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No surprise Budget leaves focus on Auckland housing market

The spotlight remains on the Auckland housing market in analyses of Budget 2015 which commentators said offered up nothing surprising.

Thursday, May 21st 2015, 5:04PM

by Miriam Bell

PwC chief executive Bruce Hassall said the Budget’s forecast of economic growth of 2.8% per annum over the next four years indicated growth would be steadier than previously feared.

“Inflation is low, employment growing, unemployment coming down and apart from Auckland housing and construction, capacity pressures in the economy are not threatening.”

It is the Auckland housing market that remains the most toxic risk to the economy, Hassall said.

“Measures to damp down demand - like strengthening the tax regime around property profits – are welcome and are joined by more initiatives on the supply side, especially bringing more Crown land into the market for development.”

While the Crown land development programme will be useful, it is not large in terms of the imbalance between demand and supply, Hassall added.

Also, it will operate on a timescale of years and, in the meantime, underlying population growth continues.

In the view of Deloitte chief executive Thomas Pippos, the Budget brought home the reality of a hard economic grind and was a far cry from the economic rock star sentiments.

He said, when it came to Auckland, the issue targeted is the ever rising cost of housing, rather than the associated infrastructure challenges, with the initial salvo being the tax changes.

“But those changes do no more than reinforce existing settings and will do little to curb investment in that sector and the upward pressure on prices.

“The tax is easily avoided, the vast majority of property would be excluded from its ambit, and even if there were a tax on some of the gains, at least two-thirds of those gains would stick to the investors.”

Further, Pippos added that, as the tax would only be paid when the gains are realised, any operating losses incurred through holding the property would still be deductible and able to be offset against other income on a current basis.

“This is not a criticism of the measures, just the reality. As international precedents prove, tax, whether of this nature or more broadly based, can only at best take an edge off a hot market.”

For Westpac chief economist Dominick Stephens the Budget contained little in the way of surprises, with forecasts much as expected and allowances for new spending unchanged.

The property related policy initiatives – including a tightening of capital gains tax rules around investor property, and the fund to open up Crown-owned land for Auckland housing development - were well-signalled.

However, Stephens said that, while Treasury’s forecasts seemed similar to Westpac’s own, it seemed to have a very benign view of what a post-Christchurch-rebuild economic slowdown might look like.

“That optimism suggests downside risks to the Treasury’s revenue forecasts further down the track.”

« $52 million to address Auckland’s housing supply problemFree Investment Property Showcase Events: Auckland, Wellington and Christchurch »

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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