New Zealand’s property market is stuck in a hiatus, trapped between strong migration and price expectations on one hand and the introduction of LVR restrictions and an impending hike in the official cash rate on the other, ANZ’s economists say.
In its latest monthly Property Focus report, they say that the new LVR rules are affecting turnover. Mortgage approvals are well done on last year. Affordability is still stretched by rising prices, and will be put under further pressure when the looming mortgage rate rises kick in.
Of the report’s 10 gauges, which indicate where prices might go, only one – migration – is pointing solely up.
Mortgage repayments are increasing faster than incomes and putting pressure on serviceability, a turning point may have been reached in housing supply, and rents still aren’t moving much, all of which the report says could lead to prices staying the same or falling.
Although mortgage approvals have taken a hit since the LVR restrictions were introduced, the rate of credit growth still high, the report says. “For a third month in a row, household mortgage lending increased 0.5%, lifting the annual rate of increase to a five-year high of 6%. That’s above income growth and doesn’t look sustainable, hence it looks like LVR restrictions will be around for a while.”
The economists say any impact on prices from the LVR rules is still likely to be months away.
On balance, the report says the market is “meaty”. “All revved up with no place to go.”