A property investor recently predicted on television that the value of the New Zealand property market will fall by 10 to 15 percent as the government cut property tax benefits out of the budget.
St. Heliers property owners may dismiss such numbers because their suburb is not prime property investment territory: the rental housing stock there is limited to 25 per cent of total housing according to Statistics NZ. All other properties are owned, partially owned, or held in family trusts by owner-occupiers. Statistics NZ is a government department and is the main source of official statistical information for New Zealand.
Additionally, St Heliers has some built-in protection because the three-month moving average on Zoodle shows that the median sales price for St Heliers rose 9.8% to $882,167. Also, listings are dwindling and so is buyers’ choice. There are now 34% fewer new properties on the market than last month. When the supply goes down, the price goes up as long as there is demand. People still want to shop in St Heliers. Zoodle gathers information and data from more than 1.5 million properties spread across 1,600 New Zealand suburbs.
However, economists at ANZ, Westpac and BNZ Bank agree that there will be a short-term dip in property values before they recover to current levels. However, the lower-priced suburbs are likely to take the brunt of the bread. Such areas are prime territory for real estate investors, and investors will now pay less for property to recoup what they lost in tax breaks.
But a subdued but improving economy and inflation, resulting mainly from the Goods and Services Tax (GST) increase announced in the budget, will help offset any price declines. The New Zealand Treasury forecasts inflation of 5.9 percent in the first quarter of 2011 before settling back to just over 2 percent a year. So there might not be enough time for falling property prices to reach expensive suburbs like St Heliers before inflation and the economy kick in. The New Zealand Treasury is a government department and advises the government on economic and financial policy.
Chief Economist Tony Alexander of the BNZ stresses that any price decline will be offset by the growing imbalance between supply and demand: not enough homes are being built to meet demand for new stock. This will be exacerbated by workers earning more than $44,000 per year who decide to stay in New Zealand because they will now pay less tax than if they went to Australia.
This imbalance is likely to continue to grow in the coming year given the slow growth of the economy and the GST increase to 15% starting in October 2010. However, the GST increase also helps protect property values from St Heliers because any new houses that are built will have to sell for more to cover the cost of the additional tax. ANZ, Westpac and BNZ are the major Australasian banks with a large presence in New Zealand.
St Heliers real estate owners are in a fortunate position. They own expensive properties in a neighborhood where other homeowners don’t easily give away their money unless there is a good and valid reason to do so. Budget announcements and signs of an improving economy will also help prop up property values. It all helps to maintain property values in St Heliers and ensure that buyers continue to pay fair market price.