House prices in New Zealand and Australia are likely to slow down or decline in 2016 due to low affordability, exposure to US rate hikes and prudential regulations, according to global ratings agency Fitch Ratings.
Fitch forecasts the pace of house-price growth to experience a sharp slow-down in the two countries,
The pace of house-price growth should decelerate particularly sharply in Australia and New Zealand this year, to 4% in New Zealand and to 2% in Australia.
Although the report says a supply shortage will continue to drive growth in Auckland, it will be offset by recent restrictions on low-deposit lending by the central bank and rising unaffordability for owner occupiers.
In Australia, this is down from an average of 8% annual growth in 2013-2015 across the eight capital cities, according to CoreLogic RP data.
But Fitch’s outlook for housing and mortgages is stable despite the slowdown in house-price growth. Low mortgage rates and steady mortgage performance should support markets in Australia and New Zealand.
New Zealand was also described as the most expensive country in the world to buy property in Fitch’s global housing and mortgage outlook report for 2016 and rates New Zealand's houses as the priciest compared to incomes.
According to QV Valuations, overall the nationwide average showed residential property values increased 14.2% or $69,472 during 2015 from $488,674 in December 2014 to $558,146 in December 2015.
Home values in the Auckland region increased 22.5% or $171,406 from $761,858 at December 2014 to $933,264 at December 2015. They are now 70.8% higher than the previous peak of 2007.
QV National Spokesperson Andrea Rush says, “Massive increases in Auckland home values during the first nine months of 2015, at a rate not seen since the early 1990s, led the Government and the Reserve Bank to announce mid-year that they would introduce measures to curb Auckland investors.
“These huge hikes in home values and pending restrictions on investors saw many look to move or invest outside of the Auckland region for more affordable homes or better rental yields during 2015. This resulted in an increase in activity and demand in previously slow housing markets in upper and central North Island centres including Hamilton, Tauranga, the Waikato District, Hawkes Bay, Whangarei and Rotorua.”
“Following the introduction of the new measures in October and November, the rate of growth in the Auckland market slowed, while values in many other centres including Wellington and Dunedin saw significant value increases in the three months of the year,” says Rush.