The New Zealand property market is painfully undersupplied and it’s all down to population, preference, and policy, according to one expert.
Kiwibank chief economist Jarrod Kerr says there is a shortage of over 100,000 homes, and since New Zealand is posed to continue to attract migrants, the population won’t contract any time soon.
“Supply has not kept pace with demand,” Kerr said. “Demand is still growing, capacity constraints are being hit, and Kiwis need more affordable dwellings. Policy changes, like capital gains tax, will hinder confidence but fundamentals outweigh tweaks to taxes.”
Kiwibank’s economists expect property prices to consolidate, before regaining traction into the mid-2020s – aided by income and population growth.
“Investors are uncertain, and therefore cautious,” Kerr explained. “The government is gearing up to implement policies targeted at speculators. These policies include tightening the bright-line capital gains test, removing the negative gearing tax loophole and banning foreign purchases of existing stock.”
Kerr expects the Reserve Bank to keep interest rates low, however believes that mortgage rates will eventually rise.
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