Tenants wanting to own their own homes are pushing house prices up and rents down, Westpac says.
REINZ data released yesterday showed that Auckland house prices are rising at almost 20% a year. But rent increases are still in the single digits according to Trade Me– and the Ministry of Business, Innovation and Employment says they actually fell in the year to May.
Westpac chief economist Dominick Stephens said that proved that it was not a supply shortage that was pushing prices up.
He said owners were holding on to their properties with the expectation of capital gain, which was driving low turnover.
But buyers and investors are keen to purchase to get a slice of those capital gains.
Stephens said there were three reasons why capital gain was widely expected in New Zealand: “People believe that Auckland’s population and incomes will grow rapidly while insufficient houses will be permitted, creating a future sharp increase in rents that restores balance. People believe today’s low interest rates will last forever, thus allowing future generations to pay more for houses despite low rental yields. The expectation is irrational.”
He said only a change in buyer expectations, not large-scale building projects, would make a difference.