1. House prices will continue to stay flat throughout 2019 – but there will be no market crash
Data recently released by OneRoof/Valocity shows that house prices across New Zealand were down 1 percent in the year to October 2018 (compared to October 2017). This is consistent with what would be expected during the flat period of the property cycle. Overall, the median New Zealand house price in 2019 will continue to "see-saw" between small increases and small decreases as most of those regions which are still seeing growth follow Auckland into a general flattening period - but there will be no nationwide crash in house prices.
2. There may be some large house price drops in specific locations
Despite house prices holding up overall – there may be house price drops in excess of 20 percent in a handful of locations around the country. These will mostly affect property investors and will generally be highly localised (ie specific suburbs rather than entire towns or cities). These drops will be the result of a drop in investor confidence and/or will occur where house price increases were driven by speculation rather than real demand – but they won’t take place in sufficient volumes to impact on overall house price statistics.
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3. It will take longer to sell a house (particularly in Auckland)
According to recent REINZ data, it took a median average of 35 days to sell a house in the year to December 2018 (up from 32 days in the year to December 2017) and a median average of 39 days to sell a house in Auckland in December 2018 (up from 35 days in December 2017). In Auckland, this represents the highest number of days required to sell since December 2001 – but this number may go even higher in 2019 as kiwis continue to take advantage of the price certainty, multitude of choice and more settled buying conditions associated with a flattening in the property cycle.
4. There will be no further major changes to the Loan-to-Value rules
The Reserve Bank will generally maintain its current LVR settings. The LVR for investors will remain at 30 percent during 2019 – while the LVR for home buyers will stay at 20 percent. If there are any further changes to the policy they will be in the form of tweaks to the level of the ‘speed limit’ (the extent to which trading banks can have clients who have less than the required deposit) – and these may be increased in 2019 if the market remains flat.
5. The cost of renting will continue to rise in 2019
While it’s normal to see rent increases in the period following a property boom – the environment in which they will take place in 2019 will be made worse as a result of the real and imagined impact of Government policies including the expected announcement of a Capital Gains tax, ring-fencing of tax losses and significant new compliance costs. As a result, we’re in for another year of bigger than average rent increases which will significantly exceed the average increase of $12, per week, which took place in the decade between 2008 and 2017.
6. High levels of immigration will continue to put pressure on housing
Annual net immigration eased to 65,000 in the year to June 2018 – slightly down on the historic high of 72,400 in the year to July 2017 – but still extremely high by historic standards. This easing will continue downward in 2019 – but (despite a pre-election promise to reduce immigration) immigration levels will remain historically high, putting further pressure on demand for both owner occupied and rental housing.
7. The Government will make more changes to KiwiBuild
With KiwiBuild homes selling for not much less than the market price; penalties for early sales of KiwiBuild homes; and lack of interest in the eligibility ballots – the Government will be forced to make further changes to their centrepiece housing program during 2019. This will take the form of changes to eligibility criteria, a coordinated Government ‘charm offensive’ to private developers or some form of State subsidisation or delayed payment – or any combination of these.
8. Toss a coin on interest rates!!
Going into 2018 every indicator suggested that interest rates were on their way up – partly because of uncertainty around international events, and partly because New Zealand banks needed to pay more to attract a diminishing fund of investment from Kiwi depositors. But interest rates didn’t go up – they actually dropped! Going into 2019 the situation looks much the same as it did a year ago – but it would be a brave commentator who would make a call this time around. If you want to know where interest rates are going – toss a coin.
- Ashley Church is the former CEO of the Property Institute.
