How is the New Government Likely to Affect the Property Market?
There is no doubt that the new government would have a negative effect on house prices. BUT, and this is a big BUT, whether negative means a slowing of growth, prices remaining stable or a reduction in house values is yet to be seen. I’ve listed below the reasons there would be a negative price effect.
Reduction in immigration numbers: It is all about supply and demand. If you reduce demand price growth will slow.
Possible ban, or partial ban, on the sale of New Zealand residential property to foreign buyers. These groups of people to a large extent operate in a different economy and sometimes are able or willing to pay more than local residents. Removing them reduces demand but also changes economic metrics in the purchasing process.
Increasing supply: Whether it is actually possible to deliver on their intended solutions, on the supply side, is another question. The new Labour government is going to be under a lot of pressure to deliver on their Kiwibuild, policy which aims to deliver 100,000 low cost houses in 10 years.
Freeing up land: Labour will aim to remove the Auckland urban growth boundary and free up density controls.
Reducing the amount of property investors: In my article next month I will list whole host of possible increased expenses, under Labour, for property investors, which would naturally remove some investors or prevent others from entering that market.
Increased Tax: not only for existing property investors but new ones too.
Regional development, as championed by Winston, would naturally have a flow on effect.
Reduced Economic Growth: With social investment, reduction in migration numbers, protectionist policies and just pure net losses due to scrapping of existing policies/initiatives and implementing new ones, there are not many economists who say that it would not have a negative impact on the economy and subsequent property prices.
Nothing sizable happens overnight and I believe for a lot of policies to really take effect, it will take another term in government for Labour.
Would I buy today? Yes I would. History has shown that over time, irrespective of government or economic conditions, property prices increase and I don’t think that will change. The key thing is you need to be able to afford your debt during the good and bad times, which would allow not selling your property in a downturn.
These policies are not all negative either. Hopefully some of these policies work and allow more affordable housing to be built and resolve some of the well-publicised issues we have around housing in N.Z.