My predictions for 2017

My predictions for 2017:

Increasing interest rates:

We expect interest rates to continue increasing and
hopefully settle in the late 5’s for a typical 2 year fixed rate. The reason
for this is increased funding costs from abroad and increased cost to generate
local funds. For example, the banks need to generate some capital locally and
to do that they need to entice people with better deposit rates and therefore
increase lending rates. If the thought of increased rates scares you, just get
in touch with me - we can work through a plan.

Property prices:

Unfortunately, I don’t see the price of Auckland housing
heading down any time soon! Instead, I expect prices in Auckland to increase by
between 5% and 10%. Yes, prices came down a bit before Christmas but that was
to be expected. Generally prices start to lift again in the New Year with
people looking for homes again, and between the shortage of houses and positive
migration numbers, coupled with a positive economic outlook, I expect prices to
keep on going up.

Reserve Bank restrictions:

Unlike some, I don’t expect any more restrictions from the
Reserve Bank - what they have done seems to be working. One of factors which has
had the biggest impact on the market, in my view, is cutting funding for
foreign investors who do not have residency, which has happened through
pressure from the government and the Reserve Bank. It is now very difficult and
expensive for foreigners to get funding and I’m sure that has had a big impact on
house prices and blocking foreign purchases.

Auckland, the world’s fourth least affordable city:

Judged by average income versus the medium house price
ratios*, Auckland was judged the world’s fourth least affordable city for
housing – and unfortunately I don’t see this changing either! There needs to be
a serious concerted effort from government and the council to release more land,
alongside higher availability of funding for these developments. We are currently
experiencing a serious lack of liquidity for development funding and various
banks have reduced their exposure to development funding. No doubt that is also
a major reason for the lack of progress in building houses.

*As per Demographia International Housing Affordability