Five things to look out for in 2020

Research firm CoreLogic has shared its thoughts on the big factors to look out for in 2020. Senior Property Economist Kelvin Davidson predicts more "swings and roundabouts" for the market next year:

Demand will remain strong

Davidson predicts 2020 could shape up as "the year of the investor".  

"The factors that have brought investors back to the market over recent months seem unlikely to fade as we move into 2020," he said. 

"At the same time, the wider economy looks set to continue to grow steadily next year as well – especially relevant for property will be a continuation of low unemployment and the likelihood of strong net migration."

Strong financing conditions

There could be a "window of opportunity" for borrowers in the first six to nine months of the year, Davidson said, "with serviceability testing more favourable for borrowers, the banks still competing strongly, and mortgage rates very low".

He added: "The combination of solid underlying demand and better access to credit bodes well for the property market for at least the first half of next year."

Bank capital rules to take effect

Eventually, the Reserve Bank's new capital rules will "flow through into the market" in late 2020, he says, "with mortgage rates facing some upwards pressures and/or the supply of finance tightening up".

Values to rise, activity to increase

After a 3.5% increase in average property values in 2019, Davidson says it "wouldn't be a surprise" to see growth of 5% in 2020, "as ‘provincial NZ’ continues to see rising prices, and the main centres tick higher too".

He believes sales activity could also increase: "After an expected total of around 90,000 sales in 2019 as a whole, activity could improve again in 2020, to about 95,000 – with demand rising on the back of low mortgage rates, an expanding economy (bolstered by extra fiscal spending), solid net migration and increases in wages."

Beware the risk of rising rates

The Reserve Bank's capital rules could eventually force an increase in mortgage rates, and Davidson warns a small increase in rates could have a big impact on the market. 

"A 1% rise may seem small, but it’s quite a bit in proportional terms when the starting point for mortgage rates is 4% or less, and the effects on households’ confidence and balance sheets could potentially be greater than is commonly assumed."