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Will China’s share market meltdown impact on NZ’s property market?

Impending doom might seem to be on the cards following China’s share market meltdown, but economists believe that, at this stage, prospects are not as dire as media coverage suggests.

Saturday, August 29th 2015, 12:00AM

by Miriam Bell

The Chinese share market’s sudden decline has generated concern and led to some dire predictions, but, in reality, it is quite separate from China’s real economy.

ASB chief economist Nick Tuffley said that economists have been expecting a drop in China’s share market for some time.

“China’s real economy has been gradually slowing over the last year – yet the equities market has still been firing away. It has become divorced from the economy.”

This means the big question is whether the share market’s decline is indicative of the underlying health of the real Chinese economy.

However, Tuffley said it was worth noting the share market’s decline was unlikely to affect the spending of Chinese households as they don’t tend to have same exposure to shares as Western households.

“Possibly some Chinese people might be less prepared to look out of China to invest now but, just as likely, is that some might want to diversify their investments outside of China.”

Therefore Tuffley believes that, at this stage, there will be minimal impact on New Zealand’s property market.

NZIER senior economist Christina Leung agreed, but she said the situation added a degree of uncertainty into the market generally.

“This could make people more cautious when it comes to house prices which could impact on price growth.

“But the reality is that, certainly in Auckland, the underlying demand for property is still there and still high – and that is what drives the market.”

New Zealand’s export market is one area which could see some impact from China’s share market difficulties.

Infometrics chief forecaster Gareth Kiernan said the risk is that the Chinese government might respond to the share market situation with moves which could slow growth in Chinese household spending.

Should this happen, it could mean that New Zealand’s export growth is not as good.

“If exporters are finding it harder, incomes through provincial areas will be affected. At the margins, that could flow into a reduction of demand for property,” Kiernan said.

“Alternatively, if some Chinese people who own property in New Zealand come under increased financial pressure, as a result of the share market decline, they might want to cash up by selling their properties.”

However, Kiernan didn’t think that such a situation would have a significant impact on either demand for Auckland property or house price growth generally.

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Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 4.05 4.49
ANZ Special - 3.55 3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
BNZ - Classic - 3.49 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.54 3.54 3.69
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank ▼5.20 ▲4.20 4.30 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - ▲3.45 3.55 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime 5.18 - 4.98 4.98
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - 3.39 3.45 3.89
Sovereign 5.30 ▼3.89 ▼4.05 ▼4.39
Sovereign Special - ▼3.39 ▼3.55 ▼3.89
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.39 3.45 3.99
Median 5.34 3.99 4.07 4.39

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