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CoreLogic: uncertainty creeps into property forecasts

commercial_property.jpgUncertainty is growing, but people's positivity could keep the housing market strong for at least one more year.

In a review of the year just gone, property data firm CoreLogic says earthquakes, Brexit, and Donald Trump's US Presidential election have all made the New Zealand property market much more uncertain.

An election at home this year, question marks about the Auckland market being overvalued, and the threat of further borrowing restrictions were also adding to concerns.


The market had already shown signs of this unease, with tighter lending restrictions and holidays putting growth on hold.

"The slowdown is real," CoreLogic senior research analyst Nick Goodall said.

Auckland's stellar annual growth had slowed to 12.8 per cent in December, a far cry from its peak a year ago at 24.4 per cent.

"But with an average property value of $1.05 million, any growth from this point on could be seen as excessive, especially with wage growth not keeping pace," he said.

This is echoed by new figures from Statistics New Zealand which show - of the 1.82 million homes in New Zealand - 1.15 million (63.1 per cent) were owner-occupied in December 2016.


Property Institute chief executive Ashley Church said news of a continuing slide in home ownership was a "disaster in the making and threatens the fundamentals of what it means to be a Kiwi".

The generational impact of closing Kiwis out of the housing market had "huge knock-on effects", he said.

"It isn't just about the value of the house as an asset - it's also about what you can do with that house.

"Mums and Dads use the equity in their homes to buy businesses, fund further education, fund their retirement and help out their kids," Church said.

"Those options won't be available for Kiwis who aren't able to buy a home and it's a disaster waiting to happen - not just for the individuals effected - but for the economy as a whole.

"There's also the impact on communities, from a generation of renters, who won't have the same ownership stake in the places where they live. That's bad news for our Kiwi culture."

PROMISE

ASB senior economist Jane Turner said while 2016 was marred by economic disappointment, 2017 was shaping up to be a year full of promise for New Zealand's economy.

"The groundwork has been laid for the NZ economy to shift back into high gear.

"Strong population growth and low interest rates have fuelled construction demand, a tourism boom has the retail sector humming, the labour market has tightened and New Zealand households feel more confident, and dairy prices have finally turned around."

This year should be a good year for the country - "that is assuming the rest of the world also holds together", Turner said.

"There are many uncertainties on the global outlook - and President-elect Trump is the biggest unknown.

"The key risk is if Trump's administration follows through with anti-trade rhetoric from Trump's election campaign and imposes stifling import tariffs on China."

But, all going well, 2017 should be a properous year.

"But, as always, being a small open economy which is subjected to the whim of global sentiment, we need to also prepare for the unexpected."

Looking ahead, Goodall said there remained a feeling of "surely this can't go on forever?".

But some of the same driving forces remained such as record net migration, low interest rates and continued lack of supply.

"There are signs of all these factors turning around but none are fast moving. The pressure they're creating will therefore continue in our short term future."
Real Estate Investar Editor
Real Estate Investar Editor
Real Estate Investar provides intelligent software, tools and data to help you save time and make money in the residential property investment market.

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