What’s next for the property market in 2020?

As 2019 draws to a close, we can confidently say it has been an interesting year for the property market.

While some regions (take a bow, Dunedin) have powered ahead, others (looking at you, Auckland) have had to shake off something of a slump. A ban on foreign buyers and tighter credit criteria at the banks have been offset by low interest rates. And all signs point to a strong 12 months ahead…

Taking stock of 2019

QV data showed 2019 ending with momentum building in the property market.

Auckland’s average value was down 1.2 per cent for the year but prices lifted by 1.3 per cent in the November quarter.

Hamilton ticked off the year with prices 5.5 per cent up on 2018, Tauranga leapt up 6.5 per cent, Wellington’s values increased by 7.3 per cent – and Dunedin had the fastest growth of all the major centres, up 17.1 per cent year-on-year.

Even Christchurch, where prices have been relatively static for a long period of time, recorded a 1.9 per cent increase in values, according to QV.

Kelvin Davidson, a senior economist at CoreLogic, said capital gains across the main centres had been solid through 2019.

“2019 has been another intriguing year for the property market, with capital gains tax ruled out, tax ring-fencing brought in, KiwiBuild restructured, mortgage rate wars frequent, and foreign buyers barred. Amongst all of that, the market itself has kept ticking along, and will have a head of steam building into 2020.”

Provincial centres had also felt the heat. Gisborne’s values rose by almost 4 per cent in November alone and Invercargill’s by 5.8 per cent.

So, what’s in store for the next 12 months?

Economists expect the strength to continue through 2020.

“We see a ‘window of opportunity’ for at least the first half of next year, where credit conditions should be favourable, and property market activity levels rising, along with further growth in prices,” Davidson said.

“Next year, we’ve also got the general election to factor in – unfortunately, they tend to create uncertainty for property. That said, a more positive impact on the economy (and hence property) could well start to come through via the Government’s recent announcement that they intend to borrow more money to bring forward a number of large infrastructure projects.”

Westpac’s economists have already predicted that house price inflation could hit 7 per cent in 2020, while the ASB’s economics team is also predicting strong growth – though slightly more muted.

“We continue to expect nation-wide house price inflation to pick up to 5 per cent to 6 per cent year-on-year by around the middle of next year,” they said in a recent update.

“Historically, New Zealand house prices cycles have been relatively sensitive to interest rates, and we expect recent sharp falls in mortgage rates to deliver a mini up-cycle in prices over the next year or so. Still-strong population and labour income growth will add support.”

Having said that, ASB economists warned anyone expecting a return to the headiest days of the recent boom that they could be disappointed (or relieved, depending on your perspective).

“Even though mortgage rates are clearly the lowest they’ve ever been, there are some good reasons not to expect a good old-fashioned housing boom of yore.

“First, housing policies targeting investor demand are acting as handbrakes on those parts of the market that previously featured a large investor component, like Auckland and Queenstown. We expect these regions to underperform the national average.

“Second, broader economic activity and population growth have slowed a little and are expected to slow further. Finally, there are signs housing supply is ramping up in some areas. From late 2020, we expect the housing upswing to top out as this additional supply gradually reduces the national housing shortage.”

Whatever the future holds, keep us in mind. We look forward to hearing from you in the new year and beyond.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.