Westpac Institutional Bank Team
Westpac Institutional Bank
The Auckland housing market is now suffering a hangover from its recent excesses, food price inflation has proven very low, and world dairy prices are dropping again. This reinforces our view that the Reserve Bank will need to reduce the OCR further than the market is currently expecting.
The message from the REINZ’s October housing report was decisive. Nationwide house sales fell by 7%, the time taken to sell a house lengthened, and the house price index fell 4% – the biggest single-month decline on record going back to 1992. The weakness was especially concentrated in Auckland, with sales down 15% and prices down almost 5% in just one month.
This confirms the idea that some of the recent froth in the Auckland market was driven by investors getting in ahead of the new regulations. From 1 October, all investment properties bought and sold within two years will be subject to income tax on the capital gain. (Previously, the tax hinged on an assessment of the buyer’s intentions, a test which still applies for investment properties sold after two years.) In addition, overseas buyers are now required to register for tax and open a bank account in New Zealand.
At this stage it’s not clear whether these measures will have a sustained dampening effect on the housing market, or to what extent they simply brought purchases forward. But either way, it appears that investors have done their dash for now, and the Auckland housing market is likely to suffer the resulting hangover for at least a few more months.
All information contained on this website is given in good faith and has been derived from sources believed to be accurate. However, the information is selective and neither Westpac nor any other company in the Westpac Group have verified the information, which may not be complete or accurate for your purposes. Those companies make no representation or warranty of any kind as to the accuracy or completeness of the information. It is general information only and should not be considered as a comprehensive statement on any matter and should not be relied upon as such. Neither Westpac nor any other company in the Westpac Group nor any of their directors, employees and associates guarantees the security of this website, gives any warranty of reliability or accuracy nor accepts any responsibility arising in any other way including by reason of negligence for, errors in, or omissions from, the information on this website and does not accept any liability for any loss or damage, however caused, as a result of any person relying on any information on the website or being unable to access this website. This disclaimer is subject to any applicable contrary provisions of the Australian Securities and Investments Commission Act and Trade Practices Act.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.