Turning off the tap: Ben’s Barometer September 2016
Normally when our property market is experiencing rapid growth, the Reserve Bank seek to steam the rise by increasing interest rates. Why is it then that our rates are at the lowest levels in NZ history?
Currently the powers that be are trying to limit the damage that an overheated market can have on the country versus the damage a high dollar (and zero inflation) can have on exports and the economy. So, when rates dropped again last week, it was like the governor pouring petrol on the fire. What he didn’t see though was the banking sector standing behind him with the hose.
Low lending rates had been encouraging all types of people to apply for additional funding but banks have decided to make it harder to access this money. Much of this is the banks trying to limit their exposure to both the property market and more widely the floundering dairy sector.
So how does this affect the property market?
It had become very apparent at our open homes that many of the parties in attendance were researching the market with the intention of investing in rental property. Since the proposed LVR changes were announced, we have noticed a distinct and almost instantaneous drop off from this sector. It’s not to say that the diehard investors are no longer out there but the first time ‘mum and dad’ investors are noticeably absent. In our own personal opinion the changes have had the desired outcome, although it is too early to tell if these will be long lasting.
Tools to cool
For all the real estate train spotters out there, British Columbia, a market experiencing similar pressures to ours, introduced a foreign home buyer’s tax of 15% last month. This has had a devastating impact across the board and all but crashed the market overnight. Measures like this may be a little extreme for New Zealand but there are whispers of further changes ear marked for our shores. One to watch with particular interest will be the linking of debt to income. From our perspective it is likely to be a game changer as it eliminates equity and focuses on your ability to service the debt.
The Wellington Market
Year on year the Wellington residential property market has experienced some strong capital gains with an increase around 20%. We are predicting the return to a more balanced market heading into Christmas.
With regards to the Wellington’s wider economic forecast, it would appear that John Keys’ statement regarding the demise of Wellington was nothing more than a bad dream. The city is alive and buzzing with new and exciting retail ventures, construction of new office buildings, hospitality and the proposed movie museum which is set to transform our tourism offering. We couldn’t be more excited!
Click here to see what your property is worth in the current market.
Wellington Market Quick Facts
Average sale price by area:
September 2016 Fun Facts
At the end of September, Wellington will again host the internationally renown World of Wearable Art competition. Finalists will compete for over $165,000 in prize money, plus internships with leading creative companies such as Weta Workshop.
Did you know:
- 50,000 people come to Wellington each Spring to attend WOW
- The show is held over 12 nights and is considered one of the main annual highlights of the New Zealand entertainment scene
- The World of Wearable Art™ was born in 1987 when Nelson sculptor Suzie Moncrieff had an idea to promote a rural art gallery – what a success story!
- Over 300 designers from New Zealand and overseas – UK, USA, Australia, India, Thailand, Israel, Sweden, Fiji, The Netherlands, Canada and Germany – enter every year, with 170 finalists making it on to the stage
Click on the image to see a full video.