NZ house price growth to 'slow sharply', says credit rating agency Fitch
By Pattrick Smellie
Feb. 17 (BusinessDesk) - The New Zealand housing market is in for a "pronounced and overdue slowdown", with national house price inflation forecast to fall to around 5 percent a year, says one of the world's top three credit rating agencies, Fitch.
"Affordability pressures and tighter regulation" of lending ratios, along with some progress on housing shortages, will drive the change.
Fitch includes the New Zealand prediction in a wider statement, predicting Australia, China and New Zealand - currently the three "hottest" retail estate markets in the Asia-Pacific region at present - are all about to experience a marked slowdown in house price inflation, although it is not forecasting house prices falling across the board.
"Demand for housing in New Zealand remains strong, particularly in Auckland and surrounding areas, but we expect nominal house price growth to slow to 5 percent nationally on affordability pressure and tighter regulation," says the statement, attributed to Fitch senior analyst Dan Martin.
"Measures of relative home price expensiveness have deteriorated more in New Zealand since 2010 than in any other country covered by our report.
"New Zealand also had the largest regional price-growth disparity over the last four years, with a difference of over 80 percentage points between Auckland, where prices increased by some 76.3 percent, and those on the West Coast, which saw prices fall by 5.1 percent over the same period."
The report, which assesses the global market for real estate, says unsustainably pricey housing is common around the world, and that central bank controls, such as the loan-to-valuation ratio restrictions used in New Zealand, "are being overpowered by a fundamental excess demand for home purchases".
"Home purchases in many countries continue to become increasingly expensive relative to household income and rents, driven by the combination of extremely low borrowing costs, readily available credit, steady economic growth and limited housing supply. These conditions look set to remain in place this year," said Andrew Currie, Fitch's structure finance managing director.
Canada and Norway are also singled out with China and Australasia as markets in which runaway house price inflation was likely to "decelerate sharply".
Of the six Asia-Pacific markets Fitch covers, "only Singapore is expected to see house prices fall, with Fitch forecasting prices to drop by a further 4 percent after three consecutive years of decline."
"An influx of new supply, slowing immigration, a soft economy and ongoing measures to cool the property market are likely to continue to dampen sentiment," in Singapore, the report says.