Regulatory changes slow Auckland market

The bank has just released its latest Home Truths report which states that the Auckland housing market has slowed with a thump. 

Westpac chief economist Dominick Stephens said the latest market data produced very weak numbers.

It confirmed what the anecdotes of declining activity have been screaming for the past three months, he said.

For example, once seasonally adjusted, November’s Real Estate Institute of New Zealand (REINZ) data showed that Auckland house sales fell by 13% in November, after a 17% drop in October.

It also showed that Auckland house prices fell by 1.9% in November, after a 4.4% in October, which leaves prices lower than they were in July.

Westpac has been saying that the Auckland market would slow in late-2015 and early-2016 for several months.

Stephens said their thinking has been that the Auckland market was speculative in nature.

This means that the government’s new tax measures and the Reserve Bank’s LVR restrictions on Auckland investors, along with waning economic conditions, were always likely to have a particular impact on the SuperCity market.

In the event, the actual downturn has occurred sooner, and has been more severe, than anticipated, Stephens said.

However, on balance, Westpac doesn’t expect the data to remain as dire as it has been for long.

Past evidence shows that regulatory changes, like the LVR restrictions on Auckland investors, only tend to have temporary impacts on housing markets.

“So we do not expect that Auckland house prices will continue falling at their current pace for much longer”, Stephens said.

“But neither do we anticipate a return for the helter-skelter of earlier this year. Rather, we expect a much more subdued market over 2016 than we experienced in 2015.”

The slowdown in the Auckland market would make it easier for the Reserve Bank to cut the OCR again, he added.

Meanwhile, markets around the rest of New Zealand continue to move along steadily.

The REINZ data showed that house prices rose modestly in most parts of New Zealand in November.

Stephens said market turnover ticked a little higher in some regions, a little lower in others.

“Of particular interest was the fact that Christchurch house prices seem to be rising again, after a long period of remaining essentially unchanged.”