Buyers and sellers can only feel a degree of comfort at the continuing low mortgage interest charges. The Reserve Bank in its November 2018 Monetary Policy Statement indicated a clear intention to hold the Official Cash Rate at 1.75% throughout 2019 and 2020.
NZ’s economic indicators are good by most measures. Growth for 2018 ran at 2.8%, and the prospects for further growth expansion are also good while inflation was a humble 1.9%. Employment therefore looks pretty solid. Economic performance that is at least neutral if not positive for sellers and buyers. And the banks are lending even if, as Deutsche Bank recently complained banks are being required to increase their reserve holdings and in order to maintain the bank’s return on investment performance an increase in loan rates could be needed.
At the micro economic level things are more uncertain, a bit more disturbed. Household expenses are continuing level to increase faster than wages and salaries. Buyers can therefore afford less. Rising costs also put pensioners and others on fixed incomes under pressure and selling their home may become a reluctant option. Mom and Pop investors who find themselves looking down the still shadowy barrel of capital gains tax and those investors who have yet to complete the upgrade to the new standards for rental property may find the option of selling increasingly attractive. Even if rental price growth continues to outstrip inflation and broader economic performance: selling for some will be the best option.
Then there is actual market performance. The shortage of rentals has worsened and rental prices are increasing so buying becomes more attractive providing you have clawed together the deposit. Kiwi Build is not going to deliver: around 300 homes by July rather than 1,000 planned. The shortage of trades folk continues with implications for both production and pricing. In mid-January the NZ Herald front paged the December 24% drop in sales volumes across Auckland, attributed in part to the ban on offshore foreign buyers. Naturally this prompted a broader check of sales numbers in Pukekohe.
So is Pukekohe somehow insulated from what is happening elsewhere? Probably not. Experience tells us that what happens in the broader Auckland market eventually arrives in Pukekohe 6 – 12 weeks later. Pukekohe is a different market from Henderson just as Pukekohe North, Pukekohe Hill, Belmont and Newsham Park are different markets to Paerata Rise.
At best this looks to be a ‘steady as it goes’ market. One in which sellers will carefully consider written offers and one in which bargain hunters should not be upset by a firm refusal. Results in February and March will set the tone for the year ahead.