Despite rising residential values, uncertainty surrounding the impending Budget has stalled New Zealand’s property market. The ASB barometer of the housing mood indicates buyer confidence is waning, reflected in a longer waiting time for properties to sell. See the following article from Property Wire for more on this.
Residential property values in New Zealand are 6.1% higher than they were a year ago but confidence in the real estate market has weakened, new reports show.
Sales in April were slow and the market it flat and patchy, according to official data from QV Valuations. The national average sale price for the three months to April was $405,235, down from $407,133 in March and $416,074 in February. Nationally, property values are 3.9% below the market peak of late 2007.
QV Valuations spokeswoman Glenda Whitehead said that doubts around the May 20 Budget, as well as possible increases to interest rates, were holding house buyers back.
‘The property market remains relatively subdued as both buyers and sellers carefully consider their positions. There is little urgency, and many people are waiting to see the exact nature of the changes in the Budget before deciding their next move,’ she explained.
‘If confidence returns then we might see an increase in activity during the winter months. However, there is also the likelihood of interest rate rises in the middle of the year which will keep pressure on borrowers,’ she added.
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Whitehead described the market as mixed. In West Auckland, there was still reasonable activity in the $370,000 to $550,000 range, but in Auckland City there appeared to be a lot of cherry picking.
The Budget is expected to change the tax treatment of rental property after the Tax Working Group reported that in 2008, the $200 billion invested in rental housing yielded net rental losses totaling $500 million. It is also expected to include measures to stop property investors offsetting their losses against income and other taxes.
Confidence in the property market in New Zealand has weakened according to ASB’s quarterly survey of sentiment in the housing market which shows a marked drop in the proportion of people expecting house prices to rise over the next 12 months, to a net 35% from 51% three months ago.
Fewer see it as a good time to buy a house, a net 29%, down from 33% in the previous survey. Expectations that interest rates will rise were almost unchanged at a net 59%.
The survey results are in line with recent data showing a slowdown in activity in the market, largely driven by continued uncertainty about the potential for tax advantages for property investment to be removed in the Budget.
The median number of days it takes to sell a property has been edging up since the spring and is now around the long term average. Although the number of fresh listings remains relatively low, the supply looks ample relative to the modest demand, ASB said.
Looking forward, ASB expects the Budget changes to reduce demand for investment properties and therefore lower activity in the housing market.
‘Beyond the ups and downs of 2010 we expect weak house price growth. A positive for house prices is continued population growth at a time when new construction has not kept pace,’ it said.
However, prices do remain quite high compared with incomes and rents, it added and the tax changes were likely to require higher gross rental yields in the future to make the sums add up.
This article has been republished from Property Wire. You can also view this article at Property Wire, an international real estate news site.