Liam Dann: House price lull doesn't fix problem for first home buyers

The reality is we'd need several more years of zero growth, at least, before buying a house in Auckland felt easier. Photo / Michael Craig

It's almost April and this is the first column I've written about the housing market this year.

What gives? We still have a housing crisis, right? Why did I stop caring?

I'm at risk of coming across like a fair-weather Warrior's fan, the kind who only gets excited about Rugby League when they make the play-offs.

Actually, I am that guy - but I am still interested in the property market.

I have a self-interested bias. I own a house in Auckland .

To be fair, I only own the one I live in, and I also have kids who'll want to buy one some day. So I'm pretty ambivalent about my own house price.

But I'm definitely biased towards dramatic news.

Without a red-hot market breaking records every month, house prices haven't been grabbing headlines.

There has been plenty of politics as the Government prepares to make good on election promises and unleash its Kiwi Build programme.

And the usual riveting local body stuff, zoning and planning and ... yawn.

Okay, I know, it's important. I get it, but prices are the sexy bit in the story - if only because they represent real data as opposed to endless political debate.

And prices have been middling. This market isn't booming but it certainly is not crashing either.

The flow of monthly data from the likes of Quotable value (QV) and the Real Estate Institute (REINZ) has been ho-hum.

There was an initial slump. The shift from annual growth at 20 per cent to less than the rate of inflation was significant.

But as we saw in last week's REINZ data, we're at least a year on from that now.

REINZ national stats for February showed annual price growth was still steady to strong, depending on where you lived. The national median price was up 6.9 per cent.

Auckland, though, was flat. Based on the REINZ house price index, the median Auckland price only went up 1.1 per cent in the past 12 months.

That's technically a fall of 0.6 per cent if you adjust for inflation. Either way, it's essentially no change.

So although the news isn't exactly dramatic it seems worthwhile to acknowledge we're now drifting into our second year of low house price growth in Auckland.

It feels like a very different era to the one I was writing about in 2015 and 2016.

The hype is gone. Around the barbecue and at the water-cooler Aucklanders aren't sharing anecdotes from auctions or whispering "how much?" the way they once did.

So what does that mean for young Aucklanders looking to get into the housing market?

Sadly, the maths would suggest not much.

There is anecdotal evidence of first-home buyers coming back into the market - as investors were squeezed by Loan to Value Ratio rules.

The sense of panic as young people's hopes of property ownership soared further into the stratosphere every month has eased.

But the reality is we'd need several more years of zero growth, at least, before buying a house in Auckland felt easier.

Economists seem pretty confident that, despite a slight pick-up in past few months, the side-ways crawl of the market will continue for some time yet.

That's based on confidence that new Government policies will restrict demand.

There's the extension of the "bright line" test for capital gains from two to five years to further deter investors.

There's the foreign buyer ban, which has been delayed but is still expected this year.

And, as Westpac economists note, "in the coming months we expect the Government to elaborate on its plans to phase out negative gearing".

But some big variables could break either way.

Immigration is the biggest. It is the elephant in the room for the Government.

NZ First campaigned hard on cutting immigration rates. Labour campaigned softly on it but was happy to stay on the NZ First side of the debate, despite dialling back on numerical targets.

New Zealand's net migration gain has settled at about 70,000 per year. It's hard to see the property market falling far on those numbers.

The big question is: does the Government still have the appetite to cut them significantly?

Will Kiwi Build ride to the rescue with a massive increase in the supply of affordable housing?

Well, to start with it looks like we'll need to get more immigrants in to build them, which is a bit of a Catch-22 - at least in the short term.

And longer term, another economic issue will start to bite: interest rates.

Rates are expected to rise from next year.

Although higher interest rates could dampen property demand and bring prices down. They also make the equations even harder for first-home buyers.

Servicing a $600,000 mortgage at 5 per cent per annum is ugly enough. Adding two or three per cent on that would be every bit as bad as another big spike in prices.

The reality is that there is still no quick fixes.

As sanity returns to the market and prices stabilise it only serves to highlight the structural problems we still have in housing.

And the failure of the last Government to adequately recognise them, let alone address them, is laid ever more bare.