I’m not buying into talk about house prices going through the roof again

My big bet is that National will be back in charge of housing policy at the end of next year.

It’s a brave man or woman who claims to have enough insight into the New Zealand property market to make predictions on what’s going to happen in the year ahead. Market conditions and circumstances can change quickly — and what appeared to be a reasonable assumption at one time can be turned on its head overnight. That said, I have some thoughts on the year ahead.

I see 2020 as being a repeat of 2019 — with continuing flat house prices, in Auckland, continuing high immigration, continuing pressure on rents and the recognition that the socalled housing shortage has been significantly over stated.

But I do see one big change coming — a change of Government toward the end of 2020. This will lead to some significant changes to housing policy in 2021 and beyond – and while there’s still a lot of water to pass under the bridge prior to the election, I’m happy to go on record with my view that the “preferred Prime Minister” ratings are a red herring and that the next election is Nationals to lose.

So here are my predictions: 1. Auckland’s median house price will stay flat What a difference a year makes! At the beginning of 2019 many commentators were predicting a market crash. It didn’t happen. Now, following a seasonal lift in prices in Auckland, some commentators are predicting that the Auckland property market is about to take off again. That won’t happen either — at least, not yet. 2020 will be another year of flat house prices in Auckland. The median house price for the region will continue to see-saw between small increases and small decreases throughout the year, with a few exceptions.

2. The stats will confirm that regional housing markets have peaked and are now trending down

Picking when a market peaks is notoriously difficult. We now know that the Auckland housing market peaked in 2016 — but this wasn’t actually confirmed until well into 2017. On this basis, and despite a burst of activity as I write this, we can expect mid-year sales stats to show that most regions were at, or close to, their peak in 2019 and are now trending downward. This is consistent with previous cycles, where regional booms and flat periods have lagged behind Auckland by two or three years.

3. The cost of renting will continue to rise

As was the case in 2018 and 2019, the ongoing effects of the Government’s housing policies will continue to put pressure on rents. We’re in for another year of bigger than average increases, which will significantly exceed the average increase of $12 per week in the decade between 2008 and 2017.

4. High levels of immigration will continue to put pressure on housing

Annual net immigration continues to ease, dropping to around 50,000 in 2018 from an historic high of 72,400 in the year to July 2017. But it is still extremely high by historic standards. This easing will continue in 2020 , putting further pressure on demand for both owner-occupied and rental housing.

5. Mortgage interest rates will stay low

With inflation low, dark clouds gathering on the international economy, and the Coalition killing business confidence, it’s difficult to see anything driving interest rates back up in the medium term. Conversely, with the Official Cash Rate at historically low levels the Reserve Bank doesn’t have much more room to influence rates even further down, so expect fixed mortgage interest rates to settle in the 3s and remain there throughout 2020.

6. What housing shortage?

The general belief is that we have a shortage of housing, but this will break down in 2020. A continuing increase in residential housing construction and access to better and more accurate information will show that claims of a shortage of up to 100,000 homes were more political than real. More up-to-date reports will show that any market housing shortage is much smaller – and may not even exist.

7. National will be back in charge of housing by Christmas 2020

It’s becoming increasingly difficult to see any scenario under which the Coalition Government could secure a second term. All it would take to see a change of Government would be National achieving more than 47 per cent of the popular vote (and picking up the rest through support from ACT as well as getting its share of the reallocated ‘wasted vote’), a new centre-right party making it into parliament, or either of the Greens or New Zealand First not making it back. Only one of these needs to take place — and, frankly, at least two of the three are looking highly likely.

For these reasons, we’ll see a change of government this time next year – leading to another big shake up in the country’s housing policy (and everything else).

“It’s difficult to see anything driving interest rates back up in the medium term.”