According to Kelvin Davidson, CoreLogic Senior Property Economist: “There doesn’t seem to be anything too major in the pipeline that would throw this steadiness off course, but there are some important milestones to watch out for in the final few months of the year – including another potential cut to the official cash rate (OCR), a possible loosening of the loan to value ratio (LVR) speed limits, and the final decision on bank capital requirements.”

In the macro economy, the news remains supportive for the property market. GDP growth is set to stay above 2% annually, full-time employment is still rising, and the unemployment rate is very low. Net migration is still high too, which is another support for property demand. In addition, lending conditions have, if anything, eased a bit in the past few months – most importantly, the banks have become less strict on their internal serviceability testing.

The CoreLogic Buyer Classification series shows that mortgaged multiple property owners (MPOs or investors) have bounced back in terms of their share of purchases over the past 2-3 months – in turn, smaller players (‘mums and dads’) have played a key role in this rebound. Davidson said: “The scrapping of the capital gains tax proposals seems to have bolstered investors’ confidence, while the low and falling returns on other assets (e.g. term deposits) will have also played a role. We may now be seeing the purple patch for first home buyers become a purple patch for investors – although they don’t have it all their own way. First home buyers still have a strong presence in many parts of the country.”

In terms of property values, the national average now stands at more than $691,000, up by 2.4% from the same time a year ago. Amongst the main centres, Dunedin is still recording strong increases (12.8% in the year to September), but Auckland and Christchurch are softer, and Wellington City has also cooled off in the past few months. Values in regional markets are generally still rising steadily, although the pace of growth has peaked.
Overall, it appears that market activity levels have found a floor and sales volumes should start to improve over the coming months and into 2020. Against that backdrop, property value growth across NZ as a whole is likely to stay slow and steady. 

Davidson concluded by noting that “One key ‘unknown’ for 2020 and the following years is the RBNZ’s decision around banks needing to hold extra capital on their balance sheets. A final decision is due by early December, with the effect on mortgage availability and/or interest rates tricky to predict. Many borrowers have only ever known falling rates, so any sort of rise as a result of the potential new rules could take a bit to get used to, and may be a challenge for some households’ finances.”