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ANZ economists don’t believe the recent uptick in house prices will result in a full-blown resurgence, and think that prices will be capped to a degree by affordability constraints and various measures proposed by the new Government.
In their weekly Market Focus publication the economists reiterate their earlier view that a number of opposing forces are likely to see house prices effectively stay ‘on ice’ for the foreseeable future.
“All else being equal, we expect this to be a headwind for consumption growth going forward, although perhaps to a lesser extent than history would suggest, given that the softer housing market has not been driven by a turn in the interest rate cycle, but rather by a more restrictive credit landscape, including macro-prudential policy.
“Nevertheless, with the household saving rate having deteriorated over recent years (to an unsustainable level in our view), weaker house price performance is expected to see households look to rebuild precautionary saving, and this will be a headwind for overall activity growth,” the economists say.
In noting that the housing market has “staged somewhat of a comeback of late, with turnover and house prices accelerating again”, they say that this “bounce” has been large enough that it will reinforce in the minds of Reserve Bank officials that it was right to take a cautious approach when it comes to rolling back LVR restrictions [with a part-lifting of them in January].
“In fact, we believe a further softening in those restrictions is unlikely in the near term.”
The economists say the housing market is still a long way off its “lofty heights” of 2016.
“Despite the recent bounce, sales volumes in January were still 12% below the 2016 monthly average. In three-month annualised terms, national house prices are currently growing at 7.2%. At the height of market strength in mid-2016, that pace was…………
Continue reading this article at the original source from Interest.co.nz
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