Articles by The Professional Trustee Team

How Far Can Auckland House Prices Go?

Tuesday, June 16, 2015

The headlines read “House prices out of control”, “House prices can’t keep going up”, “House prices are going to fall”.  But are the headlines right? How far can house prices continue to climb?  

  • Demand outweighed supply. Housing shortage pre Global Financial Crises (GFC) existed.
  • Money dried up for developers.
  • Builders went to Roo land.
  • Housing doesn’t get built.
  • Everyone breathe a sigh of relief.  GFC over.
  • Demand still outstrips supply.  
  • Immigration of the wealthy kind coming through our doors.
  • Credit at historical lows.
  • Demand-supply imbalance now at all-time high.
  • Prices racing to the top of Mt Everest.

Entry Govt and Auckland Council.  Formation of a Plan is needed.  Auckland Unitary Plan will remedy Auckland housing supply issue.  Problems abound this Plan.  RMA needs an overall.  Consents can’t be issued quick enough.  Council processes requiring extra work and additional payment of fees horrendous.  Not a builder nor tradie to be found.  Labour costs consequently high.  Material costs expensive.  Someone forgot to tell Council infrastructure (pipes and services) would need paying for and implementing into the new proposed housing areas.  What about land prices.  Land costs still expensive and climbing.

Entry Reserve Bank.  Maintaining financial stability of the monetary system is our mandate.  New LVR and bank capital funding requirements to the fore.    Surely these macro policies will work to dampen demand and cool the prices.  Someone forgot to tell the Governor most existing investors have a 30% equity hold.

Entry Govt Bright Line Test.  1 October 2015 is D-Day. All capital gains made from property bought and sold within 2 years (exceptions home, bach, inherited property, property transferred re dissolution) will be taxed.  Intention is now inferred, rebuttal is your right. It’s the immigrants’ and speculators’ fault.  Wasn't 17% the number of houses bought and sold within 2 years?  Did someone check all these would be caught?  Govt validated the necessity and consequences of enactment right?  

Entry Reserve Bank – Again.  Dollar is high.  Fonterra is low.  Economy is sluggish.  What shall we do.  Let’s cut the OCR Reserve Bank says.  Someone forgot cheap credit fuels property fires.

Enter Govt – Again.  500 hectares up for grabs for new housing.  Someone forgot to consult Iwi.  Surely this argument will go away?

End Result.  What a surprise!  Good news for those already on the ladder for the next 5 years – supply problems can’t be remedied quickly, measures taken won’t show desired results swiftly, prices keep rising – rapidly.