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What to expect from the housing market in 2020
The fizz that had leaked out of the housing market in
2019 is back with a bang. Milford Asset Management Portfolio
Manager Mark Riggall is expecting a stronger housing market
performance in 2020, with prices to rise more steeply as
supply continues to under-deliver.
“As we approach
the key selling months of February and March, we are
starting to see improvement in house prices from a weak year
last year, especially in Auckland. The key bit of data we
look at is the house price inventory – that is, how many
houses are available for sale in the market. We’ve seen a
dramatic fall in the inventory for sale and that generally
precedes a rise in prices. Furthermore, many of the drivers
of house price inflation are still in place and actually
strengthening. It’s all supportive of higher prices as we
move through 2020.”
The 2017 election
put a dampener on the housing market. Mark Riggall says
‘not this time’.
“If you cast your mind back to
the last election, there was a big issue for housing because
there was potentially a change of government and we knew
that might go hand in hand with a review of Capital Gains
Tax. That depressed activity in the housing market and
that’s really when the slowdown started. This time round
there is less uncertainty, so I think the election’s
impact on the housing market will be much more muted than
last time round.”
Investors have been
sitting on their hands to some extent over the past two
years. But they look to be getting a second wind.
“I
think we could see investors rush back into the housing
market this year. We’re seeing rental yields start to
improve (though, of course, if prices go up, those rental
yields will start to come back down). Capital gains, as
always, drive the housing market in New Zealand and the
prospects there could lure more investors back
in.”
As the market heats up, Milford is
moving to re-position its own funds.
“For us there
are two key takeaways from an improved housing market. The
first is more direct – and the way for us to play that in
the share market is to increase our exposure to the
retirement (village) sector and we’ve been doing that over
the past three months. The other is our view of the local
economy. An improved housing market likely means improved
confidence and, therefore, more spending. GDP is likely to
improve. That should be beneficial for the New Zealand
dollar and we’ve increased our position there as
well.”
You can also view Mark’s
interview, discussing these issues as well as his view of
why investing in shares is often a better bet than investing
in property, here.
Milford Asset Management
We’re dedicated to growing the wealth of investors and the overall prosperity of the New Zealand economy.
We adopt an active and flexible approach to investing, using a wide range of strategies to take advantage of changing market conditions.
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