What can we expect for New Zealand’s property market in 2017?
2016 was quite a year for New Zealand property. Auckland’s house prices cracked the $1 million mark, supply struggled to meet demand and prices in most major cities increased – to mention just a few of the major developments.
With that turbulent year in the rear-view, let’s look forward at what property’s going to look like in 2017.
Continued price increases
2016 was a booming year for property value increases around New Zealand – QV has the average increase nationwide at around 12.5 percent, while Westpac estimates the figure at 14 per cent. This growth was driven by astronomical increases in South Waikato, Tauranga, Queenstown and Hamilton (as well as ever-solid increases in Auckland).
Westpac’s economic report for November 2016 says that it’s not over yet. Their predictions say that house prices nationwide will increase at a decreased rate of 5 per cent this year, before slowing even further to 2 per cent in 2018.
This data proves that waiting for a market downturn isn’t a wise decision. Instead focus on buying when it’s right for you, as prices in most areas are likely to continue increasing for the near future.
Possible interest rate rises
Mortgage rates are at near record lows and have been for quite some time. Furthermore, Westpac’s November report suggests that the official cash rate will remain the same until at least 2019.
This begs the question:'”will mortgage rates remain at record lows for the foreseeable future?” According to Ashley Church, CEO of the New Zealand Property Institute, the opposite will occur in 2017.
Due to a range of different factors – from international events, to diminishing investment deposits – Church forecasted that long term mortgage rates will rise by up to 1 per cent in the coming year. Interestingly, he expects that short term fixed rates will remain unchanged, so that may be worth considering when you buy.
Rising rents in Auckland
Slowing capital gains in Auckland may cause investors to raise rents to compensate for the resulting decrease in investment income. This is already evident as TradeMe’s rent index shows that in December rent prices jumped by over 7 per cent on a year ago. Impressive change during a month that is traditionally quiet in terms of rent increases.
Whichever side of the equation you sit on this change is could affect you. Landlords may have to consider rising their rents to stay in line with the market, while renters may have to cope with the resultant increased cost of living.
Construction speeding up nationwide
Simple economics dictates that if supply exceeds demand, prices will increase. That’s exactly what’s occurring with property in most areas of New Zealand – particularly in our largest city, Auckland.
Luckily, data from the Ministry of Business, Innovation and Employment reveals that construction spending is expected to grow to a peak of $37 billion in 2017. That represents a 20 per cent spending increase over 2015, the largest in 40 years.
Happily, residential building in Auckland will make up 53 per cent of the total growth, an increase of $3.3 billion. Hopefully this increased construction will help to level out the Auckland property market and contribute to nationwide affordability.
The date for this year’s general election has not been announced by the prime minister. However, what we do know is that policy discussion and debate will almost certainly be focused around the property market (Auckland’s in particular).
This could mean the passing of new legislation to help control property prices, and otherwise improve the market for would-be buyers nationwide. Whatever occurs there’s no reason to put off your property aspirations – if the time’s right for you in 2017, get in touch with a local real estate agent and make your move.