ANZ: No OCR increase until 2014

It says house prices are still high relative to incomes and ongoing deleveraging, or paying down debt, will limit the extent of the upturn.

A shortage of listings and low interest rates continue to provide support for house prices, with prices up 6.1% on the year before.

Of the report’s 10 gauges, which predict the movement of house prices, two point to prices falling, two to prices increasing, two to prices increasing or remaining steady, two to prices dropping or remaining steady and two to prices stabilising.

On the negative side, housing affordability has been dented, households are trying to eliminate debt, the global economy is weak and migration is still negative although that may be turning. On the positive side, interest rates are low, housing construction is down, the number of months to sell is at a four-year low although in terms of housing stock supply is increasing faster than demand.

Overall, the report says the property market is building, with Auckland’s momentum spreading to other areas.

It recommends fixing home loans for one or two years, allowing borrowers to get lower interest rates than those paid on variable loans, locking in rate cuts that might not happen.

"Our new forecasts may look like a big change, given that we had originally been expecting policy normalisation from mid-2013. However, the reality is that many of the familiar business cycle dynamics we have gotten used to have now been sidelined by structural dynamics like deleveraging, the synchronised global slowdown and other central banks pursuing non-standard policies."

Comments from our readers

On 18 September 2012 at 6:38 pm David said:

Aucklands current housing bubble is caused mostly by the high number of immigrants buying.They are not highly indebted and are causing young NZ's to take on probably excessive debt levels to compete.If interest rates rise there will be heartache down the track. The banks of course wont care and will blame the borrowers for incurring excessive debt! Low net migration hides the fact that those leaving NZ are from all over NZ and most are probably not houseowners whereas those new immigrants all will be buying houses and mainly in Auckland.Many young Kiwis in Auckland if they can finance a house are being forced to buy out of the so called top school zones.
Competition from banks for loans and continued QE in the US and Europe will keep interest rates low or even lower and keep fueling the housing boom. A capital gains tax and extension of Aucklands boundaries are now required.

On 22 September 2012 at 7:31 pm woody said:

The Auckland housing boom is caused by many variables. But the variable which is causing the most problem is the Auckland Council. Councils costs are keeping prices up in some areas such as the extortionist compliance for subdivision. The Council is also experimenting with a social policy which will end in tears. For example, I know of elderly home owners in Mt Albert who 1) received an increase in the GV and then 2) received an increase percentage for rates. With rate bills of $5,000 per annum this equates to $96 per week for council services. Elderly who have lived in these suburbs all their life will be forced to sell. As these increases in rates start to bite, suburbs such as Mt Albert will have downward pressure on price forcing elderly to live in cheaper areas. The prices in these older established suburbs are set to burst if Council cannot get their spending under control.

ANZ: No OCR increase until 2014

ANZ says in its latest Property Focus that it agrees with the Reserve Bank’s assessment that house price growth will be limited by households’ reduced appetite for debt.

Tuesday, September 18th 2012, 12:00AM 2 Comments

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