Review of the year and where to from here?

21 December 2016
Well, what an extraordinary year this has been. Who, twelve months ago, would have predicted the changes that we’ve seen at home and abroad. In the UK, the Brexit vote went the way of leaving the European Union, America has voted to make Donald Trump their next President in January and John Key resigned as NZ’s Prime Minister, making the way for new leadership of the country. We have also seen changes to rule in many other countries, and where future diplomatic and economic relations head is anyone’s guess.
 
This was a year where the Reserve Bank reduced the Official Cash Rate to its lowest ever level and signalled an intent to keep interest rates down for as long as possible, while our currency remained strong on the world market. In fact, reports from a number of lenders all lead to an expectation that New Zealand’s healthy economic growth will continue for the foreseeable future, with business and consumer confidence remaining high. This may have been helped by the continuing lift in house values throughout the regions. The Reserve Bank introduced restrictions on Auckland buyers to combat unsustainable price increases which led to the average sale price going over $1,000,000. They also introduced Loan to Value restrictions requiring 40% equity for those with borrowing secured by rental properties. This has affected a lot of serious investors, but also those who may only have one or two properties in addition to their own home. Indications from economists are that this may be the first of a number of initiatives designed to slow down the housing market. However, what the slow-down in the Auckland market has led to is an increase in interest in provincial NZ. 
 
Figures from QV show that values of properties have increased in the Bay of Plenty by just under 30% over the last 12 months, and a lack of housing stock means strong competition for buyers, leading to increased prices. It is unlikely that the expected lift in Fixed Interest rates being driven by increased costs to funds being purchased by banks, will slow down the enquiry of first home buyers, who have seen their rental costs increase due to the basic laws of supply and demand favouring landlords. More people utilising their Kiwisaver funds and getting guarantees for borrowing from parents who have more equity available in their homes, has definitely helped those wishing to obtain loans to get a foot on the housing ladder, even with the banks tightening their policies.
 
Significant earthquakes in Kaikoura and Wellington (With decent shakes throughout the whole country) sent a tremor through the Insurance industry, with the insurability of property becoming a major issue. Many lenders and solicitors now require confirmation of house insurance prior to contracts being declared unconditional, and there is also a lot more concern over contaminated properties with many contracts stipulating a need for Meth tests on homes.
 
So, as we reach the end of 2016 we’re left with a number of questions. Will house prices continue to climb? Will the bubble burst? What will the world’s future look like? We’ll just have to wait and see, but to quote one commentator, “influencing factors are strong for growth to continue throughout 2017”. 
 
As this is our last O’Hagan’s opinion for the year, we’d like to take this opportunity to thank you for reading our articles, and would like to wish everybody a happy and prosperous new year. 
 
 
 

Published In Whakatane Beacon

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John White - who has written 90 posts

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