New Zealand’s residential market has been firing on all cylinders, unrelenting over the summer months to produce some of the most astounding sale results we have seen in close to 20 years.
While Kiwis have shown a distinct preference for larger, lifestyle properties of late, perhaps highlighting a change in preference following lockdown restrictions, residential property in all forms have been in fervent demand.
However, this seemingly insatiable appetite has posed big questions for policy-makers who are faced with the complex situation of slowing the rate of housing inflation, while continuing to stimulate other parts of the economy amidst the pandemic-induced recession.
Fiscal support measures and ongoing collaboration between the Government and the Reserve Bank of New Zealand (RBNZ) have supported asset prices while keeping many Kiwis in business, though making it disproportionately more difficult for first home buyers to take a step onto the property ladder.
We saw Loan-to-Value Ratios (LRVs) reinstated last month, followed by a recent suite of measures announced by the Government tasked with increasing supply and offering first home buyers a helping hand into the property ladder.
The Government’s latest suite of housing measures have made a splash across the market-place, and while some initiatives such as the extension from five to 10 years of the Bright-line Test were fairly predictable, while others like phasing out property investors’ ability to deduct interest expenses from rental income were fairly shocking.
While we do not expect one sole measure can quell interest, the multi-faceted approach adopted by the Government in partnership with the RBNZ has the potential to ease some investor demand, with changes to interest deductibility for investment properties having the greatest potential impact.
Despite this, key drivers of housing market growth remain for now, namely ultra-low interest rates and the social urgency to make a move before property prices keep rising.
Renewed business confidence, fiscal support and Kiwis as a captive audience to the property show further encourage more New Zealanders into bricks and mortar investment.
Across the country, we look forward to the roll-out of vaccinations, while tourism operators and family with loved ones over the ditch eagerly await progress on a trans-Tasman bubble, all the while we expect property prices to continue rising, albeit at a slower rate of growth, to half-year before targeted measures make an impact.
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