The latest CoreLogic report is suggesting a slowdown in house price increases could be on its way, with analysts pointing to Tauranga as a potential signal after the region saw a 1.5 per cent drop in property values month-on-month.
Despite the short-term drop in Tauranga house prices in February, the region remained one of the most unaffordable in New Zealand.
“In the broader context of 6.7 per cent growth over the last three months it’s too soon to call this a trend,” CoreLogic’s head of research Nick Goodall said.
The region had also seen a 14 per cent growth in house prices compared to the last year.
“Tauranga does stick out when it comes to unaffordability, however, with 43 per cent of the average income required to service a mortgage – the worst of the main centres.”
Prices in the rest of the main centres continue to increase. Nationwide property values also continued to grow over last month, increasing by 2.6 per cent.
Year-on-year, Auckland property values have jumped 13.3 per cent. In Wellington, this value is 16.6 per cent – the highest of the main centres.
In Christchurch, property prices have increased by 10.2 per cent year-on-year, and in Dunedin, by 15.3 per cent.
Goodall said the re-introduction of loan-to-value ratio (LVR) restrictions and the Central Bank’s new remit to also consider “the impact on housing” in its decision-making could be behind a potential slowdown in house price increases.
”While previously the RBNZ [Reserve Bank of New Zealand] Governor, Adrian Orr, has expressed that the bank has always done so, the latest communication is more explicit with regard to actively contributing to the Government’s housing policy objectives, namely reducing investor activity and improving affordability for first home buyers,” Goodall said.
“With the hard line taken by the Government to reduce speculator activity, and now the Reserve Bank having somewhat of a mandate to assist them, the outlook for future property investment looks less certain.
“Although, with the Prime Minister also declaring a desire to protect the wealth in our largest asset class, expectations are for a slowing of growth rather than a reversal.”
From the start of this month, on the Government’s instruction, the Reserve Bank had been instructed to consider “the impact on housing when making monetary and financial policy decisions”. This is in addition to its current remit to maintain price stability by keeping inflation between one to three per cent and supporting “maximum sustainable employment”.
Meanwhile, LVRs, which were lifted in response to the impact of Covid-19, were also reinstated to pre-pandemic levels on Monday. The ratio sets a cap on the percentage of new, higher-risk lending lending banks can offer.
Further restrictions on investors are also coming. From May, they will need to front up with a 40 per cent deposit to get a loan. Currently, that figure for investors is at 30 per cent.
First home buyers need to have 20 per cent saved to get a loan.