Southern pilgrimage benefits regions

Southern pilgrimage benefits regions

Kiwibank economists say an inter-generational transition is taking place in New Zealand. Baby boomers are retiring and unlocking their land-locked wealth in the form of subdivision before cashing up and moving to the regions.

Chief Economist for Kiwibank Jarrod Kerr says: “Once the kids have flown the coop, the need for a backyard diminishes. We’re seeing Auckland boomers leaving in droves for the cheaper regions. The exodus has boosted the housing markets in Northland, Manawatū-Whanganui, Waikato and the mighty Hawke’s Bay.”

But it is not just the baby boomers seeking a change. Younger Aucklanders, priced out of the local housing market are also choosing to move.

"There’s been a flood of interest from northerners on a southern pilgrimage. House price growth reached 13% in May in Manawatū -Whanganui. Southland is also a part of the country that has shown a little more resilience is sales activity, and house prices lifted 12% in May, compared to 9.5% a year ago,” Kerr said.

“Interestingly, these standout regions have some of the highest rental yields with good old fashioned economic opportunity at work.

“The wind has died down in the City of Sails following a period of phenomenal activity. Auckland housing has been put on ice diverging from other parts of the country. ‘Hot’ rental areas now include parts of Gisborne, Rotorua, the Hawke’s Bay and Manawatū -Whanganui,” he said.

Kerr says the government is gearing up to implement policies targeted at speculators. These policies include tightening the bright-line capital gains test, removing the negative gearing tax loophole and banning foreign purchases of existing stock.

“The policies, and the uncertainty associated with them, may hamper house price gains over the next few years but we don’t expect a major correction.

“For the time being there is a housing shortage and mortgage rates remain low. Unemployment is expected to fall, not rise. Housing corrections are often driven by haemorrhaging house-holds suddenly unemployed or lumped with rampantly rising interest rates. Neither is expected over the next few years. The jobs market will remain tight and the Reserve Bank will keep interest rates relatively low. However, we do predict that mortgage rates will rise from late next year," Kerr said.

Also covered in the latest Property Insight by Kiwibank Economists:

Three P’s of property: Population, preference, and policy…and New Zealand is painfully undersupplied.
• The largest migration boom ever recorded is receding, slowly.
• New Zealand has a shortage of over 100,000 homes. Supply has not kept pace with demand. Demand is still growing, capacity constraints are being hit, and Kiwis need more affordable dwellings.
• Policy changes, like capital gains tax, will hinder confidence. But the fundamentals outweigh tweaks to taxes. Kiwibank Economists expect property prices to consolidate, before regaining traction into the mid-2020s – aided by income and population growth.
See full report here: https://inner.kiwi/commentary/kiwibank-property-insights-crystal-ball-gazing-conjures-three-ps-property-population-preference-and-policy/

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