Auckland house prices have risen 23% since 2011, making it extremely difficult for first home buyers to get a foothold in the property market. Even though this is causing headaches for them, the Reserve Bank and real estate agents, the real concern is that this super high price bubble may burst and consequently affect the rest of New Zealand.
The high level of inflation in Auckland’s property market is not a problem while houses are in demand. However when it slows down, property prices will drop, meaning that home owners may end up owing more to the bank than their property is worth.
What is Causing Rising Property Prices in Auckland?
The million dollar question everyone is asking is, what is causing property values to rise so high in Auckland? Every man and his dog seems to have an answer and they vary from blaming speculating landlords, low interest rates or a Reserve Bank which is not doing its job properly. However there does not seem to be a single definitive answer or a solution to help slow skyrocketing house prices.
Tim Nees, the University of Canterbury’s architect-in-residence and urban commentator says, “A long term sustainable vision is needed for housing in this country, a vision supported by the Government that is fair to all levels of the market and works at a national level, not just a regional level.”
The recent announcement of National’s policy to sell New ZealandÃs state housing may just open the gates to more landlords and investors purchasing the properties at high prices in a bidding war. Rather than help introduce low cost housing stock to the market, National may in fact be helping landlords obtain more reasonably priced properties which first home buyers will end up renting as they are unable to afford to buy them.
So in order to avoid borrowing on highly inflated levels of equity or house valuations, it is a wise idea to have a chat with a mortgage broker to avoid financial trouble in the future.
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