Ten things to look out for in 2019
What are the top 10 factors that will shape the property market for the year ahead? CoreLogic Head of Research Nick Goodall shares his top tips.
Tuesday, January 1st 2019, 12:30PM
1. LVR changes.
LVR loosening comes into effect on January 1. Goodall is "cautious" about the potential impact. He says "banks are likely to stick to tough lending criteria, so the pool of potential borrowers who can meet those requirements may not be that big.”
2. Foreign Buyers.
The foreign buyer ban has been in place since October, and Goodall expects foreign purchases to fall to close to zero. Yet he believes foreign buyers could still play a role in funding apartment blocks and off-the-plan residential property: "The numbers won’t be massive, but ultimately, everything helps when it comes to increasing NZ’s housing stock."
3. Capital Gains Tax
The Tax Working Group submits its final report in February 2019. Goodall predicts no short term impact from the move: "It’s important to note that the government would then have to accept that recommendation and also survive the next election (2020) before any tax would come into law."
4. Ring-fencing of rental property losses for tax relief.
Ring-fencing of property losses against income is expected to change, as of April. Landlords will still be able to offset losses against property profit. Goodall doesn't believe it will have a major effect on the market: "It’s targeting the speculative end of the market who are in it for the capital gain. It will be really interesting to see if this triggers some existing landlords to leave the sector.”
5. KiwiBuild.
The government-scheme is set to kick into full swing next year, with a target of 1,000 affordable homes by the middle of 2019. Goodall wonders whether KiwiBuild homes will be snapped up by first home buyers, or sold to other buyers, such as investors, if FHBs turn up their nose. Goodall believes KiwiBuild could affect the construction sector: "In a year in which several major companies went bust, and development funding became a bit harder, could this means firms pivot their focus – perhaps towards smaller dwellings (independent of KiwiBuild, or pre-fabrication? One to watch.
6. Building Consents.
The country is in the middle of a housing boom, with more apartment blocks being built than ever before. CoreLogic estimates that of the 12-13,000 consents per year, only about half are resulting in a genuine chance in the stock of housing.
"In short, consents and actual construction volumes need to stay high - or perhaps even rise further to make a real dent in the current shortfall of housing. That could be problematic in 2019 for an industry already running at full tilt," Goodall says.
7. Immigration.
Goodall says falling immigration numbers will "take some of the steam out of property demand and dampen the pressure on the construction sector". He adds the "effect may only be small and slow – after all, net migration is still very high and will take a fair while to diminish".
8. Interest rates.
Like many commentators, Goodall predicts no movement in the OCR next year. However it believes the risks around mortgage rates "is to the upside": "Flow through effects from higher offshore rates cannot be ruled out, and the signaling by the Reserve Bank that capital adequacy requirements will be raised over the next five years could also see mortgage rates rise. Any increases in 2019 will probably be small, but we’ll still be keeping a close watch."
9. Market volumes.
CoreLogic predicts house sales will stay at around 80-85,000 in 2019 (similar to 2018). Goodall adds: "LVR relaxation likely to mean that the actual figure is more towards the top of that range than the bottom. But whether they’re 80,000 or 85,000, sales will still be well below previous peaks of more than 100,000."
10. Property values.
Will prices go up or down next year? Goodall predicts slow growth in Auckland and Christchurch with stronger growth around the rest of the country. He says: "Generally speaking, we’d anticipate similar patterns to 2018, with average prices across the country rising by 3-5%. It would be no surprise to see Dunedin and Wellington outperforming that figure." He adds: "Many regional centres that have fared well this year (e.g. Napier, Whanganui, Palmerston North, and Invercargill) may well do the same in 2019."
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