elections and property

The Election Fallout: The Jacinda Effect

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As the country wakes with an election hangover, what does the new government mean for New Zealand’s runaway housing market? Alex explores.

 

Since Jacinda took the helm a few weeks ago we’ve been getting many questions along the lines of:

·      How will a Labour government change the housing market?

·      What will it do to house prices and interest rates?

 

As you will well know, house prices have been heading north for the last couple of years. Great if you own property; not so great trying to get on the ladder. One of Labour’s main pre-election promises was to curb this and fix the housing crisis by building more homes, reducing foreign buyers and creating somewhat of an equilibrium in the housing market.[1]

 

 

Will this cause house prices drop?

 

Who really knows, but, best guess: it’s highly unlikely. Demand has fallen recently (see the Auckland stats for example[2]), but there also has been a reduction in supply (listings are as low as ever and the spring surge of houses coming on the market has just not been happening). This lack of supply helps to keep the pressure on house prices.

 

Some areas in New Zealand have been over-inflated, but … most areas are just playing historic catch up after a number of years of no growth at all.[3]

 

As to banning foreign buyers to relieve pressure … the forecasts from economists and investors is that it will have little to no impact (see Australia which has similar policies already in place). According to LINZ, the number of foreign buyers is actually very small and only affects purchasing of existing houses.[4] [5]

 

What will interest rates do?

 

New Zealand interest rates are influenced from events offshore. The European central bank just reported that European banks can sustain low levels of interest for the next couple of years. The Bank of England is looking to increase its base interest rate[6] and this is also the trend in the US.[7] 

 

So, will the New Zealand Reserve Bank adopt similar policies? No one knows. Maybe Peters will cause a stir with the Reserve Bank Act.[8] Besides this, economists say it is unlikely for interest rates to change too much, as other factors like net migration, unemployment and the financial outlook of New Zealand are all very positive.

 

This piece is a little more formal than normal from me, but these are the questions and answers we’re getting and giving on a daily basis. Feel free to discuss any of this over a cup of coffee with me.

 

Alex Barendregt is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

 

 

Sources:

[1] http://www.labour.org.nz/housing

[2] https://www.interest.co.nz/property/90313/auckland-records-second-lowest-volume-house-sales-september-month-after-2008-during

[3] https://www.interest.co.nz/charts/real-estate/median-house-price-growth

[4] https://www.theguardian.com/world/2017/oct/25/new-zealand-to-ban-foreign-buyers-existing-homes-jacinda-ardern

[5] https://www.linz.govt.nz/news/2017-06/linz-releases-latest-property-data

[6] https://www.theguardian.com/money/2017/oct/28/interest-rate-rise-affect-homeowners-savers-bank-of-england

[7] http://www.nasdaq.com/article/potential-implications-of-a-us-december-interest-rate-hike-on-global-markets-cm860632

[8] https://www.newsroom.co.nz/2017/10/19/54406/its-the-sixth-labour-government

Property market watch: The election, winter and a downturn

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With the election and spring fast approaching, change is in the air … or is it? Graham shares what this all means for the property market.

On 23 September 2017, we’ll discover who we can blame for the next three years. It's also the end of winter, the start of daylight savings, and it’s been eight years since 23 September 2009. 

 

So, what do we make of all those things? Well, they all have some part to play in what’s going on with the housing market at the moment, and what’s going to happen in the near future.  

 

Apparently, during every election cycle, Wellingtonians put their plans to buy and sell on hold. It makes sense when you think that the largest Wellington employer, the Government, is in a period of sustained breath-holding while public servants wait to find out who their new boss is. The traditional thought that National makes for a smaller public service and Labour for a larger team obviously impacts public servant’s enthusiasm to change houses and so on.

 

That’s the election, but let’s combine that with winter and the slowdown that comes with sellers wanting to list in spring when there is more sun. And how about we garnish this discussion by adding in a property cycle that traditionally lasts eight years (and yes, it’s exactly eight years since 2009)—and we find ourselves in a perfect storm.   

 

But is any of this true? 

 

Well, on one hand, listings are low but, on the other hand, there are buyers. Well-presented properties continue to sell with good prices, but, at the same time, many buyers remain frustrated. So, much of it becomes a self-fulfilling cycle/prophecy. 

 

It’s certainly a great time to buy; the banks are a little hard work at the moment but most borrowers are being put off by the negative media spin as opposed to banks saying no. If you know someone who is waiting for the great property price slump tell them to wake up. It isn't about to happen. 

 

The lead up to 23 September is certainly going to be a great watch. 

 

Graham Goodisson is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.