There’s a fundamental shortage of new listings in Auckland, says BNZ economist Tony Alexander. A situation that makes it difficult for those looking for a home, and potentially puts off people from listing their property for sale.
Alexander says: “Auckland has paused for now, though the fundamental shortage of property continues to get worse.”
He says investors will continue to buy in the regions for most of the year. That could see house prices in places such as Waikato, Hamilton and Tauranga gently climb as buying pressure mounts.
One calming measure Reserve Bank governor Graeme Wheeler might consider is to imposes a 30 per cent deposit requirement on investment properties there — as he has done in Auckland.
Rest assured, demand for property in Auckland and elsewhere will remain strong as investors look for somewhere to put their money, hoping for better returns than bank deposits and less risk than the sharemarket.
Migrants and returning Kiwis, currently arriving at a rate of 6000 a month, are also looking for a place to call home.
On the upside, home construction is looking good with annual consents at a 10-year high of 26,800, and valued at just under $6 billion. But still nowhere near meeting demand.
The Reserve Bank continues to be between a rock and a hard place, with inflation at near zero (0.1 per cent) and at least one bank predicting we will have a period of negative inflation this year (ouch).
That won’t be a good look for Graeme Wheeler if it comes to pass — he is supposed to have inflation at around 2 per cent.
Economists at Westpac are forecasting inflation at below zero per cent come September and remaining below 1 per cent until 2017.
That must force Wheeler’s hand to lower interest rates, and in turn should see floating mortgage rates drop to nearer 5.5 per cent.
Economists at Wespac say Wheeler may well cut the OCR on March 10, and the ASB’s chief economist Nick Tuffley expects it will go down to 2 per cent this year (matching Australia).
And according to a national survey by ASB, a net 44 per cent of respondents expect house prices to increase over the next 12 months, down from the 52 per cent who expected price gains last quarter.
The current crop of fixed interest mortgage rates are nowhere near as low as they could be.
The best deals this week are well above 4 per cent, but I think banks could offer rates in the 3s and still keep their shareholders happy.
Maybe they are helping to cool the market, but if I were looking to fix, I’d wait for something better (or drive a hard bargain).
Yes, the current deals are well below historic rates, but we don’t live in that world anymore.