The effects of one of the wettest July’s on record and political uncertainty around what’s shaping up to be an interesting election certainly had an impact on Auckland’s real estate market in July. Real Institute of New Zealand (REINZ) data shows that the number of properties sold in Auckland fell by 30.6 percent when compared to the same time last year.
These numbers can’t all be attributed to the winter and the election. The REINZ says that despite a healthy number of buyers wanting to purchase property, access to finance is becoming more difficult as banks tighten their lending criteria. Add to that the effect of LVR restrictions, which are acting as “an intimidating barrier” to buying a home, especially in the first home market.
Auckland’s median house price dropped slightly year-on-year in July, from $840,000 to $830,000. However, the consistent housing shortage in the city, together with the continually increasing population, means that Auckland is likely to be protected from more significant price decreases in the short term.
The REINZ is however concerned about the LVR restrictions. While the restrictions initially did the job of slowing the market, they are now acting as a ‘handbrake’, so the REINZ is calling for LVRs to be reviewed for the first home buyer market.
Vendors needn’t be alarmed by these figures, especially given the time of year we’re in, but many sellers still have price expectations in line with an escalating market. Buyers are feeling the opposite, so vendors need to be realistic about price.
Each time a nationwide election comes around, commentators talk about the effect the impending vote has on the housing market. The months leading up to our September election cycle are of course always in winter, a traditionally damper season in the property cycle, and as we’ve already explained, this year LVR restrictions and a greater reluctance to lend by banks are all playing a role in this slightly softer market. So, how strong a role does an election play in the mix?
Valocity analysed sales data from the 2014 election that showed that Auckland sales volumes declined between the election announcement date in March 2014 and the election itself in September. Sales volumes then recovered immediately after the election. In fact, there was a surge in activity, which continued into the next quarter, suggesting that a stable Government has a direct bearing on market confidence.
What’s interesting about this election is the uncertainty. In the last election, the National Party were never really in threat from any of the other parties, but with changes in leadership of not only the National Party, but Labour and the Greens, and more general disgruntlement from New Zealanders, there’s an increased chance of a new Government. Those who were active in the housing market in the last election will have remembered the almost immediate jump once the Government was re-elected and people believed things were back to normal. And that meant policies around the housing market and immigration remained fairly consistent.
Those two issues are bones of contention across the country, and especially in Auckland, as New Zealand’s largest housing market. If a new Government wants to look at these issues, the return to normal market activity could be delayed after this election.
As we lead up to the election, people are querying just how much an election has an effect on the housing market before it takes place, but this year, the real answer will come after the result is decided. A change of Government is likely to create different market conditions, but what that will look like is still unknown until the end of September.