ASB Bank Ltd senior economist Mike Jones says in the bank’s bi-monthly housing wrap, out today, that the market’s spring lift appears to have arrived.
In Auckland, that means a resumption of the upward trend after a 3-year hiatus.
Outside Auckland, where some regions have experienced large “catch-up” price rises after lagging during the big city boom, Mr Jones suggests the market will slow.
However, it’s not that straightforward. He forecasts “a mini up-cycle” resulting from the recent mortgage rate cuts, supported by continuing population & income growth, but warns that other factors include policies affecting investors, and increased housing supply in some areas reducing the shortage.
“We continue to expect nationwide house price inflation to pick up to 5-6% year on year by around the middle of next year. Historically, NZ house prices cycles have been relatively sensitive to interest rates, and we expect recent sharp falls in mortgage rates to deliver a mini up-cycle in prices over the next year or so. Still-strong population & labour income growth will add support.
“Still, even though mortgage rates are clearly the lowest they’ve ever been, there are some good reasons not to expect a good old-fashioned housing boom of yore.
“First, housing policies targeting investor demand are acting as handbrakes on those parts of the market that previously featured a large investor component, like Auckland & Queenstown. We expect these regions to underperform the national average.
“Second, broader economic activity & population growth have slowed a little and are expected to slow further.
“Finally, there are signs housing supply is ramping up in some areas. From late 2020, we expect the housing upswing to top out as this additional supply gradually reduces the national housing shortage.”
On the growth that occurred in some regions as the Auckland market cooled, Mr Jones writes: “We might be seeing the first signs of a switching in momentum from the ‘hot’ regional housing markets back to the main centres.
“House price inflation in regional hot spots like Gisborne, Hawke’s Bay, Manawatu & Southland is still holding at rates well into double digits. But days to sell in these regions have increased a little and the pace of house sales has throttled back, in some cases rapidly, portending a slowdown in house price growth ahead.”
Attribution: Bank release.