Government commits itself to early action on housing

Peter Thompson, Managing Director, Barfoot & Thompson

The only forecast about housing in 2021 that I feel will undoubtedly prove accurate is that as a topic, housing will never be far from being in the headlines.

As to what will happen to prices and sales is uncertain. Without intervention, or an unexpected external event, most economists see house prices continuing to rise in 2021, including Westpac, which expects annual house price growth to peak at 15% in mid-2021.

For its part, the Government has committed itself to taming the market.

It set the tone for its position in late January when covering its view of the state of the market, and its timeline for taking action.

Radio NZ coverage of that announcement had the Prime Minister describing the level of price increase in 2020 as “unsustainable”, the need to “tilt the balance towards first homebuyers” and “leaving no stone unturned” to bring about change.

Based on that statement we can expect the Finance Minister to announce in late February how he intends to “cool the market” and what further measures will be introduced in May’s budget.

This announcement came against the backdrop of the housing market finishing 2020 with a powerful rush in December, with records being set for the number of homes sold for the month and for the prices being paid.

The statement is certainly one of blunt intent from the Government. The question remains can it succeed where others – including itself – have failed in the past.

While we wait further information as to the Government’s intent, it appears the market will be left to fend for itself for the remainder of summer and early autumn.

Barfoot & Thompson ended the year with the lowest number of listings on our books in five years, and over the first few weeks of January the market was practically starved of property to sell.

In the first days of February, we will release hard data on our sales in January, and this will be the first indication as to how the residential property market has started 2021. It is information that will be eagerly awaited by market watchers.

We also started the year with the trading banks trimming their mortgage interest rates to lows that are likely to prove irresistible to those who meet the banks’ borrowing criteria and have the cash flow to meet repayments. 

Next month will see the start of new regulations covering security of tenure and assignment of leases in relation to rental accommodation. These are more contentious regulations than those relating to healthy homes, which came into effect late last year.

The introduction of these new regulations, which give tenants greater rights, have a number of landlords apprehensive.

I do not see it leading to a major retreat by investors from the provision of rental accommodation to the private sector, but the regulations will undoubtedly create challenges.

Potentially the greatest losers will be those who live in close proximity to the small group of tenants that regularly engage in mild, anti-social behaviour.

Near neighbours complaining to the landlord about this behaviour will achieve little as the landlord will have limited powers to assist. The only avenue to address such issues will be through a long, drawn out process, involving the Tenancy Tribunal.

It is hoped that the Government keeps a watching brief over this aspect of rental tenancy and have an open mind to fine tuning aspects relating to the right of a landlord to more easily evict an unreasonable tenant.