10 market predictions for the rest of 2019

Friday 28 June 2019

It’s been an eventful year for the residential property market so far but now’s a good time to look at what might be in store for the rest of 2019, declares Core Logic senior property economist Kelvin Davidson.

Here’s what CoreLogic believes are the top 10 factors to look out for:

1. Sales volumes to stay pretty flat, with various downward drivers (e.g. slowing GDP growth) largely offset by other positive factors (e.g. low mortgage rates). Our sales model points to an annual total in the range of 85,000-90,000 for 2019 as a whole, about in line with the average for the past decade.

2. Average property values still rising but in a restrained fashion, with the more affordable towns and cities in “regional New Zealand” likely to record the largest increases. By contrast, it wouldn’t be a surprise to see further weakness in Auckland – as buyers bide their time.

3. Further loosening of the LVR rules in November, reflecting our expectation of steady market conditions. Possible options include lowering the owner-occupier deposit requirement from 20% to 15% and/or raising the investor speed limit for high LVR lending from 5% to 10%.

4. Imposition of extra capital requirements on the banks by the end of November, with a phased approach (potentially over five years). This may prompt some consideration of offering different mortgage rates to borrowers with different abilities to service their debt.

5. Banking sector competition to remain intense and “rate wars” to be a recurring theme. This will be the case regardless of whether or not the Reserve Bank cuts the official cash rate again.

6. Foreign buyer ban to remain a contributing factor to softness in the Central Auckland and Queenstown property markets. The figures for Q1 2019 showed net selling of property by non-citizen/residents, and Stats NZ’s figures for Q2 will be available 26th July.

7. More homeowners potentially “trading up” or, in other words, taking advantage of a subdued market, especially in Auckland, to get a bigger or newer property, or in a better location. This will of course depend on not already being at the limit of their borrowing capacity.

8. Rental yields to continue to rise (albeit from a low base), as rental growth continues at a steady pace of about 5% annually, and above the growth in average property values. This will be welcome news for investors, who are facing plenty of other cost pressures at present (e.g. tax ring-fence for losses) – although at least they don’t have to worry about capital gains tax anymore.

9. Residential building consents to flatten off, as capacity constraints around labour and materials bite. However, they will still stay high, and that’ll be necessary to help alleviate housing shortages. A looming “re-set” for KiwiBuild could have implications here too.

10. Buildings insurance to come into starker focus, especially given the issues we’re already seeing in Wellington with changes to pricing methods and big increases in premiums. This will have implications for property values, especially apartments, and need to watched closely – not just in Wellington either.

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