Market strong in Wellington despite dips elsewhere
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 realestate.co.nz 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.’’