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Six to nine months more of flat housing market, Cotality says
News that Labour has ruled out reintroducing its interest deductibility ban may bring more property investors back into the market, data firm Cotality says.
It was revealed this week that Labour will not reintroduce its policy if it is returned to government. It had previously phased out the amount of interest that investors could claim as a deductible expense against their rental income. The current Government overturned that when it took power.
The policy was extremely unpopular with investors, who argued that all other businesses are able to claim their costs of borrowing as an expense.
Cotality chief property economist Kelvin Davidson said it might make a difference to their willingness to purchase properties.
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“I don’t expect a rush of investment activity, there is still uncertainty about job security, rents are still fairly flat, operational costs have gone up with council rates and home insurance… and capital gains tax is on the radar.
“But I was hearing on the ground quite a bit that investors who were holding off were doing so largely because they were unsure about interest deductibility changes if Labour got into power and phased it out again, it would have been quite a big hit to their cash flow.
“Now that uncertainty is gone, it will be interesting to see what happens. It may set the scene for a bit of an investor comeback.”
Investors are currently about 23 percent of the marker, a bit lower than their long-term average. First-home buyers remain at record highs.
Cotality’s latest data shows there were 6175 property deals done in August, down 11.6 percent from the same time a year earlier.
It was the eighth drop in a row.
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“Each month this year has been lower than the same month last year, but the falls haven’t been massive in those previous months from January to July, sort of 4 percent to 5 percent,” Davidson said.
“We saw the August number was down almost 12 percent. It does stand out a little bit … there’s no real obvious driver for that in August. It feels as if it might have been a timing issue and we might actually see September’s number is not quite as weak. But then September is probably going to be affected by renewed fuel price increases and a lack of confidence.”
He said sales were running at a rate of about 89,000 a year. That was below average but well up on the 65,000 recorded in 2022 and 2023.
Davidson said the number of properties on the market was high and was likely to increase as the spring “selling season” took hold.
“It will be interesting to see what happens in September if we don’t get such a bounce back and it extends that run of caution.”
Property values nationwide dropped 1.3 percent over three months and 1 percent over a year. They are still down 18 percent from their peak.
Christchurch was the outlier, up 0.2 percent over three months.
Rising mortgage rates were unlikely to help market confidence but Davidson said the big driver was the labour market.
“People can withstand higher mortgage rates if they see job creation and they see employment security and they feel as if, if they lost their job, they would easily find a new one … the labour market has a really big role to play here.”
He said it could be six to nine months before any real movement happened in the market.
He said rents were flat or slightly rising but a sharp increase was unlikely.
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The chief executive of the Parliamentary Service is confident there will be enough room to accommodate the increased number of MPs and their staff coming into Parliament.
On current numbers, up to 131 MPs could be sitting in the Chamber following the election, brought on by a record overhang result.
Clerk of the House of Representatives Dr David Wilson told the Spinoff that currently the debating chamber had enough chairs to seat 124 MPs – including the Speaker of the House – and work was being done to accommodate more by altering the seating arrangement.
In a statement, Parliamentary Service chief executive Rafael Gonzalez-Montero said planning for a larger Parliament had been going for “some time”.
“Now that the election results have confirmed an increase to the number of members we are looking at several options.
“We are confident we will be able to accommodate all members within the Chamber.”
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Gonzalez-Montero said office accommodation for members and their staff would be “stretched” for a short time, but the new Members’ Building was only a few months away from “practical completion”.
That building – located behind Parliament – was due to be ready to occupy in April next year and had capacity to accommodate around 30 backbench MPs.
“All members should be in fit-for-purpose accommodation from that point,” Gonzalez-Montero said.
Following the 2023 election, 123 MPs sat in the Chamber – a record number at the time. That decreased to 122 following the resignation of National MP Judith Collins.
Collins held the seat of Papakura and stepped down in May and Parliament voted against holding a by-election because it was too close to the election.
The election result also meant high-ranking National Party MPs like Chris Bishop, Paul Goldsmith, Nicola Willis and Gerry Brownlee – Speaker of the House and an MP for 30 years – would likely not make it back into Parliament.
Only resigning or retiring MPs were permitted to give a valedictory speech meaning none of them would get the chance to give a valedictory statement.
Asked if their would be special allowances for valedictories, Wilson said in a statement that normally only MPs were allowed to speak in the House but the House could suspend its own rules or temporarily alter them.
“It could do so to allow former members to address the House.”
Wilson said no such arrangements could be made until the next Parliament opened and members sworn in.
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