Wrapping it up: The year in review

There can be little doubt that the skyrocketing fortunes of house prices around New Zealand dominated market discussion this year. Auckland’s market has been hot for some time, but that heat spread solidly outwards in 2016. This led to rising prices and tighter supply, as well as declining yields, in the Waikato, the Bay of Plenty, Northland and Wellington markets.

While the Super City’s rampant price growth slowed down slightly as the year wore on, the latest QV data still had the average value of an Auckland property at $1,051,387. This means that speculation over whether the city’s market was in bubble territory and heading for a crash or, at least, a correction has remained rife. It also means the city’s house price to income ratio has become one of the most stretched in the world.

In a bid to reign in both the Auckland, and the wider New Zealand, market, the Reserve Bank announced another set of LVR restrictions in July. These LVRs require investors nationwide to have a 40% deposit, or equity, when applying for new loans. Although the LVRs did not come into force until October, the banks started to observe them immediately.

To date, the LVRs appear to have moderated the market but there are questions over how long that will last. The Reserve Bank has increasingly made it clear that it wants to have the ability to introduce debt-to-income ratios – in order to further curb the market should it need to.