ANZ has raised its House Inflation Prediction from 6% to 8%, matching forecasts from other lenders as confidence in the market returns. The Government furthers its investment in the market by doubling its Housing Agency’s Debt to $7 Billion.
Thank you for reading this post, don't forget to subscribe!ANZ economists raise house inflation prediction to 8%
New Zealand’s largest bank ANZ has predicted that house price inflation could hit 8% by the middle of this year – a forecast that is being matched by other lenders.
The announcement was made in ANZ’s latest Property Focus publication, with ANZ chief economist Sharon Zollner and senior economist Liz Kendall stating that there is a risk that comes with that 8%, but that the market should be able to keep itself in check, “The market is tight and house price expectations have increased – but we think a number of headwinds will keep the market in check.”
This prediction comes off the back of a healthy market at the end of 2019 with noted success from low interest rates and loosening of loan to value ratio (LVR) limits. ANZ economists had previously forecast inflation around 5%-6% this year but noted that the housing market had the “bit between its teeth again” and said they would not rule out the possibility of the Reserve Bank actually clamping back down on LVR’s.
ANZ is the first lender to forecast these higher numbers, with Westpac economist having predicted inflation will hit 7% for quite some time, and in their first Weekly Commentary for 2020, stated that their longstanding prediction of “may come good even sooner than we expected.”
Westpac have cited recent gains across the market in their reasoning, “Gains in prices have been widespread, with prices in Auckland up 4% and other regions up an average of 8.9%.” In addition to this overall economist believe that households are generally looking to spend as their trust in the market grows, “With house price growth set to take another step higher over the coming months, we expect that there will be related strength in household spending.”
Government gives the green light to more than double its housing agency’s debt to $7 billion
Kāinga Ora – Homes and Communities, the agency responsible for the likes of KiwiBuild and the country’s state houses, will have a substantial amount more headroom for future debt issuance with the government more than doubling the debt ceiling under its “Borrowing Protocol” from $3.05 billion to $7.10b from January 1. Kāinga Ora’s acting chief executive, Greg Groufsky, said the agency’s higher debt limit gives it room to “build more houses in addition to current targets if needed for the future”. This includes support for large urban development projects underway in Auckland, which will which will deliver up to 22,000 new homes over the next 10 to 15 years, as well as upgrading older state homes.
-Ravi Mehta, from Professional Finance Solutions