'Careful balance' for property market

In its latest Property Focus report, four of the ten property gauges used by the bank point to prices going down: Affordability, serviceability and indebtedness, migration and globalization.

In comparison, there are five things putting upwards pressure on prices: Interest rates, the supply-demand balance, consents and house sales, housing supply and median rent.

The ANZ economists note that prices are moving up faster than incomes, which reduces affordability, and that households’ attempts to reduce debt continue, although at a more moderate pace than has been seen over the past couple of years.

Migration was still in negative territory, with more people leaving the country in a year than moving here, but signs point to that changing, especially in Canterbury.

The ANZ report noted again this month that interest rates remained at historically low levels, with aggressive competition between the lenders. House building activity was following the increase in property sales up, the economists reported.

Median rents are also increasing, expected to strengthen property prices.

The report said the real estate market was still in sellers’ favour, with a lack of houses available for sale. It said the relatively low number of sales was a reflection of a lack of inventory in the market. The number of months properties take to sell is at a four-year low.

The only gauge putting neither upwards or downwards pressure on prices was liquidity. “Despite economy-wide credit picking up, this is modest in relation to GDP. Increases in household credit remain modest as households continue to deleverage.”

But overall, the report said the market was consolidating. “The real estate recovery appears to be broadening throughout most regions.”

ANZ recommended fixing mortgages for a short term.  “In our view the RBNZ is unlikely to cut the OCR. However, with six-month to two-year fixed rates all lower than the floating rate, borrowers have the ability to 'lock in' priced rate cuts by fixing. We therefore believe it makes sense to fix for up to two years – not to 'hide' from the possibility that the RBNZ might raise rates, but simply to save money.”