Hangover settles on market
Weakening housing data confirms the heat has come out of Auckland’s market, Westpac says.
Wednesday, November 11th 2015, 10:57PM
by Miriam Bell
Heated activity in the Auckland market, and its surrounds, was actually a rush to beat the government’s new tax rules which came into force in early October, Westpac's chief economist says.
Dominick Stephens said REINZ’s October data proved that a hangover from the post-changes rush on the market was now settling in.
It was some of the weakest data he has seen for many years, particularly in Auckland’s case.
Stephens said it was wise to treat a single month’s data with caution.
But this data was supported by corroborating evidence – a stream of anecdotes, reports of declining auction clearance rates, and notable weakness in mortgage approvals.
“Even if this month’s data overstates the case, there can be no doubting that the Auckland housing market has taken a knock.”
Just how long the current market weakness will last remains uncertain.
Stephens said experience suggests that regulatory changes can have a noticeable short term impact on the market, but that the impact diminishes with time – as with the 2013 LVR restrictions.
For this reason, he doesn’t expect Auckland’s data to remain as dire as the current batch for more than a few months.
However, he said the global and local economic slowdown, along with uncertainty in Chinese financial markets, is likely to impact on speculator and foreign investor interest in Auckland property.
“For now, we are sticking to our forecast that the quarterly rate of increase in Auckland house prices will be zero in the March quarter, compared to 7% in September.”
Meanwhile, Westpac views the outlook for housing markets outside of Canterbury and Auckland as mixed.
While low interest rates and looser mortgage lending restrictions are positives, the economic slowdown and tax rule changes are negatives.
Stephens said it looks like the new tax laws and the weaker economy have taken a toll on markets like Hamilton and Tauranga, which showed a pullback in the latest data.
The growing consensus among commentators that the Auckland market is slowing should please the Reserve Bank and the IMF.
Both organisations have issued warnings about the risks the Auckland housing market poses to New Zealand’s financial stability in recent days.
| « Auckland market drops | Regional markets fire up » |
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