The government this week clarified details of its housing tax policy changes announced on March 23, and they were slightly less bad than expected.
Nationwide average house sale prices rose by 2% in August. This followed a 2.4% rise in July, 1% gain in June, 0.8% rise in May and just a 0.5% rise in April.
Now that we are experiencing lockdown again, can we expect the same things to happen in the residential real estate market and economy as last time? No. There are some key differences between this situation and that of March 2020.
I recently wrote about the end-game being underway for the three decade period of high average house price rises. I still remain of that view, but for now the market retains considerable strength.
There are a growing number of factors in play which suggest that while demand for housing will remain firm, we've entered the end game for the period of strong house price rises well exceeding the rate of growth in household incomes.
Two week’s ago expectations for interest rate changes in New Zealand took a leap up in response to the June quarter inflation number coming in 0.5% higher than anticipated. This is a very rare event and the signal it has sent is that the pace of growth in our economy is too strong for the Reserve Bank to be confident of containing inflation below 3%.
The world has been printing money for several years, in anticipation of inflation and interest rates eventually rising. Neither of those happened. But the short-term has changed.
Whenever things like the global pandemic, the 2008-09 Global Financial Crisis, or tax policy alterations happen such as those announced on March 23, most of us can take a view on what the likely impact will be. Sometimes these views can be horribly wrong.
Two weeks ago, I wrote on the theme that young buyers will probably hold back from the residential real estate market until they see older investors returning – then they too will return. Evidence for this has already been shown from my surveys.
There is a Catch-22 situation that first home buyers sometimes find themselves in. They want to buy, but they are nervous, and if they see others stepping back, they do too even though the explicit aim of the government is to give them more space to buy.
Interest rates offered by banks are low as a result of the pandemic. The Government has helped out lots of parts of society, and we’re all grateful for this. Have they helped those reliant on interest income?
This post will start with a little rant and then progress into trying to understand the downstream impacts of a big week for the housing market. Just in case you were under a rock this week, the government announced a major change in housing tax policy.