There are a number of forces at work in the property market at the moment, trying to pull it this way and that, but for now it seems fairly balanced. On the one hand we have an improving labour market, which is looking to push up house prices throughout the country. Following that we also have an increasing number of immigrants arriving, adding to our housing shortage.
However, on the other hand we aren’t seeing a significant amount of activity in the real estate market at the moment, which is preventing house prices from increasing dramatically. Rising interest rates are playing their part too. We’re also seeing an increasing number of residential building consents, which could prevent our housing shortage from becoming an even bigger issue.
In the real estate market we’re seeing the number of house sales continue to slide, with six of the last eight months reporting declines, meaning we’re currently sitting at 17 percent fewer house sales than October 2013.
Annual house price inflation is still looking strong, but has dropped marginally in the last quarter to sit 1 percent lower than its recent peak. Housing affordability has taken a bit of a hit recently with mortgage rates continuing to rise, but the damage has been limited with a favourable two-year fixed deal.
Looking now to the big picture, and that economic momentum that’s been steamrolling forward recently has also started showing signs of slowing. The growth of our annual GDP is estimated to slow from around 4 percent in mid-2014 to around 3 percent in 2015. The construction boom is doing its part to keep us heading up, but those rising interest rates and the high NZD are taking their toll.