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Moderation on the cards - Fitch

Auckland’s supply shortage will still drive house prices in 2016 – but growth will be moderate, a global ratings agency predicts.

Friday, January 15th 2016, 10:00AM

by Miriam Bell

In its Global Housing and Mortgage Outlook for 2016, Fitch Ratings has said New Zealand will see just 4% growth in house prices in 2016.

This is down from the high of 14% growth in 2015.

While modest house price growth will continue, it will be driven by Auckland’s supply shortage – which is being exacerbated by lagging construction activity - and high demand, Fitch said.

“It will likely be offset partially by recent restrictions imposed on low deposit lending by the Reserve Bank, and increasing levels of unaffordability for owner occupiers.”

Excluding Auckland, the outlook for growth in the rest of the country in 2016 is subdued.

Fitch expects regional New Zealand will see very modest to static growth, largely due to weakened economic activity as a result of falling dairy prices.

Affordability was flagged as an issue in New Zealand’s outlook.

Like Canada and Australia, affordability in New Zealand is stretched and there are signs the limits of borrower affordability may have been reached, Fitch said.

“While growth in price-to -rent and price-to-income ratios waned in late 2015, affordability will continue to remain constrained going into 2016 as these ratios remain well above long-term averages.

“Low interest rates and stable employment indicate that macro-prudential measures are not likely to cause any significant reduction in prices in the near term.”

However, the affordability issue is, again, centred around Auckland – due to its strong population growth and the supply shortage.

Fitch said regional New Zealand is likely to remain relatively affordable, due to modest growth and low interest rates.

With the OCR currently sitting at a record low of 2.5%, Fitch expects mortgage rates to fall in 2016.

Assuming dairy prices stabilise throughout 2016 and improve in 2017, these falls will be followed by increases in 2017 – due to rate hikes in the OCR, it said.

“But, as New Zealand is greatly dependent upon international trade, concerns remain around slower growth prospects among its major trading partners, particularly China.

“Slower than expected growth in these markets would likely negatively impact on New Zealand’s balance of trade and maintain downward pressure on interest rates.”

The Fitch Outlook report comes in the wake of the latest housing market data from QV and Trade Me Property which indicates that growth in the Auckland market has slowed down considerably.

Westpac chief economist Dominick Stephens recently predicted a decline in Auckland house prices, while ASB chief economist Nick Tuffley has said moderation in the Auckland market is on the cards.

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 5.35 4.49 5.25 5.55
ANZ 5.54 5.15 5.85 6.15
ANZ Blueprint to Build 2.78 - - -
ANZ Special - 4.55 5.25 5.55
ASB Bank 5.35 4.49 5.25 5.55
Avanti Finance 5.45 - - -
Basecorp Finance 6.45 - - -
Bluestone 5.29 7.49 7.59 -
BNZ - Classic - 4.55 5.25 5.45
BNZ - Mortgage One 5.55 - - -
BNZ - Rapid Repay 5.55 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Std, FlyBuys 5.55 5.35 5.94 5.99
BNZ - TotalMoney 5.55 - - -
CFML Loans ▲6.45 - - -
China Construction Bank 5.50 5.40 6.14 6.40
China Construction Bank Special - 4.45 5.19 5.45
Credit Union Auckland 5.95 - - -
First Credit Union Special 5.85 4.70 5.20 -
Heartland Bank - Online 4.00 3.85 4.70 4.84
Heretaunga Building Society 5.95 4.80 5.50 -
HSBC Premier 5.49 4.39 5.15 5.39
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.25 ▲4.29 ▲5.09 ▲5.35
Kainga Ora 5.43 4.57 5.58 5.85
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 5.00 5.55 6.19 6.39
Kiwibank - Offset 5.00 - - -
Kiwibank Special 5.00 4.55 5.19 5.39
Liberty 4.84 - - -
Nelson Building Society 5.95 4.95 5.85 -
Pepper Essential 3.44 - - -
Resimac 4.59 5.60 6.16 6.29
Lender Flt 1yr 2yr 3yr
SBS Bank 5.29 4.69 5.35 5.49
SBS Bank Special - 4.19 4.85 4.99
Select Home Loans 4.09 4.29 4.86 5.09
The Co-operative Bank - First Home Special - ▲4.19 - -
The Co-operative Bank - Owner Occ 5.45 ▲4.29 5.19 5.45
The Co-operative Bank - Standard 5.45 ▲4.79 5.69 5.95
TSB Bank 5.59 ▼5.14 ▼5.79 6.15
TSB Special 4.79 ▼4.34 ▼4.99 5.35
Unity 5.65 4.80 5.50 -
Wairarapa Building Society 5.24 4.55 5.20 -
Westpac 5.54 5.09 5.79 6.09
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.54 - - -
Westpac Special - 4.49 5.19 5.49
Median 5.45 4.55 5.25 5.52

Last updated: 19 May 2022 10:42am

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