Is the property market heading for a serious correction? I talked to the editor of the NZ Property Investor Magazine to get her thoughts on recent media commentary. It seems when you look at house prices and income in NZ from a very broad perspective things seem unbalanced.
However I think if we look at things a bit closer things seem more balanced.
Two speed housing market
Our country is a bit unique in that we have Auckland with a fairly unique economy compared to most of NZ. The debt to income ratio which a lot of commentators look at, is a lot more reasonable for most NZer’s. Something which we forget living in Auckland is that most kiwis live in a non Auckland town.
Supply
Many countries that experienced a strong down turn also had a large number of houses being built. As a country we have constraints on the supply side. If you have tried building lately you would have noticed that, materials, architects, structural engineers are not the cheapest. This is mainly due to the fact that the supply of these services are limited.
The Reserve Bank of New Zealand
Over the past decade the RBNZ has done its bit to add layers of padding to the market. As painful as deposit restrictions are on first home buyers and investors, they act as a safety net when approaching a downturn. The RBNZ can now safely ease the downturn by slowly releasing some of the brakes. I feel that Auckland in particular has leaned more towards a gentle flattening over the past three years. Historically usually at this juncture we sometimes see an outburst of optimism.
