One of the World’s Hottest Real-Estate Markets Tries To Cool
New Zealand is pulling every lever to tame property prices.
New Zealand is pulling every lever to tame property prices.
New Zealand is emerging as a test case of whether authorities can restrain rising home prices without tanking the market and destabilising the economy at the same time.
The South Pacific nation’s efforts could offer a blueprint for the many other countries facing a similar dilemma after the coronavirus pandemic. A combination of low rates, economic stimulus and changes in buying patterns as people work remotely is pushing real-estate values higher all over the world, pricing out many first-time home buyers.
The problem is particularly acute in New Zealand, where housing supply failed to keep up with population growth over much of the past decade. Home prices have risen more than 30% in the past year, according to a property-price index from the Real Estate Institute of New Zealand.
The country’s home-price-to-income ratio, a measure of affordability, is the highest compared with the long-run average among 30 key economies analyzed by research firm Capital Economics. For each economy, the firm created an index setting at 100 the long-term average of the ratio of home prices to incomes. New Zealand’s score on the index was 178, or well above its long-term average.
Governments have several tools at their disposal to influence real-estate prices, including boosting housing supply either through direct investment or changing land-use regulations, restricting mortgage lending and offering financial assistance to first-time buyers.
Economists and policy makers debate whether central banks should use interest rates to try to rein in housing prices by influencing the cost of borrowing. Higher rates could make mortgages more expensive and cool demand for housing, but they could also have unwanted impacts on inflation or employment, the traditional areas of focus for central banks.
New Zealand is pulling every lever. In October, the country’s central bank raised its benchmark interest rate to 0.5% from a record-low 0.25% and signalled more increases over the next year, in part because of skyrocketing home prices. And earlier in the year, New Zealand’s government, in a novel move, directed the central bank to consider home prices when making decisions about monetary policy, even though bank officials warned that would have little impact on the market and could lead to lower employment and below-target inflation.
New Zealand has also restricted low-deposit lending, a move designed to reduce risky mortgages and lower the chance of a damaging housing market correction, which could destabilize the broader economy. Starting Nov. 1, only 10% of lending to owner-occupiers can have a loan-to-value ratio of more than 80%, down from the 20% of lending that is allowed now. It is working on debt-to-income restrictions as an additional tool.
The government also plans to make higher-density housing easier to build in cities and limit the deductibility of interest costs on residential property investments. The tax change aims to stem investor demand for existing residential properties, a dynamic that has contributed to higher real-estate prices in the past and made it more difficult for first-time buyers to get on the property ladder.
Whether New Zealand’s efforts have a measurable impact on housing prices, without any unwanted economic or social side effects, isn’t yet clear.
In September, the latest month for which data is available, property prices in seven of New Zealand’s 16 regions reached record median levels, according to the Real Estate Institute. Prices in Auckland, the country’s biggest city, declined 4% from August to September, but a Covid-19 lockdown in the city had curtailed buying and selling. The institute said it expects activity to pick up when the lockdown lifts.
Gareth Kiernan, chief forecaster at Infometrics, doesn’t expect New Zealand home prices to fall soon. All the government and central-bank measures combined might succeed in slowing price increases, he said, but that still means a grim outlook for first-time buyers.
Demand is also likely to increase, Mr. Kiernan said. The government recently decided to allow residency for tens of thousands of people on temporary visas, which means more people will be looking to buy homes. And the construction industry is still struggling to build houses fast enough to meet existing demand.
Mr. Kiernan said interest rates would need to rise by quite a bit more than currently expected to bring about a fall in prices. New Zealand’s central bank in August projected that the cash rate would reach 1.6% by the end of 2022 and 2% in the second half of 2023.
Even if home prices stopped rising, and assuming incomes grow 3% a year, the home-price-to-income ratio would take until 2050 to decline to its level in 2000. Mr. Kiernan said.
“It’s going to remain very painful I think, very difficult for people wanting to get into the housing market, for a long time,” he said.
Capital Economics, in its recent analysis, expects home-price inflation in major economies to moderate naturally in the coming months and isn’t expecting a destabilizing drop in prices.
However, it said the risk of a crash is elevated in countries such as New Zealand where affordability was stretched even before the pandemic. Other countries in a similar situation include Canada, Denmark, Australia, Sweden and Norway, the firm said.
“We would not say that house price falls in any of these countries are certain or imminent—some have been flashing red for several years yet house prices have continued to defy gravity,” the economics firm wrote. “But it would not take much to tip them over the edge.”
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: November 7, 2021
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
The enduring appeal of marble has gone into overdrive as designers explore the beauty of coloured stone to create truly inviting and indulgent interiors.
Like all design movements, the return of marble to interiors started quietly enough with the rise of ‘greige’ as the dominant colour palette. A warm version of grey, for a while there, you could barely step into a well-considered residential space without being confronted with the ubiquitous neutral tone.
However, to be successful, this look depended on texture, layering and patterning to provide truly heartfelt spaces with genuine depth. And so Calacatta and Carrara marble entered the room, literally making itself at home in kitchens, bathrooms, and living room hearths, as well as in a myriad of accessories and furniture from small bowls and coasters to coffee and dining tables.
As greige made way for a return to colour in interiors, in recent years designers have turned their attention to bolder choices, moving on from the classic tones of Calacatta, Carrara, and Pietra marbles to Verde Indio, Spanish Gold, and Calacatta Viola.
Not that there is anything new about marble. First documented for use in construction in 3rd century Greece BCE, with evidence it was also used in ancient Turkey and Rome, it was originally chosen for its strength and beauty, as well as its accessibility, extracted from quarries using hammers and wedges and removed using pulleys, levers, and winches rather than the more difficult process of mining. While extraction methods have improved, especially in recent years, the nature of this popular stone is unchanged.
A metamorphic rock composed mostly of calcite, it is formed when limestone is subjected to heat and pressure. When the calcite in the limestone recrystallises, it forms a rock that is a mass of interlocking crystals, creating what we know as marble.
While many countries, including Australia, have marble deposits, about half the world’s supply is sourced from just four countries—Spain, Italy, India, and China. Strong enough to endure extended use, it is also soft enough to be relatively easy to carve while its natural beauty allows it to be polished and honed, giving it a glow that adds depth—and a sense of luxury—to any space it inhabits.
Australian designers have been quick to embrace the use of marble, offering, as it does, the opportunity to create truly unique interiors. Creative director of Mim Design, Emma Mahlook, says while budget is always a consideration, a greater variety of marble has become easier to source in recent years.
“Coloured stones provide an opportunity to create distinctive and striking spaces,” she says. “As such, we are finding that there is a slight shift to bolder and braver choices of coloured stone than the traditional whites and greys.”
For homeowners interested in creating distinctive, outstanding spaces, it is hard to beat, with each piece different from the other.
“No batch of stone is ever the same, which makes it so unique and such an interesting and visually appealing product with colours, textures, and patterns that are sometimes as complex as intricate works of art,” says Mahlook.
She cites a recent commercial project her studio realised for Enoteca Boccaccio, an exclusive Italian restaurant in the heart of the Melbourne suburb of Balwyn, where she specified a selection of coloured marbles to create an intimate and luxurious dining experience that looks to the past, as well as the future.
“The choices of natural stone in Enoteca Boccaccio, which featured marbles Rosso Levanto and Carrara as well as a granite called Domino, were selected to reflect Italy’s streets and embody genuine durability and commitment to the art of preservation,” says Mahlook. “Rosso Levanto and Carrara are archaic marbles with such strong significance connecting to Italy’s rich heritage.”
Colour and Communications Manager at Dulux, Andrea Lucena-Orr, says the interest in coloured marble in Australian design has its origins in more transient hospitality spaces like bars and restaurants, where design is traditionally riskier.
“Typically, it starts in hospitality and commercial environments,” she says. “You tend to get it in high-end homes because it is expensive, but it’s beautiful.”
“That whole natural palette is a huge phenomenon—people are celebrating those imperfections in patterns and shapes now.”
Because no two slabs are the same, Mahlook says there’s the ability to create truly distinctive, personal spaces for clients seeking genuinely idiosyncratic interiors.
“The movement towards coloured natural stones reflects a broader cultural shift towards individuality, sustainability, and innovation in design and architecture,” she says.
For those falling under its spell, Director of Studio Tate, Alex Hopkins, says marble pairs well with other materials such as timber and looks beautiful indoors, particularly in kitchens and bathrooms. However, she cautions there are some things to consider before specifying it at home.
“To ensure marble remains a timeless choice rather than a fleeting trend, we recommend using it selectively and pairing it with contrasting materials,” she says. “It’s crucial to understand its maintenance demands and consider the overall budget, including installation and upkeep costs.”
While it is susceptible to staining because of its porosity, Hopkins says using marble sparingly, for example, in a powder room vanity, can minimise maintenance.
“Different finishes, like honed surfaces, can also help reduce the appearance of wear,” she says. “Working with experienced designers or specialists ensures the marble chosen fits both the aesthetic and functional needs of your space.”
Professionally applied sealants can also make staining less likely.
For those bold enough to take the plunge, Hopkins says the rewards are great.
“Its diverse colour palette and natural veining offer a unique aesthetic that other materials can’t match,” she says.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.