The Real Estate Institute of New Zealand (REINZ) has released its house price index for November, which posted a small $500 (0.1%) drop in the median NZ house price to $459,500, with prices now down a significant 5.1% from the all-time high of $484,650 set in September 2015.
On a seasonally adjusted basis, sales volumes fell 2.6% from October to November, but were up 8.5% year-on-year.
In the bubble epicentre of Auckland, prices rose by 2.2% over the month and by 14.2% year-on-year – although it represented a sharp slowing from the annual price growth of 25.4% recorded in September:
Sales volumes in the greater Auckland region were down by 1.3% compared to October and were down 14.7% year-on-year:
In its commentary on the results, the REINZ noted that new tax rules and residential requirements, which came into force on October 1, have cooled demand, as have the more recent investor mortgage restrictions:
“The Auckland market continues to adjust to the new IRD bank account rules and the new LVR rules. As expected, agents and buyers are taking time to adjust to this new environment, thus the decline in auction clearance rates is not a surprise”…
Specifically, these new IRD rules:
- requires non-residents and New Zealanders buying and selling any property other than their main home to provide a New Zealand IRD [tax file] number;
- requires non-residents to have a New Zealand bank account to get a New Zealand IRD number; and
- introduces a new “bright line” test to tax gains from residential property sold within two years of purchase, unless it’s the seller’s main home, inherited or transferred in a relationship property settlement.
From 1 November, the RBNZ’s new rules on Auckland residential investor loans also came in to force requiring the bulk of these loans to have a loan-to-value ratio (LVR) of no more than 70%. Banks are also now required to put residential property investment loans in a separate asset class and hold more capital against them.
Based on these combined new measures, it is very likely that the Auckland housing market will soon peak.
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