Looking towards 2017

NZPIF executive officer Andrew King

There’s widespread agreement that the Reserve Bank’s new investor-focused LVRs have slowed down the market – for now.

But there is some divergence of expert opinion over how long that might last and what exactly the market might do next.

So what could the new year have in store for investors?

Auckland Property Investors Association president Andrew Bruce said he was cautiously optimistic about the Auckland market in 2017 - although not gung-ho due to several factors.

One such factor is interest rates which will be going up and putting pressure on the market that hasn’t been there previously, he said.

“But whether that has an immediate effect or not is debateable. A lot of people will have some degree of cover for a wee while, although some may have over-committed themselves.

“It will be interesting to see whether, around February - March, investors start jumping back into the market, to see if the effect of the latest LVRs was a blip or not. “

While he would be surprised if there is another big surge in prices, he can’t see things just falling away.

“The basic fundamentals of supply and demand pressure are still there and, while interest rates are going up, they are doing so off the back of historically low base rates.

“And there are some significant infrastructure projects going on in Auckland which will make it an even more desirable city.”

However, Bruce said more Auckland apartment developments are likely to fall over in 2017 because it is getting much tougher to get finance for developments from lenders.

“Also, the downside to the current property cycle is on the way, although it may not be in 2017, and that might take less experienced investors, who haven’t been through a full cycle before, by surprise.”

The housing market and investors’ role it in will remain under the spotlight over the coming year, NZ Property Investors Federation executive officer Andrew King said.

“That’s because housing is likely to be a large part of campaigning for the general election – although housing was a large part of the last election and Labour found that it wasn't a vote winner.

“As house price growth is expected to moderate over 2017, I can't see as much concern over house price growth by the general public as we have seen over the past few years.”

But that won’t stop the general media from printing anything or any view that hints at a house price bubble of people being locked out of the property market for life, he said.

For this reason, he expects he will have to put forward the views of landlords many times before the election.

On a brighter note, King said landlords are set to see improvements in the areas of meth contamination and tenants’ liability for damage in 2017.

“I'm expecting to see the levels for meth increasing which will see far fewer properties requiring cleaning and less cleaning for those properties that are above those levels.

I'm also expecting a resolution to tenants not being responsible for any damage they accidently cause to a rental property.”

These two results will be greatly appreciated by landlords, he said.