Current market realities
Kelvin Davidson (pictured above), chief property economist at CoreLogic, shared insights from field participants about the current state of New Zealand’s housing market.
“The economy is hurting,” Davidson said, pointing to the modest 0.2% GDP growth in Q1 as a sign of broader economic challenges affecting the property sector.
Regulatory changes and market response
Recent adjustments in affordability and serviceability rules by some banks have made property deals slightly more feasible, despite ongoing high mortgage rates.
“Property buyers remain keen, but getting deals done is difficult,” Davidson said, highlighting the persistence of buyers in the market amid financial constraints.
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Debt-to-income caps: A balanced view
The introduction of debt-to-income (DTI) restrictions has been met with mixed reactions. While some view DTI caps as potentially harmful, others believe they could restore affordability to the housing market.
“Far from being ‘bad policy’, the balance of opinion is that debt to income restrictions are worth a try,” Davidson said.
Regional sentiments and early adjustments
In regional areas, concerns about DTI caps are less pronounced due to generally lower property values relative to incomes. Additionally, early financial adjustments by homeowners, such as downsizing or relocating, appear to be mitigating formal mortgage stress.
Brightline test and investor behaviour
The upcoming changes to the Brightline test, which could affect capital gains tax implications, are expected to influence selling activities more than buying.
“The shorter Brightline test from 1st July is arguably going to drive more selling activity than buying,” Davidson said, indicating potential shifts in investor strategies.
Investor challenges and rate speculations
Investors face upcoming challenges with tax bills, particularly as deductions have been minimised. There is also ongoing speculation about the levels of interest rates that would re-attract investors to the market.
“Many people wondered about the level of interest rates that would bring investors fully back to the market, and where mortgage rates will generally settle in the long term,” Davidson said, suggesting that a typical long-term mortgage rate might stabilise around 5%-5.5%.
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