Slowdown tipped for skyrocketing market

Relief for house buyers in the Wellington region’s booming property market could be on the horizon, with signs of a slowdown beginning to show, according to CoreLogic.

Tax changes to interest deductibility are predicted to slow the market and could eventually result in it flattening, the property analytics provider’s head of research, Nick Goodall, says.

CoreLogic’s forecast will be welcome news to buyers across the Wellington region, where the average property value reached $971,393, an increase of 23.7 per cent, in the 12 months to April 1.

Goodall said markets were likely to cool across the country as the phased tax policy, which removes the ability for investors to write off interest expenses, was introduced.

Recent LVR (loan-to-value ratio) restrictions were also expected to have a slowing effect on the market, he said.

Goodall also said house prices were nearing a ‘‘breaking point’’ where incomes would no longer be able to support mortgages.

Anecdotal evidence suggested open homes were already quieter as a result, Goodall said. Many real estate agents spoken to said that while open homes were not as well attended as a few months ago, house prices remained firm.

Nicki Cruickshank from Tommy’s Real Estate said Wellington’s problem was that supply wasn’t keeping up with demand.

In the 12 months to April 1, the Wellington region experienced the steepest price increases of New Zealand’s main centres, which Goodall attributed to its large population of public servants who were in stable and relatively well-paid jobs.

CoreLogic figures show that Wellington City had a comparatively modest property price increase of 21.3 per cent compared with its regional neighbours. The two biggest increases in the area came from Ka¯ piti and Upper Hutt, with growth rates of 32.7 per cent and 29.9 per cent, respectively.

The company’s analysis noted Ka¯piti’s appeal to Wellington workers. ‘‘Some satellite cities have benefited from being more affordable – with the region being so close together, the option is there for people to commute,’’ Goodall said.

Ceinwen Howard of Ka¯piti’s Howard & Co said many of the people moving up the coast from the capital were seeking a lifestyle change, and the ability to work from home, at least part time, had made the decision to shift much easier.

Hamish Blundell of Blundell and Mark in Upper Hutt said the city was becoming more popular with former Wellingtonians, and the lack of supply meant prices were not likely to drop soon.