Does the latest REINZ data reveal impact of policy changes?

by Ksenia Stepanova13 May 2021

The latest REINZ data has offered “limited evidence” on the impact of the government’s housing policy changes, according to Kiwibank senior economist Jeremy Couchman, who noted that house prices have increased further despite sales activity having cooled off.

REINZ’s statistics stated that April 2021 saw the highest number of properties sold within that month in five years - however, Couchman said that there are likely to be “distortions” in the data, and that comparing sales activity annually is “absurd” given last year’s nationwide lockdown and resulting drop in activity.

“Sales were up 420% compared to a year ago, however, seasonally adjusted sales in April cooled almost 6% across New Zealand,” Couchman said.

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“We think it will take a few months to see if recent policy changes, such as the extension of the bright-line test, have had a measurable impact on the market.”

“Like a massive container ship, it can take time to slow the momentum of a runaway housing market,” he continued.

“Moreover, the market is still underpinned by a notable lack of listed property. The median number of days to sell – at 30 days – remains low by historical standards. And with investor activity easing-up, first-home buyers seem happy to fill the void.”

Couchman said he expects to see a cooling in house prices towards the second half of the year, with tightened LVR restrictions, investor taxation changes and new supply all coming into play.

Commenting on the REINZ data, ASB senior economist Mike Jones said it showed “the first real signs of a cooling property market,” with nationwide housing sales showing some “decent falls.”

“It would have been surprising not to see some deceleration,” Jones said.

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“After all, there’s been a lot thrown at the high-flying property market in the past couple of months. LVR restrictions are back on, with restrictions for investors tightened to 60%. The mortgage holiday scheme has come to an end and, on 27 March, interest deductions on residential investment property were removed. The prior downtrend in mortgage interest rates has largely been arrested.”

“Still, we reiterate our view that a hard landing for the housing market is unlikely,” he added.

“Over the next few months we expect housing activity and the pace of price gains to moderate. Our updated forecasts imply house price inflation slowing to ‘just’ 10% year-on-year by the end of 2021. The risk is that the market stays stronger for longer.”

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