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Market Commentary May 2017
Does anything affect decision making more than confusion? Our observation is that this is the malaise that is currently undermining decision making dynamics that have driven the market in recent years and is the reason for its current sluggishness. Since Christmas there have been many reports and headlines indicating a slowing, particularly with regard to sale volumes. There’s no doubt that banks have taken a new very cautious approach to lending – this as well as the more stringent L.V.R. (Loan to Value Ratio) seem to have affected investment buying. In central Auckland however we have little or no indication of prices softening, just buyer attitude becoming more cautious. Add an extended summer and Easter/school holiday period with three short weeks and its not hard to understand why momentum has not built as in other years. Put the overlay of macro issues like the Trump effect, North Korean sabre rattling and bombing in Syria and you can understand why there has been something of a confused wait and see attitude.
In the meantime there are many factors that have not changed, consequently house prices continue to firm in central Auckland. These factors include record immigration, rising land value and building cost, an overall shortage of homes and a shortage of labour to build them. Given the issues around compliance and consent, there will be no quick fix to the supply side of the ledger any time soon. Given the likes of the macro issues described above its no wonder the rest of the world is becoming increasingly curious about the lifestyle we enjoy. Record tourist numbers are testament to this. Of particular interest is the 25% increase in tourist numbers from America.
Driving around Auckland leaves you aghast at the investment that is going into the city – its huge. We are undoubtedly becoming one of the most desirable places to live on earth and as a consequence developing into a big city. This won’t change. Big picture – don’t be confused. If the locals can’t see it, the rest of the world can and they want to live here. In short the demand for a piece of Auckland/New Zealand is here to stay. We have too much going for us. Yes there are many things that can slow the market in the short term like election year, the use of financial tools and a media that often creates confusion. Don’t expect a crash however, our view is to the contrary and has the weight of world opinion on our side. In short, its actually a great time to buy.