Tough times for home buyers
Andrea Rush of government property valuation firm QV paints a dark picture for home buyers in Auckland saying many areas in the city have seen double digit increases since November.
She says the average value for the Auckland region is now more than 800,000 dollars.
And it’s no wonder, with half the thousand migrants entering New Zealand every week planning to settle in Auckland, and because there’s nowhere near enough houses to go around – prices are being driven into cloud cuckoo land.
Home values in the Super City – she says – are likely to remain high and keep rising during 2015 as demand outstrips supply.
Auckland home values were led by Auckland City-South which saw increases of 5.5 per cent over the past three months – a year on year rise of almost 20 per cent.
Meanwhile, the finance industry is hanging on every word of Reserve Bank Governor Graeme Wheeler for a hint of an interest rate cut. I’ve been calling for cuts since the start of the year – and it now looks like cheaper mortgages may be on the horizon.
As a country we are on the verge of deflation. Inflation is just 0.1 per cent – a hair away from zero growth – so the economy has to be stimulated – and the blunt instrument to do that is lower interest rates.
Our OCR is 3.5 per cent – among the highest in the OECD – and many commentators have now joined me in talking rates down.
Wheeler says any change will depend on how inflationary pressures evolve. Which sounds like he is still crossing his fingers and hoping the tooth fairy will sort it out for him.
The problem Wheeler has is that while lower interest may be good for overall economy they could drive Auckland property prices even higher. But should the crazy Auckland property market be the deciding factor on the country’s economy – plenty of people don’t think so.
Boy, there has been plenty of speculation this week about a Auckland heading for a property crash. According to BNZ economist Tony Alexander the next crash won’t come for a few years yet. But it is coming.
Now, the Prime Minister may – like Graeme Wheeler – may be hoping the city’s property boom will fix itself, but no amount of hair-pulling will lower real estate prices — no matter what crazy taxes they dream up.
As Alexander points out this week in his Sporadic newsletter, there have been only two times in recent memory that property prices in Auckland have dipped — 1998 and 2008.
The first was caused by the Asian Economic Crisis, the second by the Global Financial Crisis. Alexander predicts the next housing correction will come in 2018, the year he forecasts another economic meltdown as government stimulus packages are abandoned.
If he’s correct, you have three years to reduce your debts.