BNZ chief economist Tony Alexander says his "best guess" is that housing may remain a seller's market till about 2017-18.
He also says that current moves by the Reserve Bank might lead to a spreading of house price rises from Auckland and Christchurch to other parts of the country.
In his latest "Weekly Overview" Alexander said for the past four years buyers had been asking him whether it would be better for them to hold off buying till prices fall and they can get something cheaper.
"My answer now is the same as it was back then. The longer you hold off the higher prices will go,"he said.
"Those holding off since the end of 2008 because they believed silly forecasts that house prices would collapse 40% are now facing average Auckland house prices instead near 40% higher than they were back then."
Alexander went on to pose the question of whether "this early in the housing cycle" it was possible to pick when the market may shift once again from a seller’s to a buyer’s market in which buyers would be able to pick and choose from a good range of houses on offer, "even though the prices may not correct downward by all that much if at all".
"The answer is 'not really' as there are too many unknowns. Best guess? 2017-18."
Upward pressure
Alexander said the rising gains in the population due to migration would put further upward pressure on house prices.
"In the year to July the net migration gain for New Zealand was 10,569 people. This was up from 7,907 one month earlier (that is a very quick turnaround), a net loss of 3,799 people a year ago, and an average net gain for the past decade of 10,520 per annum.
"In other words we have now officially entered above average net migration gain territory.
"Where may this end? If we annualise the last three months’ seasonally adjusted figures we get a gain of near 24,000. That is boom territory and will clearly add to housing pressure."
Alexander also questioned whether the Reserve Bank's move last week to introduce "speed limits" on high loan to value lending would have the impact the central bank wants – namely restraining the rise in house prices.
No impact on prices
"Almost certainly not," he said.
"Prices are rising in response to catch-up buying from investors and first home buyers running into a worsening supply situation that will not change much this cycle, given accelerating population growth courtesy of a migration boom, plus an aging population placing even more pressure on the housing stock."
Alexander said credit growth was not in fact particularly strong, so "attacking lending growth" as the RBNZ was doing would have little housing market impact.
"Household debt at the end of June was only 5.1% ahead of a year earlier. Growth is averaging almost 0.5% seasonally adjusted a month or 6% annualised so little real acceleration in lending growth is underway."
Catch-up increases
Alexander said "eventually" the Reserve Bank would be forced into a period of catch-up increases in interest rates- "which will likely scare the beejeebers out of those who have not yet seen our central bank in full action".
Before then some house buyers would shift their attention out of Auckland to other, cheaper, parts of the country where their deposit would go further
"So, the RB move will accelerate the spreading of Auckland and Christchurch house price gains to the rest of New Zealand," he said.
"The spread of ultra-fast broadband will encourage this population spread also to some degree. Frankly that sounds like a positive thing though some parts of the country have a lot to do in order to build their image as a suitable place to live."
Alexander said the tightening of the LVR rules would also likely to see a revival of the Auckland apartment market "with demand from buyers for lesser-priced properties which are near where they want to be".
"The alternative for many will be either forgoing home ownership this cycle, buying further away from the city centre, or shifting elsewhere in the country."
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