The man who famously labelled New Zealand’s economy a “rock star” says Auckland housing prices will keep on rocking for a while yet.
Paul Bloxham, HSBC’s chief economist, Australia and New Zealand, bestowed star status in 2014 and was proved right, with the New Zealand economy pulling off the fastest rate of growth in the Organisation for Economic Cooperation and Development (OECD) that year.
He’s since maintained that growth will return to more “normal” levels after that stellar 2014 and, on a recent visit to Auckland, was still upbeat – albeit at smaller growth levels.
In spite of contracting economies across the planet and a general environment that would normally slow housing markets, he can see no harsh “correction” in Auckland house prices.
“The fundamentals are still there to support continued house price growth in Auckland,” he says. “There is too little supply and strong demand underpinning the market – things like growing net migration and overall population growth are affecting the market and it’s very hard to change that without more housing coming to market.
“So we think there will be continued house price growth this year because of that under-supply; there might be some cooling and we’d suggest price growth will be slower this year than last year – but it will still be growth.
“It’s hard to see prices falling or cooling significantly.”
Bloxham says the Reserve Bank is keen to slow Auckland’s overheated property market but is facing a challenge: “They want stability which is completely reasonable when you realise Auckland prices have lifted 80 per cent in four years.
“But at the same time they are experiencing very low interest rates and have cut the OCR (official cash rate) to lift inflation; that works against what they are trying to achieve by cooling house prices. They have quite a challenge with that trade-off.”
HSBC have also responded to the low interest rates with a 3.95 per cent, 18-month fixed term mortgage, claimed as the lowest rate offered in New Zealand in the last 50 years.
Bloxham is one of those who believes the OCR will drop further this year. The Reserve Bank let the rate stay at 2.5 per cent earlier this year but Bloxham and other commentators believe it will go as low as 2 per cent by the end of 2016.
Source: NZ Herald