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What to expect from the housing market in 2017

Strong growth remains in store for the housing market, but that growth will not reach the giddy heights of recent years, according to the Property Institute.

Friday, January 13th 2017, 12:00AM

by The Landlord

This is one of the Institute’s just released predictions for the year ahead.

Property Institute chief executive Ashley Church has detailed their predictions as follows:

1.   Longer term mortgage interest rates will rise

“The general consensus is that interest rates are on their way up. This is partly because of international events and partly because New Zealand banks will need to pay more to attract a diminishing fund of investment from kiwi depositors.

“Expect to see little change in six month to two year mortgage rates – but a jump of up to 1% in longer term rates as banks try and woo borrowers into shorter terms in anticipation of further funding increases over the next two or three years.”

2.   House prices will keep rising

“The current lull in the Auckland market is partly the result of the 40% LVR restriction on property investors put in place in October – and it can’t last.

“The continuing gap between demand and supply means that further price inflation is inevitable for the foreseeable future.”

3.  Investors will be constrained for a while

“That 40% hurdle is a tough one and investors who were highly geared will need to wait a while before they have enough new equity in their properties to get back into the market.

“Those investors who had lower debt gearings are still buying, but are being constrained by tighter lending rules which are acting as a brake on runaway house prices.

“That means that it’s unlikely that we’ll see a return to the heady 20%+ levels of annual price growth experienced in the last couple of years.”

4.   New home construction will start catching up

“Depending on your source, Auckland either needs 40,000 new homes ‘right now’ or 10,000 per year for the foreseeable future. Either way the market will finally start to make some inroads on this target in 2017.

“The houses built through the combination of government building initiatives and private sector construction of apartments and free-standing homes will, for the first time in years, exceed the number of homes actually required just to stand still – although we’ll still be a very long way short of the number required to ensure that supply matches demand.”

5.   The cost of renting will start to rise in Auckland

“Renters in Auckland would probably disagree, but they’ve been renting in a relatively benign environment for the past two or three years.

“This is because many landlords have chosen to forgo big rent increases while the capital growth on those properties has been so strong.

“This is likely to change in 2017 as landlords look to offset lower capital growth with higher rental returns.”

6.   Debt-to-income measures are off the agenda – for now

“The Reserve Bank talked a lot about debt-to-income restrictions on mortgage lending during the latter half of 2016, but is unlikely to act on them this year.

“This is partly because it will take a wait-and-see approach on developments in the world economy but, more specifically, because the measures are politically unpalatable to either major party. While the Reserve Bank is independent, it’s not completely blind to the politics of such a move.”

7.   Property will be the #1 election issue

“Expect to see a string of announcements, from the government, spelling out what it is doing to fix the Auckland housing crisis and outlining new ideas to speed this process up.

“In particular – it’s possible, even likely, that the government will offer a more generous response to the plight of first home buyers in a pre-election budget surplus splurge.”

« Taking control of the budgetDeclining sales, subdued market »

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone ▼3.49 ▼3.49 ▼3.49 ▼3.49
BNZ - Classic - ▼2.55 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

Last updated: 13 July 2020 7:38am

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