ASB's Nick Tuffley thinks Auckland house prices will moderate this year as the action moves to other centres

This is the third in a series of articles that each feature the view of a different commentator on the outlook for the housing market in 2016. In this article the ASB's Nick Tuffley gazes into the crystal ball.

ASB chief economist Nick Tuffley thinks this could be a year of change for the housing market, with much of the action occurring outside of Auckland.

"I think we'll see see a few differences this year," he said.

"Last year was about Auckland and how much the market was accelerating, particularly through to the middle of the year, whilst everything else seemed relatively quiet.

"I think what we'll see this year is some moderation in Auckland house price growth, but the other parts of the country looking a little bit healthier,with price growth a little bit stronger than it has been.

"We started to see that occurring a bit last year," he said.

Much of this charge to the regions is likely to be led by investors.

"We have seen a degree of change [in investor behaviour] come through already," Tuffley said.

"I think the drop in sales turnover we saw in Auckland around September/October overstated the impact of the various regulatory changes [such as higher LVR restrictions and new tax rules on investment properties] that have come through, but I expect that will have an ongoing effect, probably more so over the first half of the year.

"You saw that in the second half of last year with a number of people looking outside of Auckland.

Tuffley said some investors would choose to remain on the sidelines rather than grow their portfolios, but there was still likely to be plenty of investor activity.

"The interest rate environment will still be pretty benign, so there's still likely to be a fairly healthy interest in property overall," he said.

And he sees little relief from sky high Auckland house prices

"They are just about on another planet, they have gone that far up into orbit," he said.

But will they come crashing back down to earth?

"You never say never," he said.

"But what we'd expect to see in Auckland is the momentum in prices dissipating and the market moving to price growth being relatively flat by the end of the year, rather than a decline.

"The challenge with the market is that prices are still stretched compared to incomes and rents, but the fundamentals are still pointing to a fairly supply constrained market.

"Things will change over time, we expect the migration flows to ease but the most recent data shows no sign that we've hit the peak yet.

"The challenge with migration is that it has just kept on surprising by how persistently strong it's remained.

"We had a view for a long time that the peak was just around the corner and it's still just around the corner.

"We're pretty much expecting that over the course of this year it will gradually taper off.

"We'll still have population growth, it just won't grow quite as fast,"

And although Tuffley expects much of the housing market activity and price growth to occur outside of Auckland, he doesn't think the Reserve Bank will extend the tough LVR restrictions that apply to Auckland investment properties, to other parts of the country.

"I think the Reserve Bank has a pretty low appetite for extending them outside of Auckland," he said.

To read the previous Property Outlook 2016 articles, click on the following links to read the first instalment featuring the views of Westpac's Dominick Stephens or the second instalment featuring the views of BNZ's Tony Alexander.