ANZ's economists believe there may be a rush of new property listings in the next four months, as vendors and investors try to beat the October 1 introduction of new tax and mortgage lending rules on residential property investments.
In a research report, ANZ said although uncertainty surrounded the precise impact of the proposed changes, it suspected it could be significant.
"The initiatives don't apply until 1 October and that may distort behaviours in the meantime," the report said.
"We suspect the impact could be stark given the extent of house price movement of late.
"We believe sentiment could turn on a dime.
"We will be paying particularly close attention to the number of property listings over the coming months, which could rise sharply as sellers try to beat the 1 October introduction of the new measures.
"Some sellers may rush to get out while the going is good.
"Some would-be investors may also try to skirt the borrowing restrictions by getting in now, but on the banks' part we expect to see behavioural shifts straight away.
"The RBNZ has already made it clear that it expects banks to work within the spirit of the changes immediately and we are sure it will be monitoring bank behaviour closely.
"On net then, it seems likely the changes could tilt the balance in favour of supply over coming months, further reinforcing the impact on sentiment and house price expectations.
"We may see a rather sudden rebalancing of supply and demand if sellers race beat the 1 October deadline for the introduction of the new measures.
"Ultimately, we suspect this marks a turning point for the Auckland housing market."
ASB also sees rush of activity
ASB also believes the changes could result in a rush of property investment activity over the next few months.
"As a result of the consultation period there may be unintended consequences, which could further boost demand in the Auckland property market in the short term," ASB senior economist Jane Turner said in a QuickView report on new tax rules.
"It's possible that property investors could rush in ahead of October 1 to avoid being subject to the new rules."
"However, the RBNZ's new LVR lending limits on investment property (expected to be honoured by banks immediately) could potentially dampen this impact," said Turner.
Meanwhile, the ANZ report said the Auckland housing market was already primed to soften.
"Prices have risen by a third in two years.
"That's a pretty stretched base to keep accelerating off, especially with major sources of buyer demand now being targeted.
"At the very least sentiment will be negatively affected and sentiment is a crucial element of any asset market, the ANZ report said.
It also warned that any change in the property market would be occurring at the same that the country was facing other economic challenges.
"Importantly, this shift in housing market performance will be occurring when other challenges such as dairying are intensifying and inflation is low.
"The risk profile facing the economic outlook continues to shift.
"As such, the new measures reinforce our view that the OCR is heading lower, and sooner as opposed to later.
"We retain our expectation that the RBNZ will cut in both June and July.
"We also retain a bearish slant towards the New Zealand dollar."
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12 Comments
Funny that it is all supply and demand while the bubble inflates and now all of sudden the market could turn on a dime?
What does ANZ know about its customers that the rest of us don't? A few too many 20% LVR investor loans and interest only mortgages on their books? Do they see lots of foreign money transactions that won't happen if the IRD is involved?
Chatting to a builder friend 3 weeks ago and he was advised by his banker to get as much cash into business as possible. He said too many people were overstretching and will be f*cked it it turns. Not very scientific but this came from a man with skin in the game and an interest in things continuing to rockstar along.
If Jim Rickards is right and the USA initiates QE4 next Feb-Apr then the Yuan which is pegged to the USD will drop against the NZD. All of a sudden Auckland houses could cost the Chinese 20% more, and confidence will be dented. Maybe…?
This seems relevant too..
For Minsky, an important component in the development of financial fragility is an
increase in speculative and Ponzi finance. One important source of the financial vulnerability
implied by speculative and Ponzi finance is the increasing attraction of "making
on the carry" by borrowing at relatively low short-term rates and lending at high
long-term rates. Financial institutions used this device in the Asian financial crisis by
borrowing in countries in which interest rates were low, such as Japan, and lending in
other Asian countries, in which interest rates were higher. lt was termed the "carry
trade."
However, if loans are extended by financial institutions in one country to borrowers
in another country, what becomes increasingly relevant for borrowers is the stance of
monetary policy, and the direction of interest rates, in the country from which the loans
are being made. Apparently, the rumour of increasing interest rates in Japan was a precipitating
factor in the Asian financial crisis, as profits from the carry trade were threatened.
3
ln addition to increases in interest rates in foreign countries, changes in exchange
rates can also make it more difficult to repay debt. If international loans are made in
hard currency, then a fall in the domestic currency against the hard currency can
increase the amount of domestic currency borrowers must earn in order to repay their
loans. Although the Asian countries went to great lengths to keep their currencies from
falling, the pressure put on the currencies from capital fleeing from Asia ultimately
broke the pegs.4
As financial fragility worsens, Minsky contended that a "not unusual" event is capable
of initiating a financial crisis, which Minsky identified with the forced selling of
assets to raise cash and sharp declines in the price of assets (Minsky 1977, 140). ln the
context of the global economy, a development of interest is the spread of financial crises
from one country to another.
read on.. https://www.google.co.nz/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=r…
This is how sentiment works in speculative markets.. if Auckland has gone from say 1 in 10 ppl actively looking too buy to 1 in 20, your demand has just halved.. if 1 in100 home owners were considering selling but now 1 in 50 are, you're supply just doubled... no new houses built or new immigrants, they have never been the significant factor in the supply demand equation that sets auck house prices.
http://www.latimes.com/business/la-fi-southern-california-housing-marke…
These are real houses, not the crappy little cowboy job boxes that pass for houses in NZ, yet most Americans still consider these ones to be grossly overpriced, despite the California realtor spruiker hype mentioned in the article. Huge, well constructed semi-mansions in sun-drenched southern California are averaging around NZ$500k according to the local spruikers, yet Kiwis genuinely seem to believe the pathetic crappo houses of rain sodden Auckland are undervalued at twice the price!
Anybody still dumb enough to claim there is no housing bubble in Auckland? Wow. Still so many of you. Good luck with that.
LOL
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