Following the publishing of figures by Quotable Value showing Auckland house prices have reduced slightly for the third consecutive month, Affordable Auckland Mayoral candidate Stephen Berry has said that he believes the slow-down to be temporary; a view shared by QV’s Auckland specialist James Wilson.
Wilson believes new limits on loan-to-value ratios introduced by the Reserve Bank in November and the IRD’s “bright-line” test strengthening the definition of an investor for tax purposes, introduced by the Government in October seems to have depressed immediate interest in the Auckland property market while investors take a wait and see approach.
“This is simply a temporary judder bar prompted by investors assessing their position followed by new rules, some of which require foreign non-resident purchasers to obtain an IRD number to buy property in Auckland. With 37,000 IRD numbers issued to foreigners since October 2015 I’d expect to see a resumption of previous market behaviour later this year,” Mr. Berry says.
Mr. Berry says that despite an abrupt halt to price rises occurring since the introduction of the new regulations, there is no reason for this to continue long-term because nothing else has changed in the market environment. “The fundamental distortions in the housing market, which skew participant behaviour toward speculation, have not been altered by the Council or Government.”
“The continued existence of the Rural Urban boundary maintains an artificial shortage of land for residential development which inflates prices beyond what they would normally yield. Slow consent processes and restrictive zoning practises drive up construction costs inside the city. NIMBY busybodies holding up developments that have no legitimate impact on their own property only entrenches their own privileged position. The Council needs to allow a greater variety of residential development throughout the city, while protecting the property rights of existing owners.”
Stephen Berry also believes the temporary lull and new rules for the purchase of property will have unintended consequences for tenants. “Investors who previously sought to make an income from fast capital gains will now seek alternative means of making money from property. I would expect to see many consolidating their current position and seeking to grow their incomes by improving existing homes and increasing levels of rent charged. This should become more pronounced over the next six to twelve months as tenancy agreements are renegotiated.”