Next month’s general election will not only decide the future of the government, but that of the housing market, too. Squirrel’s John Bolton gives his expert opinion on the political factors influencing the state of the NZ housing market.
It’s not unusual for Kiwis to fence-sit in the lead-up to an election, to wait to see which way things are going to go. And that’s exactly what’s happening in the housing market right now.
The Wellington housing market is always wobbly in an election year. It doesn’t respond well to the prospect of a National-led government, because that means big job cuts within the civil service.
ACT has already said it plans to halve the Ministry for Business, Innovation and Employment’s (MBIE) workforce. In number terms, that would mean roughly 3000 job losses.
It makes sense that with this kind of uncertainty, people in the capital are sitting on their hands and waiting it out, until they feel like they’ve got some job security back again, post-election.
But it’s not just Wellington. The rest of New Zealand is watching and waiting too.
Housing market politics
And that’s because, from a property perspective, I don’t think there’s ever been such a stark choice between the two major parties
For investors, in particular, there’s a lot riding on the outcome. And whatever happens on that front will have big implications for the rest of the market, too.
On one hand, if we get another three years of a Labour-Greens coalition, their policies are quite anti-property. It’ll be the end of interest tax deductibility on many investment properties and, potentially, some form of rent control as well.
If that’s the outcome, it’ll likely mean investor demand stays subdued, and would see a continuation of a soft housing market.
By contrast, National and ACT have promised to reinstate interest tax deductibility on rental properties. And there’s also the talk of pulling back on the foreign buyer ban. I’d be extremely disappointed to see the foreign buyer ban dropped. Rich foreigners buying up our best land will price many Kiwis out of owning their own bit of paradise.
If we do end up with a centre-right government, that could light a fire under the housing market as investors and FOMO kick back in. Westpac is forecasting an 8% increase in house prices next year, while the RBNZ is forecasting 9% over two years.
We are already seeing investor confidence slowly returning, in anticipation of National edging out Labour on election day, and considering that higher immigration numbers are driving rents up.
Housing market’s spring thaw
Although there’s not much happening right now, the market is starting to thaw. It feels like there’s been a mindset shift among buyers in recent weeks.
They’re not just waiting and hoping that prices will continue to fall. They’re realising that there are some great deals already to be had, and it’s worth trying to sniff those out.
The fact that people are also starting to really struggle with higher interest rates will have interesting implications for listings and buyers as well. There are more motivated sellers out there now who will be prepared to meet the market.
I wouldn’t call it a hot market, but activity is ramping up. And although we’re probably going to be in a holding pattern pre-election, there’s definitely more activity happening on both the buyers’ and sellers’ side.
John Bolton founded Squirrel in 2008. He is a former General Manager at ANZ, where he was responsible for the bank’s $60bn of retail lending and deposits. He has 10 years of senior banking experience behind him in financial markets, treasury, finance, and strategy, and is a director of Financial Advice New Zealand, the industry body for financial advisers. Check out Squirrel’s website for how Squirrel helps first home buyers, here.