Auckland market primed to soften

ANZ chief economist Cameron Bagrie

The latest ANZ Property Focus estimates that this figure, which is based on current REINZ sales figures, would equate to about 17% of total Auckland sales volumes.

ANZ chief economist Cameron Bagrie said that tight inventory levels, booming net immigration and low mortgage interest rates will ensure ongoing strong demand for Auckland property.

“But such a sizeable potential impact is nothing to be sneezed at.”

In his view, the Auckland market is primed to soften.

This is because prices have risen by a third in two years and by two-thirds in five years.

“That’s a pretty stretched base to keep accelerating off, especially with major sources of buyer demand now being targeted.”

At the very least, sentiment – which is a crucial element of any asset market - will be negatively affected by the new measures, he said.

“Ultimately, we suspect this will mark a turning point for the Auckland housing market.”

Bagrie said the precise economic impact of the actions the RBNZ and the government have taken towards Auckland’s housing market is difficult to disentangle.

But it was telling there was such a breadth of policy responses to the issue in such a short space of time.

While the RBNZ’s justification was financial stability and the government’s was about politics (ie: housing affordability), the currency played a part too, he said.

“Given commodity price falls, New Zealand needs a lower currency and only interest rate cuts will do that. You can’t simply dangle the possibility of cuts if you really want the currency down.

“Auckland property was a big hurdle standing between the RBNZ and a lower OCR.”

Bagrie added that, while the measures don’t come into force until 1 October, they could distort both buyer and seller behaviour in the meantime.

In particular, the measures could tilt the balance in favour of additional supply over the coming months.

“This would further reinforce the impact on sentiment and house price expectations.”