Article in National Business Review (NBR) exploring the foreign house buyer ban, Overseas Investment Act
All regions showed a drop in affordability over the year.
The Labour Coalition government’s moves to ban foreigners from buying existing houses will not move the market much, a Massey University professor says.
Massey’s school of economics and finance associate professor Graham Squires says while changes to the Overseas Investment Act are a politically sensitive issue, they will play a part but not a predominant part in how the property market is affected.
“We need to look at international flows of money but also hold caution because it is not the whole picture.
“Overseas demand and investment will have some impact on the market but the degree of that impact is difficult to measure and discuss politically. It is for the policymakers to wrestle with.”
Professor Squires’ comments come after the university’s latest Home Affordability Report shows a drop in house prices at the end of last year was just a blip in the continuing saga of price escalations. Median house prices rose across the country last year.
“It is interesting to see the fall in house prices in many regions last quarter hasn’t continued,” Professor Squires says.
“All the past and current data indicate the dip in prices was just a blip, and the longer term trend is decreasing affordability.
“We’d argue this trend – rising house prices and houses becoming more unaffordable – is actually business as usual.
Professor Squires says while housing markets can fall off the cliff quite suddenly and pundits can never say never about when there will be a downturn, “the talking down of the market and cooling of the market has not followed through.”
Covering the period from September to November 2017, the report shows median house prices grew in the most recent quarter every region except Central Otago Lakes.
All regions showed a drop in affordability over the past year and only Hawke’s Bay and Nelson/Marlborough showed small improvements over the most recent quarter.
The biggest declines in affordability this quarter were in Taranaki at 9.8% and Wellington at 8.6%
Wellington has the biggest quarterly median house price increase at $48,000.
The only drop in the regions during this period was in Central Otago Lakes where the median house price dropped by $3500.
“However, this small drop in price will not bring much relief to those looking to buy a house in the region,” Prof Squires says.
“Central Otago Lakes, which includes Queenstown, is still the most unaffordable region in New Zealand. It’s 69% less affordable than the rest of the country and the median house price there is now 15 times annual wages.”
Rising house prices have continued to impact Auckland’s affordability; the country’s largest city is now 53% less affordable than the rest of the country, and the median house price is 13.5 times annual wages in the city.
Southland and Manawatū/Whanganui remain New Zealand’s most affordable regions, although they experienced declines in affordability over both the quarterly and annual time periods.