He be­lieves re­gions like Welling­ton, Hawke’s Bay and Nel­son will con­tinue to thrive but says the likes of Wairarapa, Manawatu-Wan­ganui and Marl­bor­ough have peaked and are eas­ing.

He ex­pects more re­gions will join them as the year pro­ceeds and ex­pects Auck­land sales to re­main weak – but there won’t be the hous­ing mar­ket down­turn that’s hap­pen­ing in Aus­tralia.

Prices are down 10 per­cent in Syd­ney and Mel­bourne, which Alexan­der says is scar­ing peo­ple into sell­ing be­fore things get worse.

‘‘In­ter­est rates are prob­a­bly not press­ing peo­ple to sell. But abil­ity to re­fi­nance is low and in­vestors are strug­gling to get funds for new pur­chases as banks have ag­gres­sively tight­ened up their lend­ing.’’

‘‘Aus­tralia is suf­fer­ing a credit crunch. That is not hap­pen­ing here in NZ.’’

There are other key dif­fer­ences, too. Th­ese range from an over­sup­ply of prop­erty in Aus­tralia whereas NZ has an un­der­sup­ply.

Aus­tralia also has a far more volatile apart­ment mar­ket that’s also big­ger than NZ’s: al­most half of the re­cent con­sents is­sued in Aus­tralia were for apart­ments whereas in NZ they ac­count for about 11 per­cent.

Alexan­der says Aus­tralian states have levied puni­tive stamp du­ties and land taxes for non-res­i­dents while banks’ bad lend­ing prac­tices have pro­vided credit to bor­row­ers who couldn’t ser­vice it.

‘‘At the peak, 45 per­cent of home lend­ing in Aus­tralia was to in­vestors. Our peak was 35 per­cent.

‘‘In Aus­tralia re­cently 31 per­cent of lend­ing was still for in­vest­ment. We are at 18 per­cent.

‘‘This dom­i­nance of in­vestors in Aus­tralia, es­pe­cially ner­vous new ones in re­cent years sim­ply rid­ing a wave, means plans by the Labour fed­eral op­po­si­tion to re­move neg­a­tive gear­ing if they win the com­ing gen­eral elec­tion are hav­ing a far greater sen­ti­ment im­pact than the same plan here to in­tro­duce ring fenc­ing.’’

Other fac­tors driv­ing Aus­tralia’s hous­ing mar­ket de­cline in­clude a higher house­hold debt to in­come ra­tio, the with­drawal of Chi­nese buy­ers and a surge in list­ings (Syd­ney’s are up 14 per­cent and Mel­bourne 30 per­cent whereas NZ’s are down).

As for the im­pact of a cap­i­tal gains tax, Alexan­der reck­ons the pro­pos­als will be so di­luted ‘‘the govern­ment will de­fault to sim­ply ex­tend­ing the five-year bright­line test to seven years then 10 years.’’

He points out the lat­est Re­serve Bank data shows that in Jan­uary the pro­por­tion of bank lend­ing go­ing to first home buy­ers was at a record high since data collection started in mid-2014, at 17.3 per­cent.

‘‘In con­trast the pro­por­tion of lend­ing go­ing to in­vestors was 17.9 per­cent, down from a peak of 35 per­cent reached in June 2016.’’

The Welling­ton hous­ing mar­ket is strong and steady.

Priced are down 10 per­cent in Syd­ney.

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