Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Westpac sees rekindled house price inflation of 7%

By Jenny Ruth

May 22 (BusinessDesk) - Westpac is expecting house price inflation to take off again thanks to the government’s decision to scrap plans for a capital gains tax and falling mortgage rates.

That puts paid to another cut in the official cash rate.

Chief economist Dominick Stephens says he’s expecting house price inflation nationally will jump from 1.3 percent to more than 7 percent during the next year or so.

“That should spur consumer spending and remove the need for a further OCR reduction from the Reserve Bank,” Stephens says in his bank’s latest set of economic forecasts.

Westpac’s advertised “special” two-year fixed rate is currently 3.95 percent, down from about 4.5 percent a year ago.

Stephens says two-year mortgages have dropped 40 points since March while five-year rates have dropped by double that to a record low at 4.6 percent.

Two years is the most popular period to fix mortgages, with loans due to come off their fixed terms within two years accounting for 32.4 percent of all fixed mortgages and 19 percent of all mortgages in March.

That reflected the Reserve Bank firstly foreshadowing an OCR cut in late March and then delivering that cut earlier this month.

“History shows that interest rates have a powerful impact on the housing market and the fall in mortgage rates over the last few months is the most substantial move that we’ve seen in some time,” Westpac’s economists say.

But a 7 percent increase in house prices should be kept in perspective because that’s modest compared to previous upswings, they say.

“There are still policy-related headwinds for the housing market, such as the foreign buyer ban and the ringfencing of losses on rental properties,” they say.

“And we expect that the differences in regional housing markets will persist for a while longer. Auckland prices could go from falling to slightly rising while prices elsewhere may accelerate slightly.”

The latest Real Estate Institute house price index for Auckland was down 4.4 percent in April from a year earlier while the index - excluding Auckland - eased to a 6.7 percent annual increase from 7.2 percent in March.

Westpac is assuming that there has been an upswing in net migration, boosting population growth, but acknowledges the new methodology for collating migration changes is subject to large revisions.

The new methodology also suggests net migration was lower in the past than previously believed, meaning that there’s less of a gap between demand for housing and the building of new dwellings.

“The upgraded outlook for net migration gives more support to our view that housing construction is set to take another leg higher this year,” Westpac says.

“Growth has been harder to achieve in recent times, now that building activity has reached a relatively high share of GDP and capacity constraints are an issue,” it says.

“Nevertheless, there has been fresh momentum in building consents in recent months, particularly in Auckland, which has reached new multi-decade highs. That points to a significant amount of work in the pipeline for the next year or so.

“We think that this year will prove to be something of a last hurrah for growth in homebuilding as activity is now reaching the levels needed to meet population growth and address the shortage of housing that had accumulated in past years.”


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Mining: OceanaGold Announces Receipt Of WKP Mining Permit

MELBOURNE, Australia, Aug. 6, 2020 /CNW/ - OceanaGold Corporation (TSX: OGC) (ASX: OGC) (the 'Company') is pleased to announce it has received the mining permit for Wharekirauponga ('WKP') on the North Island of New Zealand. ... More>>

ALSO:

Economy: COVID-19 Lockdown Has Widespread Effects On Labour Market

In the June 2020 quarter, the seasonally adjusted unemployment rate fell to 4.0 percent, down from 4.2 percent last quarter, while underutilisation rose, Stats NZ said today. More>>

ALSO:

NZ Post: New Research By NZ Post Shows Online Shopping Grew 105% In Alert Level 3

New research by NZ Post into how the COVID-19 response has impacted the way Kiwis shop online, shows online shopping increased 105%* when the country moved into Alert Level 3, and may have changed the way Kiwis shop permanently. Online spend peaked ... More>>

ALSO:

Banking: Westpac NZ Lowers Merchant Fees For Small Businesses

Westpac NZ is rolling out a new merchant fee pricing structure that will lead to cost savings for more than 10,000 small and medium Kiwi businesses, and could make contactless transactions more widely available for customers. On 1 September, most ... More>>

REINZ: Million Dollar Plus Property Sales Increase 11.7% Nationally

The number of properties sold around the country for one million dollars or more during the first half (H1) of 2020 increased by 11.7% compared to H1 2019, with 5,426 million-dollar plus properties sold (up from 4,858 in H1 2019) according to the Real ... More>>

Waste: Government To Regulate Plastic Packaging, Tyres, E-Waste

The Government is stepping up action to deal with environmentally harmful products – including plastic packaging, tyres and e-waste – before they become waste. As part of the wider plan to reduce the amount of rubbish ending up in landfills, ... More>>

ALSO:


Antarctica NZ: Ice-Olation

Antarctica New Zealand is gearing up for a much reduced season on the ice this year and a very different deployment to normal! Before they head to one of the remotest places on the planet, all personnel flying south with the New Zealand programme will ... More>>

ALSO:

QV Valuations: July House Price Index Illustrates Market Resilience

According to the July 2020 QV House Price Index (HPI) results out today , property values recorded a marginal increase, up 0.2% over the month. This is somewhat of a turnaround from June, after the national index edged 0.2% lower. More>>

ALSO:

Property: Queenstown Rents Experience Biggest Drop In Seven Years

Rental prices in the Queenstown-Lakes district saw the biggest annual percentage drop in seven years after falling 28 per cent on June last year, according to the latest Trade Me Rental Price Index. Trade Me Property spokesperson Aaron Clancy said ... More>>

Seismology: The Quiet Earth

As many daily activities came to a halt during lockdown, the Earth itself became quiet, probably quieter than it has been since humans developed the technology to listen in. Seismologists have analysed datasets from more than 300 international ... More>>

RNZ: James Shaw Says Kiwibank, Not Ministers Should Decide On Investors

Climate Change Minister James Shaw says Kiwibank's decision to stop doing business with companies dealing in fossil fuels is the right one. More>>

ALSO:

FMA: Kiwis Confident Financial Markets Will Recover From COVID-19, Plan To Increase Investments

Despite the majority (60%) of investors experiencing losses as a result of COVID-19, the outlook on investing remains positive, according to a Financial Markets Authority (FMA) survey. Most Kiwis (71%) were optimistic that the pandemic will pass eventually ... More>>

FIRST Union: Warehouse Using Covid For Cover As Extensive Restructure Makes Everyone Worse Off

(FIRST Union comments on The Warehouse consultation and proposed restructure) 'Unfortunately the Warehouse have done the disappointing thing and used Covid-19 to justify a bunch of operational business decisions that will leave hundreds of workers without jobs ... More>>

ALSO: