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ANZ economists see continued strength in the regional housing markets with further 'catch-up' on Auckland prices

Property
ANZ economists see continued strength in the regional housing markets with further 'catch-up' on Auckland prices

It's hot in the regions and cold in Auckland and Canterbury - and that's how it's likely to remain for the moment, according to ANZ economists.

In the ANZ's latest Property Focus publication, chief economist Sharon Zollner and senior economist Liz Kendall have done a detailed crunch on the numbers around the country to assess where is hot and where is not.

In the 'not' category are Auckland and Canterbury while 'very hot' areas include Southland and Hawke's Bay. Zollner and Kendall stress that their identification of hotspots should in no way be taken as financial advice.

The economists assessed the housing markets around the country based on five key criteria: 

  • days to sell
  • expectations of buyers and sellers
  • sales to listings
  • the economic performance of each region
  • house prices to rents

They produced a detailed look at each region, including this one for Auckland...

More generally for around the country, there was this graphic showing a broad view of just which regions are hot and which are not.

The economists said there are a number of offsetting forces buffeting the nationwide housing market at present.

"Population growth has been strong, although it is easing gradually. And financial conditions are supportive of continued demand, especially with mortgage rates having fallen further recently. But a number of headwinds are also at play:

  • Banks are being prudent in their lending practices, so while mortgages are cheap, careful serviceability assessments are being applied.
  • The RBNZ’s loan-to-value ratio restrictions are binding, particularly for investors.
  • And investors are a bit wary in light of policy changes (including possible tax changes, letting fees ban, Healthy Homes bill etc), while demand from foreign buyers has been abruptly stymied by the ban that came into effect in mid-October."

Zollner and Kendall said on the whole, they expect that the housing market will remain "contained in light of headwinds", with house price pressures expected to ease gradually from here.

"In this context, we expect that the RBNZ will ease loan-to-value ratio restrictions at the November Financial Stability Review (November 28). This will provide a little more support for the market. However, given the tailwinds outlined above, a resurgence cannot be ruled out. We expect any easing will be cautious and gradual."

Looking forward, the economists said they expect the Auckland and Canterbury markets will remain weak.

"The Canterbury market has experienced a significant rebuild-related cycle, and affordability constraints are weighing there. The acute shortage created by the Canterbury earthquakes led to a significant run-up in prices. Effectively, prices overshot and this is now dampening the market, especially with new supply coming on-stream. At the same time, broader economic activity in the region is not as buoyant as it was."

For Auckland, affordability constraints are "acute and weighing heavily on the market", with prices having reached eye-watering levels, the economists said.

"Given the rapid run-up in prices seen in Auckland, expectations of strong future demand appear to have already been capitalised into prices to some degree. However, this appears to have run its course, with buyers no longer willing to pay significantly above list price and expectations of sellers slowly adjusting. Investor demand is also being particularly affected by the foreign buyer ban, with foreign purchases of homes concentrated in the Auckland region."

But outside of Auckland and Canterbury, Zollner and Kendall expect that regional markets will see continued strong growth, supporting nationwide house price inflation, especially in certain pockets.

"This is likely to see continued catch-up of prices in the rest of New Zealand to those in Auckland, although to varying degrees depending on the performance of different markets (and regional incomes).

"Based on current conditions, the hotspots of Southland and Hawke’s Bay look set to outperform, particularly if growth in these regional economies performs well.

"Other regions have conditions that appear conducive to continued robust house price growth, including Gisborne, Manawatu-Whanganui, Tasman-Nelson-Marlborough and Otago. And conditions in Bay of Plenty, Waikato and Wellington look favourable, although not to the extent that has been seen in recent history. These markets are not running as hot as they once were, and recent moderation may be sustained."

The economists said that conditions can – and will – change rapidly, and this will have a bearing on the outlook for regional house price inflation going forward.

"Strong demand in particular regions may encourage property owners to sell, leading to greater listings and tipping the balance to more supply, thus alleviating price pressures. Much also depends on the composition of economic growth, which affects regional economies differently. Population changes will also be important, given both external and internal migration flows.

"These sorts of movements can have significant bearing on the outlook for housing demand, but data on regional migration is unfortunately scant.

"The only thing constant is change; all housing markets ebb and flow. But breaking it down by region certainly goes a long way to demonstrating ‘the’ New Zealand economy and ‘the’ New Zealand housing market are averages that mask a great range of outcomes." 

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79 Comments

"Auckland prices having reached eye-watering levels" Translation, "there will be tears"

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Tears of joy.

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'Investor demand is also being particularly affected by the foreign buyer ban, with foreign purchases of homes concentrated in the Auckland region."
Who said it was going to have no impact....

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"Overseas buyers accounted for 22% of the homes purchased in central Auckland's Waitemata Ward in the June quarter. There was also significant overseas buyer activity in the Auckland suburbs of Upper Harbour 9.2%, Henderson-Massey 5.2%, Devonport-Takapuna 4.8%, Howick 8.2%, Hibiscus Coast-East Coast Bays 5.5% and Kaipatiki (Glenfield, Northcote, Birkenhead, Hillcrest, Beach Haven, Birkdale, Highbury) at 4.9%.

https://www.interest.co.nz/property/95012/overseas-house-buying-activit…

Nah, as per the Stats-NZ 3%, the FBB is going to prove a fizzer - NOT!

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John Key had us all fooled eh and then sold out to a Chinese at the last minute!

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More like at the first minute. Hence the hurried, early exit that surprised everyone. Fancy it all being about taking that unearned capital while the going was good. Once a dealer always a dealer.

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Yip, and dummas NZ gave him "Sirs". Pthww. He's still a knob

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AND a quitter

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Yup, too chicken to face a public that is so anti-foreign purchasers. I was not surprised when I figured out why he bailed.

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Tsk,Tsk, Kate. Sounds like left footed Politics and jealousy

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Not me, he always came across as a noblet (complete knob), nothing genuine about him

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And then you have Simon Bridges who has such a big man crush on John key he mimics his voice and mannerisms.

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The regions are still absolutely insane. The dreariest, poorest north island towns are now magnets for property speculators. I don't think Auckland will have a massive price collapse, but I could definitely see it happening in Dannevirke or Pahiatua.

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Dannevirke and Pahiatua are to benefit from the new $600million Manawatu Gorge replacement. There is some potential.

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Will that $600 million turn those towns into cities comparable to Brisbane or Melbourne?

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More like Gatton, QLD.

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I spent 4 months during the winter working in Dannevirke, it's bloody bleak! I'll take Gatton any day.

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LOL, there's potential because of a new section of a road that goes between two provincial centres. What a location!

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Dannevirke and Pahiatua are small towns. Palmerston North is a provincial centre. And Palmerston North has a bit of the Auckland disease - which means they chronically under-supply land and overcharge for development costs. So just like Auckland (but on a much lower cost base) the small surrounding towns have benefited. With the new road Dannevirke becomes a linked town.

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All towns in NZ have roads leading in and out of them. You might as well laud Dannevirke for its green grass and breathable atmosphere.

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The current roads mean a 55 minute commute to Palmerston North, the future road will mean a 35 minute drive. People pay more to live in a house that cuts 3 hours from commuting time each week.

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Like 'Hobart' The 'jewel' of the Australian property market!

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Stop dishing towns that aren't Auckland. Ever had a look around the Zombie suburbs of South Auckland ? There you see tragedy.

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I definitely have a soft spot for small towns (I actually meant to write Dargaville and Pahiatua, but one cannot think of Pahiatua without thinking of Dannevirke - the twin jewels of the Tararua district).

But they don't have a lot of jobs, or high salaries, or opportunity. They should be priced accordingly.

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@ saving4AUhouse: Auckland has a lot of low paid jobs. But look around those rural places and you will see real wealth.
Here is a decades old story but still illustrative. The Law Society did a survey of Law Partners incomes with the result that the highest in our fair isles was Southland. (really Invercargill)
While its true Auckland has law partners making a million or three every year, there are not many of those. And Auckland has a host of lawyers making barely enough to pay the rent.
If a person wants an Auckland job, great for them. But don't assume 'the provinces are poor' There is heaps going on there, with big money. It's just not a wage slave setup.

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I've lived in a lot of different places in NZ, from Auckland to to rural service towns of 1-2k people.

Let me put it this way - if I want a decent (six figure) salary, the opportunities for me are going to be extremely slim in anywhere but a major centre. I realize lawyers (and rural accountants) are needed out there, but most other middle class careers simply are not.

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Ah that explains the chill I've been feeling this morning, I like it though. .

Bhsl. Expat. Ttp. . Get your cardigans on..

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Why me? I have one property with a residual liquidity facility and cash in the bank. On a relative basis I'm better off if prices go down. Heck I'd positively welcome a crash if it turfed the COL out and my children's housing needs were sorted. Cash is king.

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Welcome home brother

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On the other hand, if prices were to crash your kids would be more able to achieve stable lifestyles under their own steam and merits, freeing you up from the need to support them with housing.

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It's tempting to think that you can just send your children out into the world and call your work done, but it doesn't work that way. Imagine what we all could have done differently in life if the need for a home was taken care of early in life?

If there is a crash, there will be bargains. That's what I'm thinking of. If it's in their names then CGT can't touch them. They can take in boarders etc to help with finances. On our wills the equity loans will be forgiven on our deaths. Simple.

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Yeah, we all try to help our kids. And collectively too, e.g. free primary, secondary etc. You make an argument much like those arguing for UBI.

What's the deal with gifts per annum? Isn't the limit fairly low? Be interesting to structure. Trying to give them the money or the house without it being recognised as income, or gifts over the threshold etc.

Taking from the bank with the intent to give the money to your children and have it not need to be paid back on your death...that's an interesting one.

All that said, if housing and NZ incomes were to reconnect a bit, they'd be better able to be self-reliant.

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Gift duty disappeared for gifts made after 1 October 2011

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My portfolio is not limited to Auckland.

How has your Mumbai apartment been going in terms of capital gains?

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Has tapered off since the beginning of this year. .
MIL has a half share, so it's more a long term, else would have offloaded by now

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Lots of the rest of NZ builds faster than Auckland. Phil Goff has taken Auckland's massive economy of scale advantages and flushed them down the toilet by insisting that his new suburbs be spread miles away from Auckland City. How much Auckland value has been lost to the rest of NZ is unknown, but it seems likely to be significant.

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Are any of you doom merchants short Wellington property?

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How do you “short” property? Are you referring to people with cash to buy a property who are sitting back waiting for prices to drop so they can buy at discount? A bit like me, I’m going “short” on George Foreman grills at the moment because I’m waiting for the next Briscoes sale.

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You are short property if you are renting and without any form of property investment. Particularly so if you are able to buy but consciously choose not to in the expectation prices will fall. .

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Thats not short, thats just not catching a falling knife. Short is to make a profit when prices fall. I can't see any way to directly short property (NZ residential at least, might be able to short large commercial property owners on the ASX).

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I think Te Kooti is suggesting that selling a property for $1 mill, waiting for the property market to halve, then buying back in at $500k therefore "profiting" $500k is going short.

I'm going short on motor cars, I sold my 5 Litre V8 when petrol prices were $1.65 per litre. I'll buy it back when petrol prices hit $3.30 per litre.

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Not really shorting the market though, even if you think it sounds kinda cool to suggest it is.

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If you choose not to own a primary residence because you believe prices will fall, you are short. If you think that's cool, you need to get out more.

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Sweet. Well I’m going long on my property.

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Are you actually arguing that people not buying property when they can afford to is immoral?

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This article was thrown up only 41 minutes after todays earlier article titled "Sales on less than a quarter at Barfoot and Thompsons latest auctions". Seems to be very soon compared to the rest. But i guess news is happening very fast these days.

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I wonder how long its going to take before they realise that the regional boom is largely dependent on the Auckland exodus. When Marv and Mavis discover the family home in Auckland that was worth 1.5million isn't going to sell, they wont be able to move to the regions for $800k and bank the other $700k.

Its them marginal buyers again.

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Agree.

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I used to think so too, but then I found these stats. The prime movers in the current Auckland exodus are sub-35 age bracket. FHBs exiting the Auckland market seems to be the current trend pushing up regional house prices - not marginal buys.

https://www.stats.govt.nz/reports/internal-migration-estimates-using-li…

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Interesting. just had a quick play with the CSV file.
30-59yos 50.7K Out, 37.2k In. Net 13.5K out of auckland
60+ 18.8k out, 10.6k in, Net 8.1K out of auckland

So yeah, in absolute numbers the younger ones are kicking it. Ratio wise the oldies are leaving in far greater proportion to those moving to auckland (80% more leaving than arriving, vs 36% for the younger group)

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...and who owns half of the stuff in The Regions anyway? It's been the legendary Auckland Investor for as long as I can remember ( way before it was the Chinese investor). So if they can't sell at home, guess what they will try and sell!

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A bit of a shame Christchurch and Canterbury aren't separated because, since the earthquake, they are very different markets. I agree Chch is a "cool" market but the rest of Canterbury is actually quite a hot, regional market.

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I wonder if most of us can agree that ANZ's "Property focus" is actually well balanced and representative of the actual property market in NZ?

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It is.
But sadly, it's as blind to the reality of 'what's coming' as most New Zealanders... 3.5% not possible by Christmas this year? Fletcher shares off 10% today; who saw that yesterday? As I said, blind...

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bw, glad you agree.
Well we can only state for sure what is, what will be, is speculation, but I am prepared to make a bet that interest rates won't be 3.5% by this Christmas.

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You could be right. I'll decline your offer of a bet; it wasn't my call after all. But if Nic Johnson happens to be right on that score ( he has the trend right!) I'll be well enough compensated anyway.

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Today is one thing. Tomorrow is another. We live in a fast paced country in a fast paced world. It changes by the hour. It has done for the past 20 years. It will continue to get faster. Or, it will blow. I can cope with an economic blow better than another sort of blow. One is mainly about money, the other is mainly about people. What's begun is the better of the two options, believe me.
PS: Yes, I would prefer neither. Reality sucks.

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Agreed, I lost a friend yesterday, he will be buried tomorrow, 54 years old : (((

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Sorry to hear that Yvil.

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Sorry to hear that mate

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You called me an "idiot" yesterday on this site, I'm not your mate

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So you would prefer me to refer you as an idiot from here on? Apart from being Evil?

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It surprises me that you haven't been told off about your comments. Surely they breech the commenting policy? I'm always careful not to use direct insults.

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I asked him a question. ...

I empathized with him, but he rebuked me, quoting yesterday's reference.

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ANZ economists are typical of most economists, in that they may have qualifications on paper but don’t really know what they are talking about
If they knew what they were talking about then they wouldn’t be needing a paid job!
Economists are always very conservative and never tend to speculate and that is why they always retire from their jobs with out having achieved a helluva lot!
Speak to successful property investors and they will all tell you the same.
Speculate to accumulate as they say!

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When the Aucklanders think their personal property value has dropped they stop buying investments in the provinces and when they see their equity collapse they all want to cash up at the same time - the provinces got hit much harder than Auckland after the GFC and it will likely happen again - the ripple effect in action coming to a small provincial town sooner than you think.

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bigblue, exactly.

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Of course, when things get tough, what do sell, the house you live in or the batch (or investment house)?

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It's spelt Bach in NZ. It has nothing to do with the definition of batch. Yr not a kiwi eh? Read n learn....

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You're quite right, I wrote the comment on my phone, "bach" got auto corrected

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Please tell me what ANZ economists said before Sydney and Melbourne house values started to plummet, after stalling for a while? Steady as she goes?

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"Australian house prices remain on track to rise two per cent year-on-year in 2018 and four per cent in 2019"
Hmmmmm

https://bluenotes.anz.com/posts/2018/04/house-prices-still-on-track-for…-

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LOL! crossing fingers! :O

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Yep it was all steady as she goes, then oh actually it's going to be flat for a while then a steady climb. Then, oh actually it's going to be -4 to -6% but she'll be right after that. Now most are saying no less than -15%, some way more (nobody mention Ireland). So, take the banks' forecasts with a huge grain of salt at this time!
"The great Australian property bubble is bursting at the Hayne Royal Commission...It’s no wonder that bank shares are plunging"
https://www.macrobusiness.com.au/2018/11/quietly-one-arvo-the-aussie-pr…

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A couple of the property bulls on here have got to step three, most are on step two, but still a few laggards sitting on the first step waiting for the short bus.

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I am trying to understand the logic on the map.
What is the justification of making Nelson / Tasman the same colour as Waikato?
How come Taranaki is blue and Southland yellow whilst both have 3% of sales shown?

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Seems like it was written by a 10 year old

Very cool. How is the affordability in AKl "very cool" ???

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