By Gareth Vaughan
The rampant house price inflation in the Auckland market may be cooled by immigrants spreading to other parts of New Zealand, according to ANZ New Zealand CEO David Hisco. Conversely such a development could see house prices rise elsewhere in New Zealand.
Speaking to interest.co.nz after his bank posted its interim results, Hisco said the main factor behind upwardly spiraling Auckland house prices was record high migration.
"There's about 50,000 immigrants in the last year and half of those want to end up in Auckland. That's a lot of people," said Hisco.
"That's like saying 100 people Monday to Friday start looking for a house and we just don't have that stock. So no matter what macro-prudential measures you bring in, even if you can start getting more housing stock on the market, I think that's quite a lot of pressure they're putting on existing prices," Hisco said.
'Everyone is questioning where and when it stops'
He was speaking hot on the heels of the latest monthly sales figures from Auckland's biggest real estate agent Barfoot & Thompson. They showed April's average selling price at a record high of $804,282, and a median selling price of $753,500 up $133,950, or 21.6%, from April last year.
"Obviously everyone is questioning where and when it stops. And obviously wages aren't going up that fast. So therefore people will hit a limit in terms of how much they can borrow because we're not loosening our (lending) standards," said Hisco.
In terms of migration he suggested the world had worked out Auckland was a "pretty nice" city, and predicted the surging Auckland prices would feed through to other parts of New Zealand.
"People will start to work out how they can come to New Zealand and enjoy the benefits of New Zealand but not necessarily buy in the most expensive place. So you would expect some of the other cities that are very attractive across New Zealand will start to see an inflow of people as well. I'm sure that will happen," Hisco said.
"We (ANZ) just need to be careful, make sure people can afford interest rates that one day will be higher than what they are now. So we build in a buffer. The last thing we want is to see people getting into trouble. So we try to help them look for, and make sure they've got sufficient cover and plans in place."
The latest monthly Real Estate Institute of New Zealand sales figures showed the Auckland median price up 13% in the March year to $720,000. But although the national median price was up 8% to $475,000, when the Auckland effect is stripped out the national median was up just 1.4% year-on-year.
The ANZ group results showed $64 billion worth of mortgage funds under management in New Zealand with 41% of the book in Auckland. Of the total portfolio 22% is paying interest only. The bank's percentage of home loans with loan-to-value ratios (LVRs) above 80% was at 14% as of March 31, down from 22.8% on the eve of the introduction of the Reserve Bank's speed limits on high LVR lending in September 2013.
New macro-prudential tool 'sort of makes sense'
Meanwhile, Hisco said ANZ expected to be able to cover additional capital requirements from the Reserve Bank's move to make trading banks treat residential property investors as a different asset category to home owner-occupiers from existing capital.
The Reserve Bank's hints that a new macro-prudential tool could be introduced targeting lending to residential property investors "sort of" makes sense, he added, but only for borrowers.
'There's some people that are paying cash for properties so it doesn't actually address them."
And in terms of Reserve Bank deputy governor Grant Spencer's recent call for the Government to reconsider potential policy measures to address the tax-favoured status of housing investment, Hisco said whatever the Government introduced wouldn't be perfect.
"I think property speculators are already taxed so I think that exists. I'm trying to run a bank here so I'll let them make those decisions," said Hisco.
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16 Comments
he is so wrong its not funny, maybe he should become a polly. the reasons house prices in the regions are cheaper is because of jobs, they are harder to get and they pay less. all the big players have moved to Auckland due to govt policies over the years.
Second most have friends and family in Auckland so have created new communities where they feel comfortable.
third most have come from much more crowded and expensive places to live so they don't see Auckland in the same light as kiwis.
If the difference in wages was somehow reflected in house prices I would agree, but you are dreaming if you think 5% higher wages justify 90% higher house prices. Also Auckland is one of the most of expensive places in the world to live, so the pool of people from more expensive places is pretty limited.
hahaha. Ever look at the breakdown of visa apps? They are ALL students. Ever look at job vacancies per capita or overall unemplyment levels (jobless rate per capital)? Aucklands a speculative bubble with ZERO fundamentals to justify anything over and above prehaps 5% p.a house price appreciation, and thats being generous considering rate of income and rent increases.
High paying jobs isnt true either, welly matches or beats auck, and most secondary cities are at most 10% lower, yet have house prices of a third or less than auck. What happens is banks see the valuations out of wack so rotate their lending toward regions where house prices are still low, as thats where the potential customers are.
if he moves to auckland he no doubt will find a job
http://www.stuff.co.nz/business/money/68388049/desperate-jobseeker-runs…
Isaiah's Job
Albert Jay Nock
https://mises.org/library/isaiahs-job
Still, I reflected, even the greatest mind cannot possibly know everything, and I was pretty sure he had not had my opportunities for observing the masses of mankind, and that therefore I probably knew them better than he did. So I mustered courage to say that he had no such mission and would do well to get the idea out of his head at once; he would find that the masses would not care two pins for his doctrine, and still less for himself, since in such circumstances the popular favorite is generally some Barabbas. I even went so far as to say (he is a Jew) that his idea seemed to show that he was not very well up on his own native literature. He smiled at my jest, and asked what I meant by it; and I referred him to the story of the prophet Isaiah.
Any shelter seeking influx from Auckland would place unacceptable upward rates pressure on existing destination ratepayers.
Concern over the proposed switch from a land value-based rating system to one that uses capital value to determine a property's rates, as well as general rates increases were also hot topics at the submissions hearing.
Submitter Gaylynn Bennett said she believed land values were more accurate and should be used to set the rates, as land values only changed by large amounts when the whole area had increased in land value or when land was rezoned.
"You know that we earn below the national average and mean, yet you plan to continue for an undetermined time to raise our rates above the average," she said.
"We have to live within our means, so should you. And for the majority of ratepayers these percent will be on top of the increase by your planned change to capital value rates." Read more
I think most other regions could cope as well if not better at dealing with a few more people than auckland has shown. Some tighter secondqary city markets might struggle but equilibriums and 'the flow of water to low points first' will see them out of favour with 'shelter seeking aucklanders' once prices move up, a process that could take another 5 or so years by which time hopefully auckland would have sorted its sh*t
90% of front page news of interest.co.nz are real estate related. It is becoming so boring!!!!
We all know there are some kind of market failure somewhere in AKL residential housing market, and we all know that JK government will not step in to provide right solutions to key problems.
Can we move on to something like education, health care, aging, technology innovation and etc please?
Good point Xing but actually health, traffic, education, etc is all interwoven with the demand side of housing. The last time I visited a hospital on the shore all I saw was old folk from overseas who couldn't speak English trying to get themselves sorted - hilarious until you ask how much these aged immigrants have paid in taxes thru the years. Traffic, - well you know the story there, a trip to the CBD has to be planned like a military campaign and as for education - most primary school teachers have probably given up. When I doubled up as a parent help one day the teacher was doing a suduko and it looked like half the class was being managed by a bright young multilinguist all of 8 years old.
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