10 housing market predictions for the second half of 2019: LVRs, interest rates, home insurance... Which matters to you?

Property data analytics company CoreLogic recently released 10 predictions for the housing market in the second half of 2019.

 

CoreLogic senior property economist Kelvin Davidson said New Zealand’s housing market had been very interesting in 2019, with plenty happening. With July fast approaching, what lies ahead for the market in the second half of the year?

 

Kelvin Davidson

 

Kelvin Davidson made 10 predictions:

 

1. The Reserve Bank of New Zealand may further ease loan-to-value ratio restrictions in November:

 

1) Owner-occupiers: reduce the deposit requirement from 20% to 15%.

 

2) Investors: require commercial banks to limit annual lending to investors whose deposits are below 3 tenths of the purchase price to 10% of total lending, compared with the current 5%.

 

Easing LVR restrictions would release more money into the market, provided lending requirements are not tightened further. However, if LVR restrictions are not eased until November, the impact on the housing market in the second half of the year will be limited.

 

2. Residential sales volumes remain steady

 

Factors pushing residential sales volumes down, such as slower GDP growth, are largely offset by positive factors such as lower mortgage rates.

 

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CoreLogic expects total residential sales in 2019 to reach between 85,000 and 90,000, broadly in line with the average over the past 10 years.

 

3. Average house prices continue rising, but gains remain limited

 

The strongest house price growth will mainly be concentrated in areas where homes are currently relatively affordable. Price growth outside Auckland will outpace Auckland.

 

 

 

4. An interest rate war among commercial banks

 

Banks will compete on interest rates regardless of whether the Reserve Bank of New Zealand cuts the OCR again.

 

5. The foreign buyer ban continues to affect the market

 

The foreign buyer ban will continue to affect the Auckland and Queenstown housing markets.

 

Data for the first quarter of 2019 shows that people without New Zealand passports or residence visas sold more properties than they bought. Second-quarter data will be released on 26 July.

 

 

6. More homeowners use the subdued market to sell and upgrade

 

More homeowners may take advantage of the subdued market to buy larger, newer or better-located properties.

 

7. Rental yields continue to rise

 

Rents continue to grow steadily at around 5% a year, outpacing house prices — good news for investors.

 

8. Growth in building consent numbers slows

 

Labour and building material constraints will cause the number of building consents issued in Auckland to level off, although it will remain high.

 

9. Home insurance problems worsen

 

Wellington has seen premiums rise and some properties refused insurance. This will affect property values, particularly apartment values.

 

10. The Reserve Bank of New Zealand raises banks’ capital requirements

 

The Reserve Bank of New Zealand may decide in November this year to increase banks’ capital requirements. There is widespread concern in the banking sector that this policy will lead to higher lending rates, lower deposit rates and slower economic growth.