Mortgage rates may be at a historic low, but according to ASB economists, this doesn’t necessarily mean full steam ahead for the property market.
Senior Economist Mike Jones says that although the “rock-bottom” mortgage rates will significantly boost the market, policies targeting investor demand such as the foreign buyer ban are also likely to have a restraining influence. The restrictions on non-resident house buying came into effect in October 2018 and are starting to become visible – especially in Auckland and the Queenstown Lakes, where the share of homebuyers without New Zealand citizenship or residency fell from 2.2% in the March 2018 quarter to 0.6% in March 2019.
“Restrictions on non-resident house buying are biting, particularly in Auckland and Queenstown Lakes,” Jones stated. “These regions are underperforming in the broader and increasingly patchy housing market. This supports our view for only a modest pick-up in house price inflation over the second half of the year, despite plunging mortgage rates.”
ASB data shows that these areas had previously held a comparatively large chunk of the non-resident buyer market, and have unsurprisingly experienced the largest falls. This is also true for the Auckland data split by suburbs.
“It’s probably no coincidence that the areas where foreign buyers were previously the most active have experienced the sharpest slowdowns in property prices,” Jones said.
“Folk have pointed out that the overall level of non-resident buying is fairly low, and this is certainly true. Over 80% of the market comprises transfers by residents. But as our previous research suggests, it is often the marginal buyer that has a disproportionate impact on setting the price – and a clear reduction in non-resident housing market participation over the past year appears to be having an impact on parts of the New Zealand market.”